Net Profits

How the internet is changing the Indian media and entertainment business

Video, accessed via mobile or desktop internet, is powering online revenue. {{name}}
01 December, 2013

IN NOVEMBER THIS YEAR, YouTube launched a channel dedicated to Sachin Tendulkar. It has an anthem with music by Amit Trivedi (Kai Po Che!, Dev D) and lyrics by Swanand Kirkire (3 Idiots, Barfi) and runs non-stop footage of fans declaring their love for the cricket icon. One Digital Entertainment, the company that has the rights to produce the YouTube channel, is also producing several others—on the comedian Vir Das, the porn star Sunny Leone and the controversial rapper Honey Singh, among others. It has provided 200 channels to YouTube so far, which makes it the biggest “multi-channel network partner” to Google’s video portal in India. The Delhi-based company is the third venture that the 36-year-old entrepreneur Shabir Momin has co-promoted in the digital media space. ZengaTV and Singapore-based Maverick are the others.

Momin is one among scores of entrepreneurs trying to make their fortune from a combination of factors that are pushing online content back to the forefront of the Rs 83,000-crore Indian media and entertainment industry. The factors are a rapid growth in internet penetration, an increasing variety of devices available for surfing, and the subsequent rise in video consumption online. According to the data of comScore, a leading internet analytics company, the audience for online video in India grew by 27 percent between 2012 and 2013. After years of being treated as a hub for piracy, rather than an opportunity for growth, the internet is now back on business plans at Indian media and entertainment firms.

The possibilities of digital media have been speculated about ever since the internet took off globally in 1995. But it is now, 18 years later, that the combined effect of these three factors is finally bringing to the fore the prospects of the internet as a medium to sell entertainment products. As more than 227 million Indians tune in to listen to music or watch a film, a TV show or a cricket match on their mobile phone, computer, tablet or other devices, the internet is becoming a serious business in terms of audience size and revenue numbers.

Take audience size first. If you know that 354 million people read newspapers in India or that 765 million watch television, then 227 million sounds like a sizable number. It is 19 percent of India. And it’s arguably the young, trendsetting India.

A look at the revenues affirms the trend. For a very long time, about 80 percent of the money one paid to download a ringtone or a song (over Rs 25,000 crore), was retained by the telecom companies (Airtel, Vodafone etc). The remaining 20 percent was split between content owners (such as T-Series, Colors and Fremantle) and aggregators (such as Hungama and OnMobile). As the variety of devices grows, making it possible for consumers to access video from tablets, phablets and so on, both content owners and aggregators are finding it easier to target consumers without having to go through a mobile operator. It means that pay revenues are both higher and more evenly spread.

What these factors have also done is push online advertising. This is largely because advertisers, who are used to television commercials, are more likely to understand the value of video ads than the banner or click-through ads that have dominated the web so far. Thanks to increased video advertising, the ad rates for every thousand people reached online rose by about 70 percent between 2011 and 2012, according to Kedar Gavane, senior director at comScore India. The Rs 2,100 crore spent yearly on online advertising is still a fraction of the advertising budgets for television or print, but it is a higher amount than those reserved for radio and outdoor media. Online advertising is also the fastest growing part of the ad pie, as confirmed by FICCI-KPMG’s 2013 report on the Indian media and entertainment industry.

This boom in digital media consumption is leading to two things: the birth of hybrid media firms on the supply side, and, somewhat contrarily, the formation of media ghettoes and the loss of serendipity on the consumption side.

The first effect of a growing, active, online audience is the hybridisation of the media business. The “new media firm” combines the ability of the television and print brands to keep audiences glued through lucrative content and claim fitting ad rates, with the knack of online services to serve content fast and across devices.

ZengaTV, which Momin started in partnership with a friend in 2009, is an example of this. The successful mobile broadcasting service, which began with 100 channels, such as Aaj Tak, Colors and MTV, has gained 23 million unique users over the years. Today, around 35 per cent of them tune in to watch video-on-demand, a swift increase from 5 percent in 2011. The remaining watch live television,

though this section of the audience is decreasing every day. “Content consumption is happening on search, so people ask for a specific thing, say yoga, food,” Momin told me. It is professionally commissioned and created content that, he reckons, works best for generating web traffic. Zenga, or Hungama, or any of the other media brands emerging in the digital market, could source the content from traditional outlets like T-Series or Star TV or create it in-house or commission a production house such as Endemol or Fremantle to do it.

YouTube, which accounts for 58 percent of all video traffic out of India (according to comScore data) gets most of its revenues from content that is generated by professional media firms. (T-Series and Star incidentally are among the top ten video sites out of India on YouTube.) Similarly, much of the 10 to 12 hours of content that One Digital generates and shares with Zenga every month is created specifically for an online audience.(One of the shows Momin has commissioned is a Rs 5-crore project on extreme sports that will take five months to make.)

In many ways, then, ZengaTV, which started as a mobile broadcaster, or Neeraj Roy’s Hungama, which started as a content aggregator, are becoming more like traditional newspaper and television broadcast media firms. They are generating professional content, attracting audiences, and getting either advertisers or audiences to bring in revenues. This follows a global pattern. An example is Netflix, which commissioned the hugely successful $100-million political drama series House of Cards for an online-only release earlier this year. In all other aspects, except for the medium it was released on, House of Cards is exactly what The Sopranos or Sherlock are—a well-made show that is commercially successful. Digital media may not be changing the kind of content we consume, but it is changing the company that serves it to us.

In the last hundred years, every medium that has emerged—radio, television, print—has created a new structure that jostles with the existing one and then fits in. Each has also created new media leaders. Digital media is doing something similar. As it jostles to find its place in the media and entertainment order, it is creating a kind of hybrid company that is a broadcaster, content creator, aggregator and cable or direct-to-home operator all rolled in one. Zenga commissions content, aggregates it from other channels, broadcasts it, hosts it and streams it to us (like a cable operator) and gets advertising revenues for it. In India, broadcast firms are not allowed to own more than 20 percent in distribution companies. For industry, policymakers and regulators who have always thought that cross-media regulation is a given, these hybrid firms present questions that we haven’t even begun to articulate.

The second major transformation that the rise of digital media is effecting is the creation of media ghettoes and the loss of serendipity. The ubiquity of the internet, the seeming infinitude of available content, and the variety of devices it is available on, give us a lot of freedom to choose the content we want, as well as when and how we want it. This means that ghettoes of consumption are inevitable.

In the old days, even five or seven years ago, when you read a newspaper or a magazine or watched television, you would come across material, some of which bored you, interested you or gripped you when you weren’t expecting it. Many years ago, on a day when I did not have any time to spare, I remember getting hooked to a long piece in the Wall Street Journal on a reporter’s search for the hottest chilli in the world. (He found it in China.)

The chances of that happening drop significantly as media consumption moves online. A Twitter feed is a great example of this extreme customisation and flexibility. Mine is tailored to my interest area—the business of media and entertainment. Somebody else’s could be focused on cinema or politics. Paradoxically, when there is so much choice, we choose to limit ourselves to our areas of interest, ghettoise ourselves within a certain subject or point of view. For example, the issues that the Dainik Bhaskar reports about in Raipur or Prabhat Khabar reports in Ranchi or Patna are hardly of interest to many of the 227 million, largely English-speaking people online in India. The chances of coming across less-publicised issues or unusual points of view were better when we read only one newspaper.

There is a danger we face in these circumstances of responding with utter surprise, or even intolerance, when we encounter an unfamiliar point of view, even if it is one that has been around for some time. There is no research to prove this is happening in India yet. But many years ago, when everyone complained that the internet was destroying our ability to read, the idea was brushed off by techies. It took the work of several social scientists to prove that the internet had indeed made “browsers” and “power readers” of most of us.

The loss of serendipity has similar consequences. If you think that some of the conversations online—say the Narendra Modi versus Rahul Gandhi debate—seem very polarised, without any grey areas, blame it partly on the medium and the way it wraps itself around our very specific demands. That, however, is no reason to go back in the past, because the future is very definitely online.

Correction: In the Wall Street Journal article referred to in this story, the hottest chilli in the world was found in China, and not Assam as an earlier version stated. This has been changed online. The Caravan regrets the error.