Sameer Nair, group CEO of Balaji Telefilms Ltd, has spent the last 10 months agonizing over the type of content that the company’s brand new initiative ALT Digital Media will showcase when it goes live in June. The subscription video-on-demand platform is currently going through its beta testing stage, says Nair. This year will be an important one for Balaji as ALT is the content company’s first B2C (business-to-consumer) business. Balaji is a producer of Hindi films as well as television serials for private channels.

Thirty minutes away from Nair’s Mumbai office, Gaurav Gandhi, chief operating officer of Viacom18 Digital Ventures, is equally stressed working 24x7 to get his video platform out before the end of this fiscal year. Also known as over-the-top (OTT) services, the video-on-demand brand from Viacom is called VOOT.

To be sure, these are just two of the several new video-on-demand services that will make their debut in India this year. Ronnie Screwvala and B. Saikumar are also busy putting together videos, podcasts, documentaries and other original content for Arré, the brand new content platform under their start-up UDigital Content Pvt. Ltd. In January, Netflix, too, announced its India launch. The company describes itself as the world’s leading Internet television network with more than 70 million members in 190 countries enjoying more than 125 million hours of TV shows, films as well as original series and documentaries.

These new platforms will be joining the existing dozen or so already up and running services some of which—like YuppTV and Hotstar—were launched in India last year. The video-on-demand platforms are either start-up ventures (like Sequoia-backed PressPlay TV) or promoted by broadcasting networks (like SonyLIV by Sony Pictures Network and dittoTV from Zee Entertainment) and film and television production firms (Eros Now and ALT, respectively).

It’s easy to see why the sector is witnessing explosive growth. For starters, the ecosystem that supports video-on demand offerings has gradually made progress: smartphone penetration is growing, and the quantity and quality of bandwidth is improving. Besides India’s young audience, with 50% of the population under 25, is comfortable consuming entertainment on-the-go and on devices other than television, says Uday Reddy, founder and CEO of YuppTV that offers both live and catch-up television options over the Internet in addition to a library of films.

Another factor that may probably help India embrace OTT faster is the fact that almost 90% TV households in the country are single-TV homes. This will drive the use of personal devices for entertainment consumption. Also, unlike in the US, the digital video recorder penetration in India is pretty low, making consumers turn to OTT services for catch-up content.

A couple of recent reports on the media and entertainment industry also highlight OTT’s bright future in the country. According to Deloitte Technology, Media and Telecommunications Predictions 2016 report, “Over-the-top is likely to bring new dynamics in digital media." A few reasons why OTT will gain market share in coming years are the three Cs—convenience, content and control. “4G will bring the complete transformation of the current television viewing experience and mark a shift in the control from the broadcaster to the consumer," said the Deloitte report.

Another report (titled Future of Digital Content Consumption in India) by consulting firm EY predicts an increasing proliferation of digital media consumption in rural markets driven by smartphone adoption. Smartphone penetration in India is expected to grow to 520 million by 2020, the report said. “This use of smaller screens on personal devices will fuel ‘personal escapism’ or watching content individually, with 45% of all content consumed expected to be on the small screen by 2020," it added.

That is not all. The EY report said that the next wave of growth in Internet penetration will come from tier II and tier III cities, enabled by wireless mobile Internet. By 2020, of the 650 million Internet users, 50-55% are expected to be in rural areas.

By 2018, the country’s earning population (above the age of 25) is expected to grow from 40% of the total population to 54%. In addition, mobile wallets will see 60x growth in the number of transactions by 2020. This increase in the earning population and ease in the ability to pay will lead to higher spending on media and entertainment, added the EY report.

Against this backdrop, firms offering video-on-demand services are betting on the future, and preparing their content and business strategies. ALT from Balaji, for instance, plans to focus on original premium content. It won’t be an aggregator. Nair says he believes that for OTT to work and people to pay for content, it has to be both exclusive and compelling, besides being priced right.

Abhesh Verma, chief operating officer of nexGTv, an OTT platform, says his company is turning to original content too after being a mere content aggregator initially. Recently, it launched a 14-episode mobi-serial with actor Priyanka Chopra. When it launches, VOOT will showcase content from Viacom’s network of TV channels (Colors, MTV et al) plus offer original content.

Content is a function of capital, says Rajiv Vaidya, CEO of online video streaming service Spuul. Clearly, building an OTT platform does not come cheap. Content is a big cost component, as are marketing, technology and customer acquisition. So the platform owners either follow an advertising-led or subscription-based business model. Spuul is currently ad-free and charges 150 a month for its content. It claims its business is growing 20% a month.

Currently, finding a sustainable monetization model is key for all OTT firms. Whether it is subscription or advertising-led, what is clear to everybody is that there is no free lunch. Interesting, original and premium, and widely consumable content will require someone to pay. It’s a matter of time before everyone finds their sweet spot, says Verma of nexGTv.

What is happening in the OTT services sector right now is similar to what happened to private satellite television in India in the early 1990s. If people were suspicious about the longevity of the growing number of private TV channels then, they are wary of the dozens of video-on-demand platforms coming up now. However, what must be remembered is that today we have more than 700 satellite channels in India.

So in five years, we may see a different world of media and entertainment with OTT proving to be the technology of the future.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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