Amazon stirs up content market in India

Smaller players could feel the heat from its cut-price videos

Bookending the year for the video streaming industry in India, American e-commerce giant Amazon announced the launch of Prime Video. Earlier this year, another American biggie, Netflix, entered India as part of its global expansion plan. Needless to say, the two American players caused a stir with their content and pricing.
 
Netlfix’s entry into India was about access to content that was making waves the world over. While there were sceptics who felt that Netflix’s journey would be a rough one, given the widespread resistance to paying for online content, there were others who welcomed the move as they felt Netflix would eventually pave the way for paid content in India.

 
With Amazon, it was the pricing that got people excited. At Rs 499 annually, the service is among the cheapest in the country:  the annual subscription rates start at Rs 6,000 for Netflix, Rs 2,400 for Hotstar and Rs 600 for Eros Now.
 

In many ways, Amazon has set the pace for pricing in India. “Netflix set the upper benchmark, especially for players targeting the top two to five per cent of viewers. It wasn’t a mass targeted pricing. So, after the launch of Netflix at Rs 500 a month, Hotstar, for instance, would have found it easier to launch its premium HBO content and movies at Rs 199 a month. With Amazon, the lower benchmark has been set for the players looking at the mass audience,” says an executive from the over-the-top content industry.

 
However, few see Amazon’s streaming service as a challenge for the big local players, although they agree the smaller players may feel the heat from Amazon’s pricing. Zulfiqar Khan, business head, Eros Now, says: “We launched our paid services starting at Rs 49 a month long ago. So in a way, Amazon’s pricing follows in our footsteps. Pricing depends on the company’s perception of the market and its own strategy, but I don’t really see it a challenge for other players as such.”
 
Room for all
 
The fact that the over-the-top content industry is still in its infancy in India will work to the advantage of local players. “While online video has crossed 100 million users, there is a big market yet to be tapped. Given how large the market is and the scale of it in the next few years, launch of a new service has no direct bearing on other players’ growth. All the players are focusing on acquiring new users and positioning themselves in the marketplace,” says Gaurav Gandhi, COO, Viacom18 Digital Ventures (the entity that runs VOOT).

 
Many believe it would have a limited impact even on Netflix, which keeps its prices in India on par with those in other countries. The reason for such a strategy is that it enables global access to accounts. So, if customers from India travel to another country, they can still use their Netflix account, only they will be able to access the content library of the country/region they are accessing the service from.
 
Amazon’s pricing, on the other hand, is not only competitive for the domestic market, it is significantly lower than the rates in the US. In fact, in dollar terms, the Indian yearly price is less than one month’s subscription to Amazon Prime Video in the US.

 
“We are a customer obsessed company and so we try and customise our offerings according to the market we are in. We manage the pricing for each market accordingly. We want our customers to enjoy the library of international and India content and we realise that Rs 499 a year for Prime services is a competitive price point for India,” says Tim Leslie, vice-president, Amazon Instant Video.
 
For many reasons, the two companies can’t really be pitched against each other. Abhesh Verma, COO, nexGTv, says, “While Amazon and Netflix may offer similar services, the two entities are very distinct in the way they operate. Netflix has a much bigger user base which dedicatedly consumes video content offered by the platform. Amazon, on the other hand, is a value add-on for users of Amazon.in. Comparing the two services is premature and unjustified at the moment.”

 
Those with membership to Amazon Prime, which gives customers access to a variety of services including free shipping, can access Prime Video at no extra cost.  This is similar to Amazon’s pricing model in the US, where Prime users get video content bundled with their yearly subscription fees.
 
Deep pockets
 
While Amazon’s losses in India more than doubled to Rs 3,572 crore during the twelve months that ended March 2016 as it stepped up its investments in the country, Verma says given the scale of Amazon’s business and its deep pockets, “the brand can perhaps afford to operate on heavy financial losses for longer than several other players in the market.”

 
Will the entry of two big players hasten the consolidation wave in the over-the-top content industry? Experts think not.
 
“For acquisition or consolidation, there has to be something complementary/synergistic in the two companies or a robust established business model of one that will add immensely to the other. In the current scenario, all players are in the digital video business for very strategic reasons and it is still early for one to see consolidation in this space,” says Gandhi.
 
Yet, while there is space for smaller players to grow, a few trends are clear. One, original content will play a crucial role in garnering market share in 2017. Currently, Netflix has the upper hand in this area. Being a content-focused company with a global footprint, it has more original content than anyone else.

 
Catching up will not be easy for Indian players. “Building an original content library takes time, and it involves serious investment. These are limited episode, highly scaled series and cost economics work very differently compared to Indian TV fiction. Audiences want much differentiated stories when it comes to digital originals from what they get on TV. So it is important to get the writing and execution right and tailored to this audience’s tastes,” Gandhi says.
 
A number of original shows, meanwhile, have been lined up for next year: Eros Now will launch at least six new programmes in 2017; Netflix will release its first India production in association with Phantom Films called Sacred Games, which is based on a book by the same name; and Amazon has nine new shows planned for the year.