Digital infra will boost OTT: KPMG

05 Oct,2017


By A Correspondent


KPMG in India brings this report at a crucial juncture when the era of on-demand content has reached a tipping point with consumption shifting to the mobile screens and going ‘mass’ – particularly on the back of a successful 4G roll out. OTT consumers will demand seamless access to services, compelling stories and value for money.  As the OTT landscape gets hyper competitive, organisations which are able to tick all the above boxes may stand a chance to emerge as the preferred platforms for consumers. To pivot from their traditional businesses, media organisations would need to commit zealously to an organisational transformation initiative, which aims to harness the collective energies of all stakeholders towards a single minded ‘Digital First’ cause.  Right from telling the digital story to the internal stakeholders to implementing the digital architecture on ground, each step in the digital transformation process holds the key to survival and potentially to success in the market.

The report gives an insight into the key themes of the Indian OTT market, key pillars of success for an OTT platform, roadmap to a digital transformation journey divided into four significant phases from a digital vision and strategy, customer proposition, business design and execution planning. The report also delves into operationalisation of the actual pivot of a traditional technology organisation into a digital avatar, highlighting two nodal frameworks for digital enablement, strategy and architecture realisation. The last section highlights the critical considerations for implementation of digital initiatives.

Commenting on the OTT evolution in India and road ahead for digital and digitising businesses in India, Girish Menon, Co-Head, Media and Entertainment at KPMG in India, said “OTT consumption in India has reached a tipping point, with the 4G rollout and related data wars which have resulted in a dramatic and rapid growth in internet penetration and video consumption.  This has also fundamentally altered the consumption demographics and patterns, with OTT viewership becoming more mass.  Organisations can no longer afford to take baby steps and will need to wholeheartedly commit to build out their digital businesses.  However, pivoting to a digital business requires a change in organisational DNA and a ’digital first’ mindset. Building a digital business is an evolving process and organisations would need to adopt a systematic approach balancing scalability and flexibility with speed to market and customer centricity.”


The ‘Over the top’ (OTT) video consumption in India has rapidly evolved over the last year, given the advancements in digital infrastructure and efforts by platforms to create compelling content for consumers at price points which provide value.


Market potential

Growing internet penetration and data consumption is likely to help increase digital advertisement spends in India at 30.8 per cent CAGR between 2016 and 2021 with mobile advertisement spends and social media aided digital video advertisement spends expected to grow at 50.9 per cent and 40 per cent CAGR between 2016 and 2021 respectively.

The OTT landscape in India is punctuated by the following key enablers, around which both the growth of the segment as well as potential success of platforms are woven.


Digital infrastructure

The mass launch of 4G services by Reliance Jio in H2, 2016 and subsequent launches by incumbents was an inflection point in India’s data story. This disruption led to a rapid surge in data usage on the back of promotional offers by all leading telecom operators.

Further, other enablers such as Government of India’s ‘Digital India’ initiative, growing usage of affordable smartphones, rising internet penetration in rural India and rapid growth of digital payments has further strengthen India’s digital infrastructure. This has resulted in video dominating data consumption, which is expected to continue to grow in the near future.


OTT content consumption and evolving trends

The OTT content consumption is evolving from niche to mass based content and long form content is gathering traction. The increased popularity of large screens and investments in original content creation is further driving the consumption. Live streaming has emerged as a focus area for OTT players, with the sports genre especially attractive from a viewership and monetisation point of view.


OTT distribution

The OTT distribution landscape is dominated by own platform players, although social media platforms YouTube and Facebook still constitute a major chunk of video viewership in India. With telcos betting big on data, partnerships with telcos is also emerging as an important medium to reach a fairly large, and a mass user base.


Monetisation models and associated challenges

While Advertisement Video on Demand (AVOD) remains the primary source of monetisation for the OTT players in the country, the Subscription Video on Demand (SVOD) and Freemium models are seeing traction, largely on the back of compelling content, including sports. Sponsored content has also emerged as an important monetisation tool, with brands baking in the advertising messages into the content itself.

The growth in monetisation though, is partially held back due to challenges around digital viewership measurement and rampant content piracy which must be addressed in order to realise the true potential of OTT platforms and build a sustainable model in the future.

Further, digital video businesses require high investments, and returns are currently not commensurate given the still evolving business models. Media organisations are currently attempting to bridge the gap between market share acquisition and economic viability, as they attempt to build long term sustainable digital video businesses.


Changing consumer demands mandate companies to transform digitally

When users stream videos on their mobile phone through an OTT platform, little do they know the entire digital infrastructure that is set in motion to ensure that the content streams flawlessly. It is this internal infrastructure that defines the ‘OTT player of today’, and is a key ingredient for ensuring continue success in the competitive OTT landscape.

The adoption of digital infrastructure has evolved from resistance towards digital technologies to their mass adoption. Success in the digital world is dependent on various factors such as time to market, customer experience and the will to constantly innovate and change with the relevant developments in the market. This requires OTT platforms to identify and design digital solutions comprising strategies to predict, influence and respond to customer behaviour.

Building a successful digital video business in the long run requires sustained commitment to the digital transformation process and a ‘digital first’ mindset.


Digital transformation rests on four pillars

The path to digital transformation encompasses a holistic approach including; clearly defining the organisation’s digital vision and strategy, thorough understanding of the customer proposition, accurately assessing the business design and, finally, carefully designing the execution plan.


Key drivers for successful digital transformation:

:: Innovation focussed mind-set: Innovation has become hygiene for OTT players, given India’s crowded platform market. For a fruitful digital transformation, it is critical for the leadership to evaluate their business through a number of facets and set up in-house labs to drive both internal and consumer focused innovation. Companies could also look to set up incubation centres in the form of accelerator programmes, or partner with third-party innovation labs.

:: Integration across organisational DNA: Digital transformation requires a holistic strategy that permeates across the entire organisation including front, middle and back offices. The OTT organisations should move past silos that have a traditional media (for eg: TV) bias and adopt a ‘Digital First’ mindset.

:: Data analytics: Data has evolved in type, volume, and velocity with rapid uptake of digital technologies. It has become a new currency and key for OTT players to understand the consumers and decode their viewing patterns. Big data technologies along with advanced analytics help answer key content and engagement questions, enable quick reaction and draw meaningful and actionable insights to fuel the customer facing productivity and enhance overall performance of the platform.

:: Data protection and IP security: With OTT business models inherently digital in nature, data and content security has become even more paramount. It is vital for the platforms to protect data and content across systems, devices and the cloud.


A successful transformation needs a strong technology foundation

A strong technology foundation acts as the backbone of any digital transformation initiative.

The pivot from a traditional IT to ‘today’s’ digital function is underlined by an architecture that is agile, flexible, and is able to deploy technology frameworks to give quick insights for decision making around customer behaviour and content strategies.

The ‘all-in’ commitment of the entire organisation to the cause is a non-negotiable and is a precursor to embarking upon the technology deployment.

In conclusion, the digital transformation journey of a media company comprises a marked strategic shift, with customer centricity at the core, and an internal thinking process that needs to change the organisational DNA into ‘Digital First’ mind-set.

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