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Business News/ Technology / Tech-news/  TMT convergence: Future of media, and entertainment sector

TMT convergence: Future of media, and entertainment sector

Convergence between technology, media and telecom companies will be crucial to attract and retain eyeballs

YouTube has been able to successfully tap into the Indian market, with over 225 million active monthly users. Photo: iStockPremium
YouTube has been able to successfully tap into the Indian market, with over 225 million active monthly users. Photo: iStock

As one of the world’s largest data consumers, media consumption habits of Indians have changed. While traditional TV-based family viewing is still strong, we are moving to an individualistic, more personalized entertainment experience through video-on-demand (VoD) platforms and mobile screens. Even as technology and telecom companies have started looking at content creation and distribution seriously, broadcasters and production houses too recognize the need to reach consumers directly through their own digital platforms, instead of relaying content through intermediaries. This essentially means that technology, media and telecom (TMT) players are not only competing but also partnering with each other.

What’s driving this convergence

Rapid increase in penetration of smartphones, driven by affordable handsets, and a drastic fall in high-speed data costs post the start of services by a new entrant in September 2016 have helped make data usage ubiquitous in India. According to the India Mobile Broadband Index, the average price of an entry-level 4G-capable device fell from 3,000 in CY16 to 1,500 in CY18. Average data costs (for GSM subscribers) fell from 205 per gigabyte (GB) in Q1 FY17 to 15 per GB in Q4 FY18, according to the Telecom Regulatory Authority of India (Trai). This has not only catalysed the growth of data usage in urban India but also brought rural areas into the fold of digital consumption.

What’s in for TMT companies

Technology: While technology firms such as Google, Facebook and Amazon have distinctive businesses, the one thing they have in common, apart from being tech-driven platforms, is that they have a wide user base that puts them in a position to control and manage content delivered through their platforms. Further, according to the “KPMG Media And Entertainment Report 2018", nearly 80% of the people in major Indian cities are consuming news over social media platforms. Therefore, to tap into the huge potential of digital media consumption, these firms are investing heavily, not just in content distribution but also original content creation. For instance, according to the report, Amazon has committed $300 million for development of original video content for the Indian market. Similarly, Facebook has reportedly started testing its dedicated video platform, “Watch", in India, and the company also displayed strong emphasis on acquiring sports properties in the country with its massive but unsuccessful bid of $600 million for the digital rights of the Indian Premier League (IPL). Moreover, Google is also planning to introduce original video content in India to take on the likes of Netflix, Amazon and Hotstar. Currently, Google-owned YouTube and Facebook account for nearly 60–70% of the total online video consumption in India. YouTube is also the largest digital video platform in India with 225 million active monthly users.

Media: With digital platforms, broadcasters and content creators have established a direct connect with consumers, gaining access to crucial consumer behaviour data while also generating a direct revenue stream. The success of over-the-top (OTT) video platforms depends primarily on the depth and quality of content, effective distribution and robust monetization models. To win on the content and distribution front, media companies are using various technologies and concepts such as Big Data, Artificial Intelligence (AI) and Blockchain--aiming to predict and create content that consumers want, personalise it as per their preferences, optimise the streaming to provide a seamless user experience, and also manage transactions in a transparent manner. Monetisation, though, has been tricky in these early stages of development with players primarily adopting one of the three models--viz. freemium (paid access to premium content with the rest of it free), purely subscription-based and purely advertisement-driven.

Telecom: These companies, which provide the entire digital infrastructure, have been looking to capitalise on their own network and not just act as a ‘dumb pipe’. They are betting on content to push data usage on their networks, while also differentiating their offerings from other telecom players. This need for differentiation through content arose in the wake of commoditisation of voice services over the past several years. To support the consumption of data, telecom operators are increasingly looking at content as a differentiator—both in terms of customer acquisition as well as retention.

What does the future look like?

It would be safe to conclude that business models around standalone product offerings—whether these are prime time shows on traditional TV, voice and data packs from a telecom operator, or the ability to stay connected on a social media-based tech application—may not remain relevant in isolation in the future. It is the war of ecosystems that is likely to pan out in the TMT space, and the leaders would most likely be organisations that are able to smoothly merge these traditional business models, and ensure customer stickiness on their ecosystems.

Note: Data for this report has been taken from KPMG’s Media and Entertainment Report 2018- Media Ecosystems –The walls fall down

Mritunjay Kapur is Partner and Head (TMT), KPMG in India

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Updated: 01 Oct 2018, 12:32 PM IST
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