ICICI Securities on Monday said in a report that the streaming apps such as Netflix and Amazon Prime Video may have a "significant impact" on cable TV connections in India. The company engaged in the financial services said that the “increasing adoption of streaming apps” may result in the number of cable TV connections to decline. ICICI Securities highlighted that the streaming apps had “limited success” in the country in the early years due to the “expensive wired broadband and lower smart TV penetration.” However, the company said that the “bottlenecks” surrounding the streaming apps have been “massively eased” in the recent months, largely due to the revamped Reliance Jio and Bharti Airtel broadband plans.
Entry Level Broadband Plans “Sufficient to Run Smart TV Seamlessly”
In its report, ICICI Securities said that entry level broadband plans are now priced at Rs 399 per month as compared to Rs 699 earlier with the plans now offering “unlimited data allowance.” The company said that the entry level plans with speed up to 30 Mbps is “sufficient to run smart TV seamlessly.”
“Further drop in smart TV prices means it has [a] much higher share of total TVs sold in India, which is helping drive penetration,” ICICI Securities said in its report. “And innovations such as Amazon Fire stick, and Airtel Xstream box (hybrid boxes) are enabling non-smart TVs to run streaming apps.”
ICICI Securities said that the streaming apps are in “direct competition to TV viewership” rather than competing with theatres and multiplexes. The company said that the theatres provide an “experience” along with “family outing” that the streaming apps “fail to replicate.”
Further, the company highlighted that the US and Canada are the “world’s biggest cinema market” with the two countries together delivering over US$11 billion in box office collection in 2019. The two countries together in the past five years are said to have delivered box office collections in the range of US$11 billion to US$12 billion. Crucially, ICICI securities highlighted that the box office collection in the “world’s biggest cinema market” was recorded despite the increase in the penetration of streaming apps such as Disney+ and Netflix.
“Clearly, increasing adoption of streaming apps has not disrupted the theatre market in US/Canada, which are digitally evolved markets,” ICICI Securities said in its report. “However, there has been [a] significant impact on cable connections, which have been declining and we may see similar trends in Indian market as well.”
ICICI Securities Says Streaming ARPU Significantly Lower in India
Unlike the US market, ICICI Securities said that the movie production in India is a “fragmented business” with “very few studios” engaged in the streaming services. The company said that the Star Network with its Disney+ Hotstar app along with Sun TV, Zee Studio and Balaji Telefilms “don’t contribute materially to net box office collections.”
Further, ICICI securities also said that the average revenue per user (ARPU) in India is “significantly lower” and that the “monetisation opportunity is limited” with the streaming apps in the country.
“Thus, we believe Warner Bros and Disney’s US strategy of releasing movies directly on streaming platforms (and gain through valuations) does not apply to India,” ICICI Securities said in its report. “In India, the best monetisation of movies will continue to happen through theatrical route.”