The recent decision of major telecommunication players like Bharti Airtel, Vodafone Idea and Reliance Jio to up their tariff rates by nearly 40% will only have marginal impact on the business of video streaming services, an industry whose growth is directly proportional to the Internet data people consume.
“There is likely to be some impact on consumers on the fringes of the pre-paid segment. These are probably people who are constricted from an income perspective and recharge their data in small amounts," said Jehil Thakkar, partner at Deloitte India.
Thakkar said the fact that video streaming has achieved a kind of utility status in India and is viewed as an essential service, could be one major reason. There is a systematic change in video consumption and habit formation as far as viewing is concerned that has commenced over the past three years.
But there are other reasons too. The entry of Reliance Jio into the telecom industry in 2016 has meant the availability of cheap data packs provided by players across the spectrum, some of these extending to 5 GB of data per day.
“In a sense the consumer has had data in excess of his utilization," said Neeraj Roy, managing director and CEO of Hungama Digital Media that owns the Hungama video and music apps. “It’s really a Rs. 30-50 swing (per month), even if you’re talking about the lower income groups of society."
As far as the telecom industry is concerned, India has always been a 97% pre-paid market, Roy added. The difference is that until three years ago, consumers could buy the pre-paid pack in small denominations—daily or weekly packs and switch to a different carrier (there were 10-14 players then) once they ran out of data.
“That certainly doesn’t happen so much now. Even though pre-paid users are over 95% of the market, they are on one service for at least a whole month, before being presented with three other alternative choices, post that. If you were buying into a plan for Rs. 149 and the same now comes for Rs. 199, you don’t have a choice, you can’t say you’ll buy only three weeks," Roy said.
Ali Hussein, chief executive officer at Eros Now says it would be simplistic to presume most of these pre-paid consumers belong to India’s small towns and specifically low-income groups. But as a group, they could be accessing the Internet in other ways. “A large part of the pre-paid universe knows how to access content in a smarter fashion. “They are accessing Wi-Fi zones in public places, and there is a lot of investment being done across the ecosystem for the same," Hussein said.
According to an earlier Mint story, video streaming services are now making their way to India’s small towns, with platforms claiming anything between 40-50% of their consumption coming from these areas.
“On a principal level, there is definitely a direct correlation (between tariff hike and video consumption) but I believe there will be work wherein telcos will introduce snackier packs, or have some kind of a daily structure where they would ensure viewers have access to the content or video offline so there isn’t a heavy drain on data consumption because they also want to ensure they don’t lose a bunch of users who migrate to other data services," Hussein added.