Predictions 2022: OTT eyeing TV's $7.2 bn revenue, says Sameer Nair

Year-end predictions always foreshadow promising futures. The illusory and festive passing of yet another anniversary of Earth going around the Sun heralds new beginnings, resolutions and hope. The reality is of course much simpler. The future is the momentum of the recent and immediate past, the direction and velocity mostly set and events already in motion. This new year, 2022, is no different, especially for the media and entertainment industry.

For the past 6 years, the digital universe has been growing exponentially. Since the Telco Wars of 2016, data prices crashed and availability of cheap devices triggered rapid connectivity across the country. While social media was already a decade old by then, the global streamers started making their presence felt even as traditional broadcasters were adapting their business models and understanding of consumer behaviour to a new digitally connected world. The pandemic in 2020 totally disrupted our lives, but amongst a host of terrible outcomes, had one cheer for the M&E industry... it dramatically accelerated adoption of the already fast growing digital services, especially streaming apps, popularly known as OTT.

As we emerge from an abating second wave, one data point jumps at us. The number of users of digitally connected services — subscriber and free/ad-supported — has grown from tens of millions to hundreds of millions, a tenfold increase at the very least, and this audience now straddles a very large swathe of gender, age, social and economic demographics.

Traditional cable and satellite TV connectivity touched 197 million homes this past year. At approximately 5 per home, this is a billion Indians who have access to television, and pay for it. At an average of $3 per home per month, this adds up to an annual revenue of $7.2 billion. Over the past two pandemic years, downloads of OTT apps has risen from single digit millions to now close to 50 million paying subscribers. Since most traditional TV content is also streamed catch-up and/or mirrored on OTT, it is fair to assume that consumers are not going to continue to pay for both technologies offering the same content. A fall in C&S connectivity and a cannibalisation of the low-hanging $7.2 billion subscription revenue from TV to OTT is obvious; how quickly is hotly debated.

Another developing trend which will see action in the coming year is fragmenting ad revenues. While the overall pie continues to grow – advertisers need to reach consumers – consumers increasingly try and skip ads. But consumers also love free stuff, and since there is no free lunch, content will have to be subsidised by advertising. Meanwhile, a large section of the audience is gradually moving to an ad-free universe. The most interesting data point of recent times – the premium Netflix service at 220 million subscriptions worldwide, and at 4 people per subscription, is close to a billion upmarket customers globally who don’t come in contact with any conventional advertising messages while getting their daily entertainment fix. As the streaming market expands, the implications of this trend for advertisers and ad-revenues is staggering.

More than just ad-free, what OTT has introduced consumers to when compared to traditional linear broadcast television feels like fantastic science fiction. No appointment viewing, binge watching, resume watching, you may also like, watch anytime-anywhere, exclusive and original content, better production values, content without borders and beyond languages, all next to each other... the list of pluses is endless, and suddenly makes TV feel very low-tech and last century. Pre-2020, it was primarily young adults and early adopters, but the pandemic has allowed our parents and grandparents to also get introduced and addicted to OTT. Eventually, life will return to normalcy, theatres will reopen, but there is no putting the OTT genie back in the bottle.

Going forward, the quality and texture of content will improve. The initial surge of sex and violence will gave way to accommodate more varied tastes, become more niche and also more universal. There will be high quality content for a mass of niches rather than the existing one-size-fits-all TV model. The global streamer has truly destroyed all borders and boundaries, and we are well on our way to live in a global village, consuming content from anywhere, everywhere. Since all shows and movies can simultaneously co-exist on the same platform, this democratisation will allow creators from smaller regions to strut their stuff on a national and global stage. We are already seeing that happen with shows like Squid Game and Money Heist attracting global audiences, and this trend will accelerate in 2022. For the Indian creators, the breaking of the language barrier significantly expands the market for the south and east into the Hindi heartland, and beyond. The Great Indian Kitchen is a great example of a little gem in Malayalam being discovered by audiences because of the global streamers. More will follow.

Another big trend playing out is the endgame battle between legacy media and new tech giants. All over the world, traditional companies are allying, merging and collaborating with each other to create larger entities that can withstand the ginormous wallets of the tech giants. The recent Zee-Sony merger is an example. Earlier Discovery-Warner, and before that Disney-Fox-Star took the same route. We will see many such M&A deals even as the technology companies try to gobble up legacy media assets to add content muscle to their offerings. Amazon buying MGM is just the first of more to come.

Finally, snapping on the heels of these seismic changes is the next big wave whose momentum is already building up. The digitally connected globe will be rapidly overwhelmed with immersive experiences in entertainment, news, gaming, social, commerce and engagement. The much touted Metaverse is a ‘Second Life’ for real; it’s just a matter of time. It has been famously said that “the future comes at us in waves, each new wave higher, and the interval between waves, shorter”. Turbulence expected; fasten your seatbelts!