Digital paid subscriptions expected to double to over 100 million by 2023: FICCI-EY report

Video paid subscribers will cross 50 million by 2023 and audio subscribers will reach 4 to 5 million by that time

by exchange4media Staff
Published: Mar 30, 2021 9:00 AM | 6 min read

Digital subscription revenue is projected to grow at 25% CAGR as paid subscriptions are expected to double to over 100 million by 2023, according to FICCI-EY's M&E sector report 'Playing by new rules'. Video paid subscribers will cross 50 million by 2023 and audio subscribers will reach 4 to 5 million by that time.

Digital products owned by newspapers will increasingly go behind paywalls with news and related products to generate subscription revenues of Rs 400 crore by 2023. Subscription will be driven by genres like women, audiences aged 50 years or above, and non-metro audiences.

The report stated that paid video subscriptions crossed 50 million in 2020. It estimated that 29 million subscribers paid for 53 million OTT video subscriptions not counting subscriptions bundled along with data plans.

Digital subscription grew 49% in 2020 to reach Rs 4350 crore with video subscription revenues growing at 50% in 2020 as premium content – originals and sports – went behind the paywall particularly during the
pandemic, when original content could not be produced for television. Audio subscription grew comparatively slower at 15% in 2020 as several free products are available which reduces the need to subscribe.

The percentage of paying subscribers to total OTT consumers remained less than 10% and 1% for video and audio respectively.

The digital segment in India is estimated to grow at a 22% CAGR to touch Rs 42,450 crore by 2023. Within digital, the advertising revenue is expected to be Rs 34,000 crore while subscription revenue is projected at Rs 8450 crore.

The digital segment market size stood at Rs 23,500 crore in 2020 with advertising revenue coming in at Rs 19,150 crore and subscription revenue touching Rs 4350 crore. Digital overtook print to become the second-largest segment in 2020. It is expected to reduce the gap with television as digital infrastructure (screens, broadband connections, e-commerce, digital payments, etc.) continues to grow.

The report noted that digital advertising will grow at a 21% CAGR, to equal television advertising by 2024 or 2025. Advertising on e-commerce platforms will reach Rs 1000 crore by 2025 as e-commerce players like Amazon, Flipkart, Jio Platforms, Tata, Zomato, and others grow their reach and active users.

Digital advertising remained flat at Rs 19,150 crore in 2020 while becoming the second-largest advertising segment after television. While certain sectors like travel showed a marked decline, sectors like M&E, Auto, BFSI, Durables and Telecom increased spends as they implemented or widened digital sales channels during the pandemic

SME and long tail advertisers spent an estimated Rs 9060 crore primarily on performance advertising on Google, Facebook and e-commerce platforms. "We are, however, unable to verify this and have
shown this amount separately and not included in our overall segment sizing estimates," the report clarified.

Of the total, the share of ad revenues generated by e-commerce platforms increased to Rs 3500 crore, crossing 12% of total digital advertising. Total advertising including SME & long-tail grew by 1% in 2020.

The CPT will emerge as the common metric for cross-media measurement and the M&E sector will need to provide models to measure it, the report said. The metrics that matter will change from MAU to DAU and from audience numbers to engagement, loyalty, and time spent, leading to platforms focusing on segmented audiences and community ownership.

As digital advertising grows, more advertisers will implement ad fraud management solutions and validate ad spend efficiency as digital becomes a larger portion of their media mix.

Another key trend that the report foresees is that e-commerce apps will provide a significant opportunity to license news, library, and interactive content onto their platforms to increase time spent and visitations.

Content costs will continue to increase as the overall quality benchmark rises to address the needs of a more aware audience, particularly across regional markets. Demand for original content will double by 2023 from 2019 levels to over 3,000 hours per year. Around 500 original titles are expected to be released in 2021 across platforms.

Curated short video platforms will garner 25% of total time spent on online video viewing by 2023 while the share of regional language consumption on OTT platforms will cross 50% of total time spent by 2025, easing past Hindi at 45%.

Sports will play an increasingly important role in growing subscription revenues and this could lead to a growth in the valuation of digital media rights. The proposed content code will require the implementation of processes for content curation, checks, and monitoring controls, the report noted.

In 2020, around 1,200 hours of original content were created for OTT platforms across films and episodic content, which led to increased demand for OTT subscriptions. OTT players spent upwards of Rs 1002 crore on
creating around 1,200 hours of original content across 220 titles in 2020, excluding acquired movie rights and sports. This is a reduction from Rs 1400 crore in 2019 for around 385 titles due to stoppage of shoots during the pandemic for five months

Netflix invested Rs 3000 crore in content in India across 2019 and 2020; it has announced over 60 titles in India and launched 17 films and 11 series in 2020 alone, making India one of its largest content production hubs worldwide. Disney+ Hotstar claimed 26 million paid subscribers by the end of November 2020 on the back of the IPL going behind a paywall.

OTT players are expected to increase spends on original content to around Rs 1920 crore in 2021 (a 17% growth over 2019) and further increase their total investment in content (including sports) during 2021-25 to Rs 30,000 crore.

As the number of connected smart televisions grow to approximately 40 to 50 million by 2025, 30% of content consumed on such screens will not be broadcast content, but gaming, social media, short video, and content products specifically created for this audience by television, print and radio brands.

Around 400 million subscribers will consume content bundled by telcos or aggregated by ISPs, cable, and DTH companies, as part of their mandate to assimilate OTT content with pure television content to protect and/or grow their subscriber base.

As the screen ratio tends to shift towards 3 small screens against 1 large screen, the type of content being produced will change to reflect the opportunity that 750 million small screens will provide viz, an increase in niche, interactive and personal content

The report contended that valuations will be driven by the size and stickiness of the addressable D2C audience base, with a loyal paying subscriber base attracting the highest valuations. Products will either focus on mass advertising models or, in many cases, smaller but more cohesive communities, monetizable across a range of transactions apart from content.

It also mentioned that business models of aggregators would need to be realigned if regulation around payment for aggregated news comes into being and if audio streaming subscription revenues fail to grow. Investors will have little patience for business models with negative customer lifetime values over the medium term and will look to leverage consolidation and partnership opportunities to achieve marketing and operating efficiencies.