Cord cutting in India remains a virtual outlier as opposed to a consumer trend, and is currently estimated to be 0.5 million homes according to CII KPMG report released earlier this month which is just 0.2% of TV universe. An overwhelming majority of Indians prefer pay TV as their primary source of entertainment. Pay TV will continue to rule the roost in India with subscription costs being the lowest in the world, while OTT subscription costs are close to 2.5X of pay TV based on an analysis conducted by BCG. Launch of several paid OTT platforms in India were followed by subsequent slashing of subscription prices & introduction of limited duration package offerings to accelerate conversion but have shown negligible impact on cord cutting.
Cord-cutting and the shift away from pay TV has happened in markets with very high pay TV subscription costs, such as the U.S., which made OTT an attractive lower priced alternative. Developed markets of Europe have been a complete contrast to the U.S. with very little cord-cutting and pay TV universe remaining steady despite paid OTT subscriptions growing at a 37% CAGR over the last 5 years according to a JM Financial report released recently.
The rapid growth of smart TVs in India, albeit, from a small base and its dominant share of all new TV purchases was perceived as a trigger for consumer shift away from pay TVs and relying on OTTs entirely for their entertainment needs, but internet connectivity impediments and relatively higher entry costs have made them stick with linear TV. The low-price Smart TV households are unlikely to upgrade to bundled offering from telcos in the foreseeable future. Only 10% growth in wired broadband connections between 2018 and 2021 despite the Covid-19 pandemic and a lower expected growth of 6-7% over the next few years is indicative of challenge surrounding cord cutting. CII KPMG report estimates that the cord cutter homes will take another 4 years to even exceed 10 million and will remain below 5% of the TV universe.
The aggregate cost of wired broadband connection and OTT subscriptions works out to about 4 times as high as Pay TV, which is in complete contrast to the cost arbitrage in developed markets such as the U.S., where cord cutting is a definite trend.
India’s predominant co-viewing behavior across homes and its preference for content suitable for family entertainment led by live sports will severely curtail cord cutting intent 88% of India watches TV together with an average of 3.5 co-viewers per household according to BCG and JM Financial analysis. Households prefer content suitable for family viewing and therefore will stick to pay TV subscription. The OTT content in contrast is to some extent differentiated but tailored to preferences of individual audiences and therefore gets consumed primarily on screens outside of TV such as smartphone, tablet and laptop.
The presence of Live sports as a major content offering of pay TV will keep audiences away from even thinking about cutting the cord. Live sport remains unbeatable in the context of shared viewing experiences and audiences have demonstrated a strong preference for the live sports experience on TV with 83% choosing it over digital according to a YouGov research earlier this year. Connectivity challenges, inferior audio/ video quality and lag of OTT platforms vis-à-vis TV will make pay TV retain its overwhelming preference for watching live sports.
Cord cutting is also likely to get limited by the sheer volume and diversity of content offered by pay TV, which OTT platforms wouldn’t be able to match given their substantially higher production costs. As per JM Financial report, the content being produced by OTT platforms stands at only 2.5% of the content produced by pay TV and therefore will be unable to address the entertainment needs of collective household audiences.
Cord cutting in India will remain an imported fad rather than a trend.
