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Insights Tag： Netflix

Top 5 Indian Metros Account More Than Half of the OTT Video Content Platform User Base

Young Indians are driving the OTT Video Content market, with 89% of the users within the 16-35 years age group. Male users account for over 79% of the total market.

New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires – June 18th, 2019

Young Indians, under 35 years of age, accounted for 89% of the total Indian OTT video content platform users, according to Counterpoint Research’s India OTT Video Content Market Consumer Survey. Among young users, the age groups of 16-24 and 25-35 contributed equally to the overall market. Male users account for 79% of the total users.

Overall, Top 5 metro cities account for 55% of the total OTT video platform users, while Tier I cities account for another 36% of the users. As per the survey, Hotstar leads the Indian OTT video content market, followed by Amazon’s Prime Video, SonyLIV, Netflix, Voot, Zee5, ALTBalaji, and ErosNow in terms of the percentage of respondents subscribed to each platform. Production house-backed local OTT players, such as SonyLIV, Voot, Zee5, ErosNow, and ALTBalaji, are also competing with foreign players such as Amazon’s Prime Video and Netflix. The market remains highly focused on the ad-based model (AVOD), where advertisements drive revenues. However, subscription-based market (SVOD) continues to grow significantly.

In terms of engagement, Counterpoint Research survey found ErosNow users were the most engaged users, with 68% of its users indicating that they watch content on the platform daily. The platform continues to thrive through partnerships. In India, it partnered with Xiaomi for pre-installation on smart TVs. ErosNow has the highest percentage of its users consuming content on Smart TVs. A total of 27% of ErosNow users watch content on Smart TVs. ErosNow also remains the only major Indian OTT platform to partner with Apple for its’ new Apple TV+ service which will launch across the globe later this year. Further, our survey revealed that 9% of ErosNow’s users see content on the platform for more than 21 hours a week. This is the highest among all other OTT platforms in India.

Exhibit 1: Engagement Levels of OTT Users

Source: India OTT Video Content Market Survey

Commenting on the findings, Senior Analyst, Hanish Bhatia said, “India is a young country and OTT video market is a very competitive space in India at present. Platforms are focusing on price innovation, content creation and acquisition, and partnerships as the engine for growth. The low cost of mobile data and affordable smartphones have revolutionized overall video content consumption in India. However, OTT platforms have struggled to register profits, creating an environment ripe for acquisitions or exits. Having said that, new players continue to enter the market as it is expected to record double-digit growth from subscription revenues during the next five years.”

Key Insights:

Overall Market Demographics:

  • Salaried employees are the largest consumer group of OTT users, followed by students, business owners, housewives, and others.
  • More than one-third of the respondents indicated that they’re inclined to use free services only, while another one-third indicated that they’re paying for the subscription. Remaining respondents were either on a trial period or indicated that their friend or family pays for the subscription cost.
  • The smartphone is the most popular device for OTT video content consumption. Xiaomi is the most popular smartphone brand among OTT users.
  • Jio is the most popular network among OTT users in India, followed by Airtel and Vodafone-Idea.
  • The most preferred language for video content is Hindi and English. Among regional languages, Telegu was found to be most popular, followed by Punjabi, Bengali, Marathi, Tamil, and others.
  • Action and Comedy are the most preferred genres. While preference for Action was highest among male users, Drama and Romantic genre content was found to be most popular among female users.

OTT Video Content Platform Analysis:

  • Local player Hotstar leads the market at present, with a sharp focus on cricket and content partnerships. According to our survey, 56% of Hotstar’s users hail from metro cities. The platform also has the highest penetration of non-paying users.
  • Netflix and Amazon’s Prime Video were found to be highly popular in metros. Top 5 metros account for more than 65% users of these platforms. This was highest as compared to all other major platforms. These two platforms also have the highest penetration of salaried employees.
  • However, SonyLIV scores highest among Tier-I cities. More than 40% of SonyLIV users are from Tier I cities.
  • Voot has the highest penetration of female users. It also has the highest penetration of young users aged between 16-24 years.
  • ALTBalaji scored highest among 25-35 age group users, which account for 59% of its users. Also, the platform is highly popular in Kolkata, with more than one-third of its users from Kolkata alone. This was the highest among all major platforms.
  • ErosNow has the largest share (59%) of its users in the 25-39 age bracket in Tier II/III cities, highest among all major OTT platforms.

Background:

This is a primary consumer survey conducted by Counterpoint Technology Market Research through an online platform. More than 4,000 OTT users participated in the survey which was conducted across Top 25 major cities across India. The survey focuses on OTT video consumer demographics, platform consumption trends, content preferences, content consumption patterns, device and network analysis. Key platforms included in the were Hotstar, Amazon’s Prime Video, SonyLIV, Netflix, Voot, Zee5, ErosNow, ALTBalaji, YuppTV, Viu, DittoTV, Hooq, Arre, and Spuul.

Netflix Q4 2018 Earnings Highlights: International Markets Drive Subscriber Growth

The US streaming giant Netflix reported earnings for Q4 2018. The company spent heavily on building new streaming content assets, while it kept subscribers glued to their screens throughout the year. The analysis below is a review of Netflix’s year-end quarter and key takeaways.

Key Takeaways:

  • Revenue: Netflix’s total Q4 2018 revenue (domestic and international) climbed to $4.1 billion, marginally missing the $4.2 billion industry expectation. This led to a 4% drop in its stock price reflecting investors’ disappointment over the revenue miss, although the stock price recovered later. On a YoY basis, Netflix revenues grew 35% YoY in FY18 and the growth was well spread-out periodically as well as geographically. Netflix also moved up the app download charts, particularly in the US, within the iOS ecosystem. The chart below clearly underlines the growing importance of international markets for Netflix.

  • New Subscribers: When it comes to new subscriber additions, there are multiple positive indicators. In fact, the net addition numbers crossed the management’s own expectations (7.5 million) with 8.8 million new subscriptions in 2018. This continues to come from international markets outside the US. During the last three years, more than one-fourth of the total new additions have come from international markets.

  • New original content has played a key role in international new additions.
    • Birdbox, Bodyguard and You were primary drivers of growth in Q4 2018, globally. 80 million+ households watched Birdbox. Netflix has been quite open about sharing numbers lately, be it on social media or in its recent earnings report.
    • On the local language content side, shows like Elite did very well in Spain as well as with Spanish-language audiences globally.
  • Pricing: Netflix recently revised the subscription cost of its plans in the US. The overall price increase for different plans ranged between 13-18%. This is expected to generate incremental revenue of $1 billion+ in 2019. Commenting on the price increase during the earnings call, Chief Product Officer Greg Peters said, “Management is confident the price hike will not have a chilling effect on new and existing subscribers.” He further added that the company uses overall engagement levels as the key underlining factor that drives the decision making on subscription cost.
  • US Market Saturation: The US is Netflix’s largest and most highly penetrated market. Therefore, YoY net adds are expected to remain low due to higher penetration. However, Netflix is working on multiple strategies to keep the margins growing even with low new adds and a price increase is one of the ways to drive bottom-line growth, particularly in the US. Overall, Netflix believes that the US Internet television market size has the potential to reach 90 million homes, so there is still room for growth in the US.
  • Burning Cash: Negative cashflows remain a key concern for investors. In the fourth quarter, Netflix logged a deficit of $1.32 billion and $3 billion for the whole of 2018. Netflix started investing in original content in 2014, and its content budget has ballooned from $3 billion in 2014 to $8 billion in 2018, along with rising debt (long and short term combined) which now stands at $18.4 billion. Further, the problem is expected to peak in 2019, as Netflix increases its content spends to put pressure on new entrants such as Amazon, Disney+ and AT&T.
  • Rising FX Exposure: Netflix’s foreign exchange risks are likely to grow as the company expands its geographic footprint. At present, the company is using hedging derivatives and natural hedging in which international market spends are paid in local currency, in case it is favorable.
  • Local Content as a Hook for Global Content: Netflix wants to push its global content, as local content represents a minority audience. However, Netflix continues to invest in local content to onboard new subscribers and get them hooked to their global catalog.
  • Speculations for Lower Pricing in Emerging Markets: So far, Netflix has done well even as a premium service across emerging markets, including India and Latin America. It has been successful in gaining new subscribers with a focus on intriguing original content, quality streaming experience, payment channels, and a polished user interface to drive traction on its platform. Therefore, the probability of lower pricing for emerging markets remains low in 2019.

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