India – Amazon Prime Video

Contributed by Ishita Tiwary

November 2018

 Key Findings

• The Indian Market has the second-fastest growing user base in the world. Improvements in infrastructural conditions has aided this growth. This has led to a huge amount of money being invested in VOD platforms, especially content creation.

• Amazon Prime Video has taken the lead over Netflix when it comes to VOD platform in India, due to its pricing, integration with its own prime services and telecom services available in India, and bullish investment in acquiring and creating local content. However, both Netflix and Amazon are trailing behind local VOD platforms such as Hotstar and SonyLiv.

• There is an industry-wide push to draft a censorship code to regulate VOD platforms. Amazon Prime Video is against it, but is engaged in discussions on the regulation. However, Amazon Prime Video is engaged with the practice of self-censorship of the content it offers to the Indian Market.

Market

India has one of the lowest broadband speeds in the world, an average of 2 mbps compared to the U.S. average of 11.5 mbps. Data charges have recently come down due to the launch of Indian telecom major Reliance Jio, backed by India’s richest industrialist Mukesh Ambani with a $22.5 billion investment. The service accumulated around 240 million wireless phone users as of August 2018.

The Indian market is home to 460 million internet users, second only to China’s 721 million user base. The Indian internet user base is also the second fastest growing in the world, surpassed only by China, and is expected to reach 730 million by 2020. According to an industry report by KPMG, the growth will be driven by increasing mobile penetration, faster internet speeds, 4G mobile connectivity and cheaper data charges. As per the latest FICCI Frames Study, there are around two million paid digital subscribers across application providers including video platforms, and 1-1.5 million customers who have moved entirely to digital media (mobile telephony, internet). The number of people using only digital platforms is expected to burgeon to four million by 2020.

The market is steadily opening up to local content production. According to consultants Media Partners Asia, video content budgets in India topped $4.2 billion dollars. OTT video revenue in India was pegged at Rs 2,019 crore (around $290 million) in 2017, according to a PwC report. It is expected to reach Rs 5,595 crore (around $776 million) by 2022, and to grow 45 percent annually through 2023, helped by the rising adoption of smartphones, smart TVs and other devices.

Promotion

Roughly a year after its launch, Amazon Prime Video is slightly ahead of Netflix when it comes the market share of VOD platforms in India in 2017. Netflix has 1.4 per cent of the market share as opposed Amazon Prime’s 5 per cent. Meanwhile, Indian platforms surged way ahead with Hotstar leading with 69.4 percent followed by SonyLIV with 13 percent market share. Although Netflix continues to be the global leader in online video streaming, Germany and Japan are the other two markets, where Amazon’s subscriber base has surpassed that of Netflix’s. Amazon’s service is available in 6 regional languages (Hindi, Tamil, Telugu, Marathi, Bengali, Kannada) in the country, and it has over 10 million subscribers as of now. With time, analysts expect Amazon’s local content investments, integration and deals with local telcomm companies and expansion of the Amazon Prime offering to be the key drivers for Amazon Prime Video’s growth.

Pricing has been the key factor driving take-up of Amazon Prime and Prime Video in India. Amongst the three major video streaming platforms in India (Amazon Prime Video, Hotstar, Netflix), Netflix is the most expensive. Its basic monthly plan costs Rs 500 ($7). Hotstar charges Rs 199 a month for premium content and has a free option available as well. Amazon Prime Video is the cheapest platform to subscribe to amongst the three as is costs Rs 499 ($7) a year, which works to Rs 42 ($0.58) a month.

It is important to note that Amazon Prime Video’s rise in India is linked to its integration with Amazon Prime. Amazon has silently rolled out a new subscription plan for its Amazon Prime users in India. India is one of the international markets where Amazon offers its full Prime shopping service and the company has fulfilment centres located in 10 Indian cities (Delhi, Mumbai, Bangalore, Chennai, Ahmedabad, Hyderabad, Jaipur, Gurgaon, Pune, Kolkata). Indian consumers can avail Amazon Prime Video either as a standalone service or bundled with Prime subscription. In India, as per the new plan, non-Prime subscribers will be able to use Amazon Prime at a price of Rs 129 ($1.79) per month. Until now, subscribers could only opt for the Rs 999 ($13.85) annual plan of Amazon Prime. The non-Prime subscribers can pay for the service, which will be renewed automatically on a monthly basis, via their credit cards or select debit cards. Amazon offers a number of benefits to its Prime members in India. Apart from free one-day and two-day delivery, Prime members also get free scheduled delivery, a free no-rush shipping with a cashback of Rs 15 ($0.21), discounted same-day delivery, exclusive deals, unlimited access to video streaming via Prime Video and an ad-free access to playlists via Prime Music. Notably, Amazon had launched its Prime service in India back in July 2016 at an annual subscription fee of just Rs 499($7). The company later added Amazon Prime Video as value-added service. Nearly a year after a successful innings in the country, Amazon doubled its price with a subscription fee of Rs 999 ($13.85). As of November 2018, the company added a Hindi Interface to Prime Video, which has meant that Hindi speakers can now easily navigate the video platform. This new update has been extended to desktop, mobile apps, including Android and iOS.

The OTT platform has also partnered with telecom service providers BSNL (Bharat Sanchar Nigam Limited) and Vodafone. Vodafone was the first telecom player to partner with Amazon Prime Video India, and offered its consumers free Amazon Prime subscription if one bought the Vodafone SuperNet 4G plans on offer. In the case of BSNL, customers get free subscription to Amazon Prime Video if they buy BSNL’s Rs 399 ($5.53) postpaid mobile plan and above or customers with plan of Rs 749 ($10.39) and above.[i] This enables the customers of these telecoms services to access a large selection of Bollywood, Hollywood, regional movies, US TV shows, kids’ programming and global Amazon originals.

The Indian arms of Netflix, Amazon Prime Video and other key video streaming platforms will spend an estimated Rs. 300 crores ($41.5 million) on advertising in 2018 to make individual viewing a habit. Advertising expenditure on mainline media is expected to be Rs 250 crores ($34.6 million), with an additional Rs 50 crores ($6.9 million) to be spent on digital media this year collectively by the over-the-top (OTT) players, according to the estimates.

Amazon Prime Video has been spending on advertising since its launch in December 2016. Its first fully integrated campaign ‘India ka naya prime time’ (India’s new Prime Time) ran across television, digital and outdoor in February last year. The second campaign series, released in 2018, features a young couple accessing the latest films and other content, emphasising the anywhere, anytime viewing proposition

Content

According to a KPMG report, Western programming commands a minuscule 0.5% viewership compared to 60% for domestic entertainment on Indian television. Similar numbers are replicated when it comes to the box office, where Hollywood and foreign films account for less than 10% share in the Indian market. Such a scenario has pushed VOD platforms in India to aggressively procure and commission local language content.  According to consultancy firm Deloitte, the Indian film industry is dominated by Hindi Movies, contributing 43% of the overall industry revenue, which is in excess of $2.1 billion. Half of the revenue comes from regional cinema, and the remaining 7% comes from international cinema.

Amazon Prime Video has reportedly invested $300 million in Indian content, which is higher than most budgets of top entertainment channels in the country. It is investing heavily into acquiring TV shows, films and originals. It has partnered with most of the top Bollywood production houses in the country such as Dharma Productions, Excel Entertainment, and OML (Only Much Louder) to expand its platforms catalogue and commission original series. Currently, the streaming platform’s USP in India is its stand-up comedy specials and competitions.

Amazon debuted its first Indian series, the cricket drama Inside Edge, in July 2017 and since then, the company has expanded its portfolio with more originals like Breathe, Pushpavalli, Mirzapur and other formats, such as the comedy talent hunt Comicstaan and the dating show Hear Me, Love Me hosted by Bollywood star Shilpa Shetty Kundra.

Amazon has also stitched up a slew of film output deals with some of India’s biggest studios, offering subscribers a range of new and catalog titles (including Hindi-language Bollywood movies) and is rapidly adding more vernacular shows and movies to its catalogue. It is even producing Telugu-language and Tamil-language originals.

Amazon launched its music streaming service – Amazon Prime Music – in India in February this year as a companion to Prime Video. The ad-free music streaming service was launched with no additional cost to the Prime subscribers. In India, Amazon Prime Music, which comes with an annual subscription of Rs 999 ($13.85), competes with Gaana, Saavn, Google Play Music and Apple Music which come with an annual subscription fee of Rs 1,050 ($14.55), Rs 1,020 ($14.13), Rs 1,200 ($16.63) and Rs 1,400 ($19.40) respectively. The service has inked deals with top five music labels in the country which includes T-Series, Tips Music, and Sony Music to launch its music streaming service in India.

Regulation

In 2018, Netflix and Amazon Prime Video were sued for airing ‘vulgur’ and ‘sexually explicit content’ on their platforms.The case is currently being heard in the Delhi High Court which the response of the Central Indian government to this plea. In this context, it is important to note that censorship codes in India come under the Indian Cinematograph Act and the Cable Television Act. Web content currently does not have any such censorship codes to adhere to. In India streaming platforms such as Netflix and Hotstar are pushing for an industry censorship code akin to one that exists in Southeast Asian nations with Netflix, Fox and Walt Disney. Such a move has been prompted by VOD companies’ anticipation of the Indian government coming up with its own rules which they fear will be onerous for the industry.

In the light of this anticipation, VOD companies want to develop with their own voluntary mode of regulation. Crucial to note is that in India, there is no law that requires censorship of films and shows that are streamed online. Many VOD companies have been criticised by viewers and civil society in India for censoring content pre-emptively. There is also concern over the backlash on social media.

Amazon is opposing this move by its VOD peers, as it fears that such a move will alienate its paying subscribers, and is trying to dissuade other VOD players from participating.  On 15th November, 2018, Netflix and Hotstar came to an agreement with the Ministry of Information and broadcasting to adhere to ‘self-regulation’ to adopt the “best practices internationally” and come up with a set of guidelines. Netflix will also provide the ministry with a note on the guidelines. A later update by Huffington Post India, reported that even though such a meeting did take place, there was no concrete discussion or agreement on self-regulation, and as for now, content on VOD platforms won’t be subject to censorship.  It is worth mentioning that Amazon Prime Video was not a party to this discussion to the Ministry. However, it did take the self-censorship route when it entered the Indian market. Frontal nudity, vulgar language or subject matters that were religiously or politically sensitive were all matters of self-censorship. For example, one of the episodes of the motoring show called The Grand Tour is listed as only 30 minutes long on Amazon Prime, while the original is actually one hour. The half-an-hour difference is the sum of cuts made to remove all references to a car made of meat. Nude scenes in TV shows such as Californication and The Man in The High Castle were found to be blurred or pixelated. Huffington Post sought Amazon’s response on this matter, to which Amazon stated, “Amazon Prime Video offers the largest selection of movies and TV shows of any OTT video service in India and give customers the choice on what to watch. We respect our customers’ preferences and will comply with the regulations applicable to our service. Amazon is a responsible company and we are here to entertain the Indian customer with award-winning content from the US along with blockbusters from Indian and regional makers. We will keep Indian cultural sensitivities in mind while offering this content to customers.”

NOTES

[i] In India, there are two kinds of mobile plans offered by Telecom companies- Prepaid and Postpaid. In Prepaid plans the payment is made in advance and services are availed afterwards. In a prepaid plan there is no requirement of credit history, there is no bill provided, one can charge the mobile on real time basis and hence it costs less. In postpaid plans, first one avails the services and then pays for it. Credit history is important, a detailed bill is provided to the customer at the end of the month, and the cost of plans are higher than prepaid. The post paid subscribers constitute just 4 per cent of the market share while the rest belongs to pre paid subscribers. For telecom companies the post paid subscribers are the main customer base from which they make the most money. A post paid subscriber spend around Rs 350 (around $5) while a pre paid subscriber pays around Rs 67 (less than a dollar) a month. Thus, one can infer, that it makes sense for telecom companies to partner with Amazon and Netflix and vice versa as both are using it as strategy to boost their subscriber bases. For more please see here.