India Digital Media Landscape: a first-cut

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Regarding the Video content: Below are some interesting posts related to Video content growth and its dominance in Ad share.

It’s no secret that video content is on the rise. By 2019, video content will be the driving factor behind 85% of search traffic in the US. Whether it’s Snapchat, Instagram, or Facebook, video content on social media is what marketers need to focus on.

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“Brands should anticipate their audience to expect them to offer video content. Those who don’t will be left behind, with consumers opting to engage with brands that tailor their content to consumer preferences. In addition, marketers will be creating more video ads, especially on Facebook and Instagram, as they yield more engagement and higher click through rates than traditional static ads.”

Facebook Watch to overtake Youtube: Only time will tell it, it won’t be cakewalk for Facebook when the competition is with Google, same things were touted when Facebook started giving ads that the google ads would dry up, but that didn’t happen.

As the trends show’s video is the new focus area and Irrespective of the technology to deliver the video content will be served more and more, also as the content creation will get fragmented better it gets for content aggregators, in the end, content owners are the king.

Regarding the Monetization of content, it seems obvious that per view/click monetization will go down with respect to the amount of content creation or it won’t be applicable as the monetization policies will keep getting enhanced/sharpend as per the focus needed from Advertisers also as per the variables like Ad blocker, Type of video(all the genres), Viewer type (Age, gender, class, location, spending capability), total number of view on video, length of video, and ethnicity of content creator and so on.

Rest I think its futile exercise to predict the exact monetization model due to so many variable, but I feel that older content which already has mass appeal should be valued higher in Ad serving business, as it can instantly generate the views.
For Example: in the continuous feed of new videos, I would be reluctant to risk my time on new video rather I would definitely watch a clip from Sholay or any known movie, as I already have an association with it and almost surety of getting entertained.

Also, there is Bias at play “Old is Gold” even in normal day to day things people are valuing older things as precious, even in naming, the old Great Great Grand Father :slight_smile: although its certain that ALL the forefathers were not great but we just call them Great, such a bias won’t go away easily.

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The India Watch Report 2018

Interesting Data Consumption Insights from HotStar 3 years operation. Salient Points to note (From an OTT Platform perspective though)

The Big News:
Nearly 5 times growth in video consumption in the last 12 months.
96 percent of all usage being focused on long form video. This marks an inflexion point in India where the early years of online video were characterized by short form consumption from users deeply fearful of data charges.
The last 12 months have also seen access to data and consumption of video go deeper into inner India. Growth in smaller cities, less than 10 lakh in population, outstripped that in the large metros. And, while the gender gap in access to data persists, affordability is opening up new opportunities for women, with women in smaller cities coming online faster than in the metros.

Other highlights:
Streaming video has hit critical momentum. The Champion’s Trophy Final 2017 on Hotstar hit 4.8 million simultaneous viewers, a record!
Streaming habits have gone well beyond being ‘snacky’ time fillers. More and more users are treating the mobile as their first screen.
Streamers don’t follow stereotypes. Data reveals that consumption habits cut across stereotypes and traditional boundaries. 26% of Game of Thrones viewers also watched Hindi TV shows; 24% of Modern Family viewers watched cricket; and 50% of watch time of Star Plus’s show Yeh Rishta Kya Kehlata Hai, came from men.
While cricket still rules the roost, other sports are sprouting well. VIVO IPL consumption grew nearly 7 times between 2016 and 2017. However, VIVO Pro Kabbadi and Premier League also grew nearly 10 times.

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Impact of 5G networks:

In Layman terms, 5G is basically this: it will bring down the cost per GB, and it will improve the connection lag between opening the data connection from mobile and getting the first data block.
and hence IOT devices can work smoothly.

efficiency – bringing the cost per gigabyte down
digital experience – improving customer experience and cost reduction //Bringing down latency of the connection.
and creating new revenue streams based on 5G and IoT use cases.

Between 2017 and 2023, data traffic is projected to rise at a compound annual growth rate of 40 percent. This means eight times more traffic per site.

and the majority of this traffic would be from Video & IOT devices communicating with each other.

however 5G won’t be coming to India very soon, but impacts are minimal, as for the common user if Video streaming is working fine that means the connection is good,
this is the baseline setup teleco’s are using, irrespective of the advertised speed of 42MB/s or 1GB/s which you never get.

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More and more Indians are logging on to services like YouTube, Hotstar and Netflix on smartphones, according to a recent joint report by EY India and FICCI on the media and entertainment sector. Revenue from films is expected to grow at a slower pace to about Rs 19,200 crore by 2020 compared with Rs 22,400 crore for digital in the same time.

A third of 1.2-billion Indians now own smartphones. About 77 percent consume media on mobile devices, as a price war triggered by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. made data cheaper and faster. Average monthly data consumed by a user nearly tripled to 3.9 GB in 2017, and EY expects it to more than quadruple to 18 GB in five years.

Movie-goers are gradually declining. The country’s largest multiplex chain PVR reported slower-than-expected revenue growth in its most recent quarterly results as occupancy levels fell and footfalls declined, said a Nirmal Bang research report. The occupancy rate has been falling at least since 2015 for both PVR and Inox, according their investor reports.

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The latest FICCI Media & Entertainment Report shows number of interesting trends

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Silly Monks available at IPO price today with a fall from 185 to 120 levels. Any takers? With a profit of about 1.5 Crores, I personally wouldn’t be comfortable paying anything over 20-25 Crores. Current market cap post fall is about 55 Crores.

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Lets wait for results for March 18 & execution for Silly Monks.

Opp is huge & its among duopoly in vernacular southern language mkts specially Telugu.It has exclusive content tie up with one of the leading Telugu prodn house Varaha chalachitram who also have 20% stake in co,also a informal tie up with Bahubali producer Arka films,first gen entrp with good reputation n execution.

PE players have take stake in similar cos at valn of 250 cr in Bollywood like Culture machine etc while its mktcap is 50 cr odd only.

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Relative valuation like that is pretty much like an open outcry auction. It induces a cognitive ease about actual value and the anchoring (eg. IPO price) messes up what someone would actually be willing to pay if they actually put a lot of thought into it with System 2 thinking.

2015 (the year of the digital wallets) saw a lot of such acquisitions be it Snapdeal acquiring Freecharge for $400 million and selling it to Axis bank for $60 million in just 2 years in 2017 or the crazy valuations that most these companies had in 2015 purely on relative basis.

If you had 55 Crores, will you go and buy Silly Monks outright for Rs.55 Crores if you knew they made 1.48 Crores in profit last year and had a book value of about 5.6 Cr? Isn’t there a lot of risk in the business model to be paying that kind of money?

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Brother dont buy it or sell if u already hold if u dont have the conviction.Period.

I have made an option type of investment in its ipo with a 2 year pt of view till it migrates to main board along with some other bets in SME stocks.I will be happy if 55% of them work out…

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Pratilipi, India’s vernacular language publishing medium, has collected over 23,000 writers and over million readers

Some radical thinking on paying users for the digital data. Facebook and the other technological Goliaths offering free online services — from which they harvest data from and about their users — should pay for every nugget of information they reap. The European Commission proposes to impose a tax on the revenue of digital companies based on their users’ location, on the grounds that “a significant part of the value of a business is created where the users are based and data is collected and processed.”

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Some of the OTT players are planning on becoming very large content producers. Netflix is leading this race.

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Very good overview of Media landscape by Crash course:

Key Fact: In US avg person is now consuming almost 10hrs daily media, that is massive 40% of the awake time :face_with_raised_eyebrow:



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A presentation on “Changing face of indian TV”

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Samir Nair says all mediums to grow together, digital media cannot grow in isolation. Good insights must watch : https://www.bloombergquint.com/business/2018/03/15/human-attention-is-the-new-oil-media-veteran-sameer-nair-says

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As we do not have separate thread for SillyMonks which is (ONLY) one of the listed players in digital media space, I’m putting 2 interesting developments here.
Silly Monks is co-producing TV serial ( may be sold to OTT players rather than regular traditional TV serial ) on Chanakya which will be showcased at 2018 Filmart exhibition at Konkong, this will be targeted to international audience.

Another development is also from Silly Monks which is working on another venture to bring the stories around Taj Mahal in 100 Episode TV serial.

It will be interesting to see how this thing develops in coming months.

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https://www.nseindia.com/sme/marketinfo/corporates/announcements/announcementDetails.jsp?seqId=2274

Deal worth $500,000 closed with Chinese territory for internet and TV rights by Silly Monks. Details of deals (or no deals) with Japan, Korea, Indonesia, Taiwan, Malaysia and Thailand yet to come in.

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Digital media is a space which has intrigued me always and have been following it from two hats - Cosumer & investment banker. Donald has done an awesome job in putting forth the entire landscape. Although he has restricted himself to primarily video chain and not content in general.

While consumption is exploding through digital channel, unfortunately I believe none of the Indian players will be able to achieve scales which can deliver returns to public equity investors. There will be few companies who will be successful but they will be small and generate value only for founders / employees / early stage investors.

Every human being aspires to upgrade their lifestyle and upgrades usually mean moving closer towards English language and western habits. Increasingly English is becoming the first language of Indians. I myself probably watch more English TV shows & movies as compared to Hindi. And my hunch is everyone is moving in that direction. Or at least everyone who can pay for a subscription or who advertisers care about are moving in that direction. I want my Game of Thrones episodes as soon as they are available to my friends in US.

Coming back to business models

OTT Platforms
Only freemium/advertising models will not work. (Cost of content + Cost of delivering content at HD quality) Vs Indian CPMs make it a loss making proposition. One may argue that OTT platforms promoted by content producers (HotStar, Sony Liv, Ditto TV) may have an advantage but then I am not going to pay subscription fee for two separate platforms and thus would expect a platform to provide me all the content that I want in all the languages (Atleast Hindi & English … Yes I am a hypocrite as I am asking for Hindi which I watch less than 10% of my time). And till now none of the Indian players have been able to do this.

Thus I have a strong belief that global platforms like Netflix or Amazon Prime have an advantage here. Gradually they will add more Indian content and will attract to people like me.

MCNs
This is an interesting business model but my hunch is it will be difficult to achieve scale of say INR 100cr in revenues by just doing this. So in my view (I have limited understanding of this space) we will not be able to find opportunities to invest. Yes Silly Monks is there and I am following them but they are way too small right now to convince me that they have a business model which will allow them to reach from 15 cr to 50 cr and 50 cr to 500 cr (50 to 500 is where I will be interested in).

Content Creators
I expect a lot of consolidation to happen in this space. I believe this is a space where we would see large studios emerging who will distribute their content across the channels. I don’t think short form digital content creators (example AIB) will be able to show good growth once they reach 20cr in earnings milestone and will essentially become acquisition targets.

To sum up, this space has got all the eyeballs but probably no opportunities to make money for a public equity investor.

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Detailed analysis on OTT disruption in the Indian media sector by Amit Mantri OTT Disruption

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Hi

Today prof Damodaran has published his views on Netflix on his blog. Worth a read.

Regards
Deepak

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