ONE of the fastest-growing businesses in India today is the video-on-demand (VoD) segment, which is witnessing rapid expansion.

Some of the world’s top leaders including American giants Netflix, Amazon and YouTube are investing huge sums in trying to capture a significant share of the expanding market.

Estimates are that demand for such services will grow phenomenally over the coming years and the world’s top players will continue focusing on India.

A recent report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and KPMG projects a doubling in internet consumption from mobile phones — from 15pc at present to 30pc over the next five years. Interestingly, most of the movies that are being watched by people through VoD are on their handsets.

And with smartphones getting cheaper by the day — and also featuring larger screen sizes — demand will soar over the coming months. The FICCI-KPMG report says mobile video traffic will expand by almost 12 times over the next five years at a compounded annual growth rate of 63pc.

Video-capable devices and connections will cross the 800m-mark in just five years, presenting a huge market for these service providers. And there are an estimated 30 content providers in India today, according to the FICCI-KPMG survey.

Besides the three American majors — Netflix, Amazon and YouTube — the segment is packed with both international and domestic majors, most of them eager to invest huge sums in the market.

Amazon Prime plans to invest Rs5bn in the segment, while four others — including Hotstar (the VoD service of Star group), SonyLiv, Eros Now and Voot — plan to invest another Rs20bn in the segment.

Analysts estimate that the VoD market in India is currently valued at around INR15bn, but is expected to shoot up rapidly

Analysts estimate that the VoD market in India is currently valued at around Rs15bn, but is expected to shoot up rapidly. At present, subscribers add up to a mere 2pc of this segment, with the rest enjoying free services, but heavily backed by advertising.

While companies like Netflix have refrained from going ‘commercial’ by letting advertisers decide on their strategies, others have not been so refrained. Hotstar for instance — which has both a subscription-led service for premium users — and a subscription-free service — finds that a majority of subscriber are satisfied with the second service.

Interestingly, except for Netflix, all the other players have slashed the price that they charge users and are proudly talking about their growing consumer base. App Annie — described as ‘the gold standard for app trends and cited by industry leaders worldwide’ — estimates that Amazon Prime has nearly 10m subscribers in India.

An App Annie estimate says that over 180m Indians watch YouTube every month on their mobile phones.

Netflix, which was among the first major international firms to enter India in 2016, is estimated to have a base of a little over 4m. All other entrants including Hotstar, SonyLiv, Voot and even JioPlay (part of Reliance Jio, the new telecom giant and part of Mukesh Ambani’s Reliance group) are believed to be way ahead of Netflix.

Of course, one reason for the phenomenal success of Amazon Prime is the competitive rates it offers. While Netflix has a minimum subscription fee that starts at Rs500 a month — and goes up to Rs800 — Amazon Prime has roped in millions of subscribes by offering them a rate of just Rs499 for an entire year. Hotstar offers its premium service at a price as low as Rs199 a month.

LAST month saw Reed Hastings, the CEO of Netflix make his first visit to India in a bid to woo viewers. Noting that internet TV had a great future in the country, Hastings pointed out that there was tremendous prospects for growth in the creative sector.

For Netflix, India is one of the top three markets in terms of mobile usage, he said. The company has almost 100m users worldwide, and 45m of them outside the US.

Netflix, which already has offices in Japan, Singapore and Taiwan, also plans to set up an office in Mumbai, said Hastings. “Our office in Mumbai will be as large as the Tokyo office,” he added.

For the American VoD provider, India is a hugely important market on the long-term basis, “because it is one of the strongest internet markets and internet TV is the future over the next 10-20 years,” notes Hastings.

“It’s a great opportunity to get in at the very beginning of internet TV, which will rise in India as phone networks as well as international players like YouTube and Netflix do more on the internet in India,” he added.

During his busy stay in the country, Hastings interacted with ordinary subscribers, telecom majors, direct-to-home players and Bollywood celebrities.

Admitting there was ‘a great battle’ with YouTube, Amazon, Hotstar and many others in India, Hastings emphasised that Netflix’s strength was in the international titles that it had access to and the ‘great local talent’ in India.

He has, for instance, tied up with superstar Shahrukh Khan’s Red Chillies Entertainment; all its films would be screened exclusively on Netflix over the next three years.

Telecom major Vodafone has also tied-up with Netflix, enabling easy payment terms for clients of both groups. The American giant has also tied up with Airtel DTH and Videocon d2h to expand its reach.

Analysts, however, feel that Netflix will have to revise its costing if it has to face up to the competition that is building up in India. Television channels including Zee TV and Viacom 18 are launching their services and with much more local — including Hindi and other languages — films and programmes.

Another major factor that could have a tremendous impact on the VoD segment is the entry of telecommunications and entertainment giant Reliance Jio, which is offering its video on demand service, JioPlay, along with its data and voice offerings.

Reliance Jio has 100m subscribers, many of who have signed up for its premium Prime membership, which costs Rs303 a month. Importantly, Reliance is also offering unlimited 4G high-speed data to its customers. And this has pushed other telecom operators including Vodafone and Airtel to also come up with similar plans to exceedingly low data prices to customers.

Published in Dawn, Economic & Business, April 10th, 2017