With its diversified cultural background and people who are really talented, India seems to have the DNA of a major entertainment country. While most people still think of Bollywood and cricket when they think of India, internet penetration has made a dramatic impact on the country’s entertainment industry.
Data will be cited to explore the development and competitive landscape of different entertainment segments in China and India (news, video, music, live streaming, and short videos). This article will present a comprehensive roadmap and vision of India’s online entertainment business, exploring its investment value and identifying potential investment targets.
I. Overview: Entertainment Business in China and India
1.Traditional entertainment dominates the Indian industry and infrastructure is still lagging behind
According to a 2017 report KPMG published on India’s entertainment industry, traditional entertainment like TV, print media and movies still dominates a major part of the country’s entertainment industry. In terms of market shares, TV accounts for 46%, followed by print media (24%) and movies (11%). As for advertisement, both TV and print media command a 38% market share while 5% of the budget goes to radio. The Indian market is close to where China was in 2005.
a. TV: rural areas have more TVs than cities
Among the 183 million Indian households that have TVs, there are more rural families (99 million) than urban ones (84 million). The country has about 780 million TV viewers, with 99% penetration in cities and 60% in rural areas. About 80% of India's cable TV users are analogue service subscribers, while China has achieved that figure between 2008 and 2009.
2.Over-dependence on ad revenues has caused much pain for India's online entertainment industry
As India’s disposable income per capital is lower and most people are not willing to pay for services, Indian operators have reported average revenue per user (ARPU) of about US$2. The figure is quite low even for a developing country, and is less than one fifth of China's.
The urban-rural divide is also bigger in India. Statistics from Care Ratings show that ARPU in India’s tier-1 cities (165 rupees) is two-times higher than those of tier-3 and tier-4 cities (98 rupees). Therefore, revenues from advertisement have easily exceeded subscription earnings and become the main source of income for India’s entertainment sector. In comparison, while advertisement still accounts for a big part of Chinese content platforms’ revenues, its share has been declining since 2014. Consumers start to realize that they have to pay for content, and other monetizing methods like e-commerce and derivative revenue are also emerging.
By 2025, the size of India's entertainment industry will be one third of China's in 2016
India's GDP per capital was US$1,710 in 2016, which is about the same level as China's in 2005. Entertainment spending has grown significantly as personal incomes increase. As such, India’s video, live streaming and music segments are at where China was around 2010. Lower personal incomes and progress of the industry will be key factors constraining the entertainment industry.
An Ernst & Young report on digital entertainment found that, in India, only 1% of mobile users (or less than 5 million people) are willing to pay for legitimate mobile content. The percentage is also not high in China but already stands at more than 10%.
As urbanization continues and GDP per capital rises in India, Cheetah Data conservatively predicted that by 2025, the size of India's entertainment industry will be one third of China's in 2016.
3. India's online entertainment business is maturing with the influx of capitals: Western platforms take the lead while Chinese players are tapping into the market one after another
Looking at the development of India’s online entertainment sector, it’s easy to find that many segments have been dominated by Facebook, Google and big players from Europe or the U.S. who have entered the Indian market at a relatively early stage. For example, YouTube, Google News and Facebook have tapped into live streaming services in the country. Also we have seen a lot of Chinese companies in the past two years, including UC News. According to app ranking from Cheetah Data, live streaming apps like Bigo Live and Live.me, and short video clip maker VivaVideo, have also grabbed their shares in the Indian market.
Despite Western platforms dominating certain segments, Indian players still control a majority part of the market. On one hand, local companies know what users want and need, and they are also familiar with other local companies’ strategies; on the other hand, the capital market’s optimism towards India also helps bring in huge amounts of investment for local startups. Therefore, despite being late starters, many Indian startups have achieved certain status in the market and the next unicorn company might be forming. Meanwhile, India’s diversified culture and language background is also leaving much room for imagination.
II. Development and competitive landscape of online entertainment segments in China and India
Cheetah Data will now explore the development and competitive landscape of various entertainment segments (news, video, music, short videos, and live stream services) in China and India based on actual numbers and figures.
a. India's video segment is at where China was in 2010
Since Google acquired YouTube in 2006, China’s video segment has been emerging and local players started to invest in video sharing services. After Google’s withdrawal and years of competition in the business, China’s video segment has entered an era of monopoly as iQiyi and QQLive are two apparently leading apps. In 2017, China has 525 million mobile video users.
When the internet base is growing in India, it basically skipped PCs and went directly to the stage of mobile devices. In 2013, India’s internet user base increased rapidly as budget smartphones became common, and Jio’s low-price strategy sent service rates significantly lower. Currently, video apps have a 52% penetration among Indian netizens.
This is about 240 million users, which is equal to China's user base in 2009.
As the first device most Indian users use to connect to the internet for the very first time is Android phone, the operating system’s pre-installed app of YouTube would naturally become their first choice. Thanks to its rich content and maturity of service, the app has grabbed a majority part of the market. Therefore, India’s online video sector is unlikely to experience the entire process of product development followed by competition among big players like China has had.
In terms of development timeline, India is still at where China was between 2006 and 2010, or between netizens started uploading their own works and platforms began purchasing copyright content. In view of that, Cheetah Data believes that India’s video segment is at where China was in 2010.
b. Video apps' competitive landscape: content is king everywhere
YouTube has absolute dominance in India's video app market, followed by Hotstar whose weekly active users (WAUs) are only one sixth of YouTube’s. Hotstar also dominates in the tier-2 category as its WAUs are more than twice as many as the No.3 player.
Aside from these leaders, competition remains extremely fierce in the market. Among video apps in India, there are apps associated with TV networks like Hotstar, and services created by TV/film production companies. For example, the No.11 ALT Balaji is a subsidiary of Blaji Telefilms. And not to mention omnipresent operators like Jio and Airtel. Jio TV, JioCinema and Airtel TV are all among the top 10 apps.
The No.8 app Amazon Prime Video was launched in India in late 2016. In its first six months of operation, WAUs continued to soar and quickly surpassed AirtelTV and Netflix, who had entered India in early 2016.
Being the largest platform for user-generated content (UGC), YouTube has apparently dominated the Indian market and it has attracted the most influencers and video content providers in the country. But YouTube seems to lag behind Hotstar in self-produced series and drama content, while other U.S. players like Amazon Prime Video and Netflix have started to acquire local Indian content.
In terms of development trends, Indian-language comedies and music videos will grow further as mobile internet becomes more accessible. The target viewers of web series are young white-collar workers who have decent incomes in tier-1 cities, because such content takes more time to watch, needs more mobile data and viewers will incur data charges. Subscription fees of these platforms are still a barrier for some low-income users. For example, Netflix charges a monthly subscription fee of 500 rupees (about US$8) while Amazon users have to pay an annual fee of 999 rupees (about US$15).
In comparison, China’s subscription-based video app market is more stable. It has also entered an era of monopoly, with nearly 80% of the market grabbed by iQiyi, Tencent and Youku, or so-called “BAT camp” (Baidu, Tencent and Alibaba). China’s video apps continue to improve their competitiveness of content resources, as original productions and variety shows have become secret weapons to driving viewership. When major platforms are building all-embracing entertainment empires, they are also seeing video apps as a one-stop content portal.
What makes India’s video app market different from China’s is the dominance of YouTube. The market also has to deal with the reality that users are less willing to pay for services. In an era when content is king, many foreign apps are having a hard time adapting to India’s market. However, local video apps are also unlikely to achieve steady traffic growth and a stable competitive landscape in the near future.
2. Short videos
a. Fragmentation: the product of a mobile internet era
A clear fragmentation of time can be observed when mobile internet users consume content, and this is true in both China and India. China’s video and short video segments are so mature that some sub-segments and vertical players have started emerging, including Meipai, a video platform with flattering filters, and music-oriented social app Tik Tok.
In comparison, India’s short video market is still dominated by standup comedy, musicals and skits. The distribution channel is centralized, while other approaches, such as short video-based social apps, are still at a nascent stage.
b. Competitive landscape for short video apps
Enthusiasm in short videos continues in China, and short videos may become the next hit in India
Ranking by Cheetah Data shows that there is no apparent leader in India’s short video market and services are not diversified enough. Most of the top-ranking apps come from foreign countries. The No.1 app is China’s Xiaoying, followed by German lip-syncing app Dubsmash.
For the past six months, WAUs of the top three apps were all rising. The No.1 app VivaVideo and No.3 musical.ly grew faster.
YouTube India recently claimed that content with Indian dialects are becoming the company’s star product in the country, as views have doubled in the past two years. 40% of the views come from overseas Indians.
Despite that short video production and the entire ecosystem are still at their nascent stages, and production and distribution of content are less sophisticated, user demand remains high. Statistics from Google showed that 87% of Indian netizens watch short videos via phones every day. By 2020, 80% of the internet content will be short videos.
India may see an explosion of PGC (professionally generated content) and UGC production in the next two to three years. Localized content speaking different dialects may bring growth momentum for the short video segment, and short videos can become the next hit for India’s mobile internet industry.
Comparing to the stagnant atmosphere in India, the Chinese short video market has remained active. As a war of size continues, big players are entering the market for bigger shares of the market. In the first half of 2017, Tencent spent a whopping US$350 million for a stake in Kuaishou, while Alibaba announced Tudou will transform into a platform for short videos. Toutiao.com is seeking market segmentation with three apps, and both Toutiao.com and Alibaba have spent huge money to support short video creators.
According to app ranking by Cheetah Data, China has apparent leaders in the short video segment and more apps are tapping the short video market via sub-segments.
In terms of content production and distribution, there is quite a gap between the Indian short clip market and its Chinese counterpart. It may be hard to have dominant apps like Kuaishou, but the case of Toutiao.com, who taps the short video market via different segments like news, entertainment/showbiz and creative video-based social services, may help Indian players think out of the box. Big platforms will have bigger chances taking pre-emptive moves in the segment because they know the Indian culture well.
3. Live streaming services
a. India's live streaming segment is at where China was between 2010 and 2011
India only has 20 million broadband users. While data rates are relatively lower there, watching low-price video for an extensive period of time is still an expensive habit. Therefore India’s live streaming segment is still in its nascent stage, and it is at where China was back in 2010-2011.
b. Competitive landscapes for live streaming apps
China has exported services to overseas markets, while India has not yet seen signs of a boom
Thanks to the emergence of internet celebrities and people’s enthusiasm in videos, prospects look good in India’s live streaming market. However, there are few live streaming platforms in the country. Only two apps, Bigo Live and Live.me, have stood out in the market but both can be regarded as exports from China.
Bigo Live is ran by Pagoda Orchard Industry Development, a company built on YY Inc.’s mobile arm. The service can also be seen as a product YY designed exclusively for overseas markets. Live.me is a live streaming platform under Cheetah Mobile.
In March 2016, Bigo Live started to focus on young users in Southeast Asia. Live.me entered India in early 2017. From the perspective of numbers, Bigo Live’s WAUs are three times higher than Live.me’s. Both products have over 100 average weekly activations, signaling that they enjoy higher user stickiness. Live.me performed better in activation numbers.
In terms of WAUs in the first half of 2017, Bigo Live had some ups and downs but its performance was basically steady. Live.me maintained an upward curve and is growing rapidly.
While the atmosphere is stagnant and cautious in India’s live streaming market and foreign services are being introduced into the country, China’s live streaming market experienced an explosive first year in 2016 amid a craze hyped up by the influx of investment and in-app tipping for content creators.
The competitive landscape of China’s live streaming apps has largely stabilized. When looking at the app ranking published by Cheetah Data in October 2016, only one third of the apps report more WAUs as size of the market is pretty much fixed without much room for further growth. In terms of parent companies’ sizes, most of them are supported by big companies or big investors, or both for some services.
While we can say that India’s live streaming platforms are copycats of the Chinese model, and Chinese apps have started tapping into the Indian market, India may be unable to have a stellar first year like China did. Internet infrastructure is less advanced, and people are not in the habit of using digital payment tools— these are creating barriers to the development of Indian live streaming apps. All Indian live streaming apps have their payment handled by Google Pay, but the payment process is complicated and failures are quite common.
In addition to these independent live streaming apps, social giants like Facebook, Instagram and Twitter have also added live streaming services. The benefit of pre-installation is that users don’t have to download new apps to shoot live videos. These social giants have contributed to most of the internet traffic in the Indian market.
As India's mobile internet, influencer community and user enthusiasm in videos are all rapidly growing, there is no doubt that the outlook is bright for the country’s live streaming market. Just like videos and short videos, localized content will be the key for live streaming apps to achieve breakthrough in India.
III. India's local entertainment industry looks good but has a longer monetization period
Investment opportunities do exist in India’s entertainment industry: foreign players dominate as major platforms, but IP and content are the real cores of the entire ecosystem and they will be the key for players to succeed.
The market will continue to request for and recognize products of good quality and platforms with high monetization value. As India has a highly diversified cultural and dialectal background, there is much room for the creation of localized content in the early stage.
Overall, India’s online entertainment industry is still at its early stage when compared to China, and a mid- to high-speed growth is expected for the following five to ten years. We believe that India’s local entertainment business has great potential but will show a longer monetization period.
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