Streaming Wars - Global Competitive Analysis And India’s Legal Dynamics
Author: LawSphereX
Category: International Law
Published:
Updated:
STREAMING WARS: GLOBAL COMPETITIVE ANALYSIS
AND INDIA’S LEGAL DYNAMICS
Millind Dev, B.A. LL.B., Bennett University (The Times Group)
ABSTRACT
This paper delves into the rapidly growing Over-The-Top (OTT) market in India, with a particular focus on defining the market accurately within the Indian context. The author explores the distinct framework of OTT platforms compared to traditional television. The analysis examines prominent OTT merger cases from various global jurisdictions to gain a broader perspective. This comparative approach sheds light on how markets are defined elsewhere, the key players involved, and their market share distribution. Finally, by evaluating India's OTT market maturity, the research aims to ascertain whether competition concerns necessitate regulatory suggestions or if the market remains in its nascent stage.
INTRODUCTION
Over-the-top (OTT) streaming platforms are rapidly reshaping the media landscape on a global scale. These services bypass traditional cable and satellite providers, delivering streaming content directly to viewers over the internet. This trend is particularly striking in India, where a surge in internet penetration and affordable smartphones has fuelled an OTT boom. Several factors contribute to the proliferation of OTTs, particularly streaming services. Firstly, they offer a wider selection of content compared to traditional broadcasters, often catering to niche audiences. Secondly, OTT services provide greater flexibility and control to viewers, allowing them to binge-watch shows on their own schedule and across various devices. Additionally, competitive pricing models make OTTs an attractive alternative to cable subscriptions.
The Indian OTT streaming market is particularly intriguing due to its vast and diverse audience. This presents a lucrative opportunity for both domestic and international OTT streaming players. However, with this rapid growth comes a growing area of interest for competition law. The consolidation of power by a few major players could potentially stifle innovation and limit consumer choice. Therefore, a critical analysis of the OTT market structure and its competitive dynamics is essential. Defining the relevant market for OTT streaming services in India is a crucial first step. This will help assess if competition is healthy and ensure a vibrant ecosystem that fosters innovation and benefits consumers. HOW ARE MARKETS ANALYSED?
MARKET DEFINITION
Competition Act to define the relevant market, which includes factors such as substitutability, consumer preferences, and geographic boundaries. In its 2021 Market Study on the Indian Telecom Sector, the CCI recommended considering non-price factors as well. In the Lifestyle Equities v. Amazon case, it was observed that "the delineation of the relevant market and competitive assessment are based on market realities as they exist at the time of assessment, considering the facts and allegations." Consequently, it was held that defining the relevant market is a dynamic exercise that evolves based on market realities.1
LOOKING AT THE RIGHT MARKET DEFINITION OF OTT (STREAMING) IN
INDIA
OTT Streaming Services refers to a digital media distribution model that allows subscribers to access and watch video content at their convenience, usually through an online platform or service. With VoD, subscribers can select what content to watch, when to watch it, and how to consume it, enabling them to stream or download video content on demand without relying on traditional broadcasting schedules or physical media. VoD platforms generally offer a broad range of content, including movies, TV shows, documentaries, and other video materials, which can be viewed instantly or stored for later. VoD has grown increasingly popular in recent years, providing users with convenience, flexibility, and a personalised viewing experience.
In India, the market definition of Over-The-Top (OTT) services encompasses "online curated content," which refers to a curated catalogue of audio-visual content, excluding news and current affairs. This content is either owned by, licensed to, or contracted to be transmitted by a publisher of online curated content and is made available on-demand, including but not limited to through subscription, over the Internet or computer networks. This category includes a wide range of media such as films, audio-visual programmes, documentaries, television programmes, serials, podcasts, and other similar content. This definition highlights the diversity and on-demand accessibility of OTT content, which can be accessed via various digital platforms, reflecting the broad scope and evolving nature of the OTT market in India. 2 1 https://www. taxmann.
com/research/competition-law/top-story/105010000000023858/market-definitionrevision-a-leap-towards-the-vision-experts-opinion 2 The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, § 2(q).
The market comprises several segments, including Video Streaming (SVoD), which involves streaming on a subscription basis; Pay-per-View (TVoD), which entails paying for digital video content to watch online; Video Downloads (EST), which refers to downloading digital video content; and OTT Video Advertising, which involves advertising within video streams. 3 Revenue in the OTT Video market in India is forecasted to reach US$4. 06 billion in 2024, with an anticipated annual growth rate (CAGR 2024-2029) of 7. 43%, leading to a projected market volume of US$5. 81 billion by 2029. The largest segment within India is Video Streaming (SVoD), expected to achieve a market volume of US$2. 02 billion in 2024. Globally, the United States is projected to generate the highest revenue, amounting to US32. 9 billion in 2024. In the Indian OTT Video market, the number of users is expected to reach 634.
3 million by 2029, with user penetration forecasted at 34. 1% in 2024, increasing to 42. 2% by 2029. The average revenue per user (ARPU) in the Indian market is estimated to be US$8. 26 in 2024. Hotstar accounts for approximately 23% of the Video Streaming (SVoD) market in India and the selected region in 2024. India's OTT video market is experiencing rapid growth, driven by the increasing availability of high-quality content and competitive pricing strategies by key players. 4 The market comprises revenues, users, average revenue per user, and penetration rates. Revenues are generated through purchases and subscriptions. Market numbers for OTT Video can also be found in the video-on-demand market. Key players in the market are companies such as Netflix, Amazon or Disney+.
LEGAL FRAMEWORK OF OTT IN INDIA
The paper explores the regulatory aspects of OTT services and OTT Communication Services and how they might be reasonably classified if a new regulatory framework is established in India. Currently, these services are regulated under the Information Technology Act of 2000, along with subsequent notified rules. As of now, TRAI, which has been issuing public consultation papers and soliciting comments since 2015, does not regulate OTT services in India. To define OTT services, it is essential to distinguish that they are provided over the internet, unlike traditional telecommunication channels. This perspective aligns with how international bodies have defined these services, as highlighted in the report. Other defining characteristics are the lack of regulation or licensing requirements to operate these services,
3 https://www.statista.com/outlook/amo/media/tv-video/ott-video/india
4 Id
particularly for voice/video communication and messaging. A broader definition could lead to confusion regarding the applicability of future regulations; thus, characterising such services based on the absence of licensing regimes is no longer appropriate. The report discusses the classification of OTT services in general and the specific classification of OTT Communication Services, which are a subset of OTT services. Categorising communication services based on their nature would be beneficial if additional regulatory obligations are necessitated by such distinctions. In the absence of such requirements, further classifications of OTT services may not be needed. Therefore, the classification of OTT services or OTT Communication Services should be based on whether the proposed regulatory framework requires distinct licensing approaches for different service categories.
5 In India, the Telecom Regulatory Authority of India (TRAI) plays a crucial role in regulating traditional television services, including cable and satellite television. TRAI’s regulatory framework for television includes guidelines on pricing, content distribution, quality of service, and consumer protection. This regulatory oversight ensures fair competition, standardizes pricing models, and safeguards consumer interests. TRAI's regulations cover aspects such as tariff orders, interconnection agreements between broadcasters and distributors, and quality of service standards for television channels, ensuring that viewers receive uninterrupted and highquality service. Conversely, OTT (Over-The-Top) services, which provide content via the internet, remain outside the purview of TRAI’s regulatory framework.
OTT platforms like Netflix, Amazon Prime Video, and Hotstar are governed by the Information Technology Act, 2000, and subsequent rules notified under this Act. The IT Act provides a legal framework for regulating online content, ensuring compliance with laws related to data protection, privacy, and content moderation. 6 The Ministry of Electronics and Information Technology (MeitY) and the Ministry of Information and Broadcasting (MIB) oversee aspects of OTT regulation, including content guidelines and data privacy norms. 7 The regulatory distinction stems from the fundamental difference in the nature of service delivery. Traditional television relies on licensed spectrum and physical infrastructure, necessitating TRAI's oversight to manage limited resources and ensure fair competition. In
5 https://www.trai.gov.in/sites/default/files/SFLC_04092023.pdf
6 Telecom Regulatory Authority of India. "TRAI Annual Report 2020-21." TRAI, 2021.
7 Ministry of Information and Broadcasting. "Guidelines for Online Content Regulation." MIB, 2021.
contrast, OTT services leverage the open internet, providing a diverse and rapidly evolving array of content without the need for traditional broadcast infrastructure. This regulatory divergence allows OTT platforms greater flexibility and innovation, fostering a dynamic digital content ecosystem. While providing similar end services, telecommunications and OTT communication services differ significantly in most other aspects. Currently, TSPs are licensed service providers, whereas OTT service providers are not. This distinction should remain, as detailed in the next answer. Economically, TSPs and OTT service providers also operate differently. TSPs function in an oligopoly, while OTT services are offered in a highly competitive market, a polyopoly. The OTT ecosystem has thrived because it is not constrained by the same restrictions and limitations as TSPs.
Conversely, OTT service providers cannot sell internet access; they can only offer their services to those who already have internet access, which is provided exclusively by TSPs. Therefore, both economically and operationally, TSPs and OTT platforms deserve different regulatory treatment. The services provided by TSPs and OTT platforms should adhere to different privacy and security standards. India's telecommunication interception law (Sections 5 and 26 of the Telegraph Act) is outdated. The lawful interception requirements under the License Agreements were established based on privacy and security assumptions from the British era. Imposing similar standards on OTT platforms would be highly detrimental.
Rather than requiring backdoors, weakening encryption, or increasing surveillance on OTT platforms, it is necessary to revisit and review the surveillance and interception provisions under the Telegraph Act, its Rules, and the lawful interception requirements under the License Agreements to ensure compliance with the Right to Privacy as per the Supreme Court’s judgment. Additionally, OTT platforms are already subject to surveillance under the Information Technology Act of 2000, the Intermediary Guidelines of 2021, the Interception Rules, and the Blocking Rules of 2009. We recommend against implementing any additional surveillance or interception measures on OTT platforms. 8 Licensing Standards for OTT Service Providers and Traditional T. Vs
as TSPs. OTT providers and TSPs offering similar services (written and oral communication) operate in entirely different realms. While both achieve the same objective—facilitating communication—TSPs and OTT providers are not in direct competition. TSPs have an oligopoly over the limited natural resource of the spectrum, whereas OTT providers face extensive competition. Therefore, TSPs and OTT services should not be regulated under the same restrictions, as they operate in fundamentally different domains. It is important to remember that TSPs are the sole gatekeepers of internet access and can charge accordingly for that privilege. Unlike traditional push platforms like cinemas, where films must be pre-certified by the Central Board of Film Certification before their release, curated content on OTT platforms does not require pre-screening or certification.
OTT platforms can broadcast content without prior permission or compliance with the Cable Television Networks (Regulation) Act, 1995, which governs satellite television in India. However, curated content on OTT platforms is subject to certain checks and balances within the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. These Rules establish boundaries for permissible content on OTT platforms, although they are not prescriptive. Importantly, these regulations apply to both Indian and foreign platforms engaged in the systematic business activity of making their content available in India. 9 The framework aims to balance creative freedom with responsible content dissemination, ensuring that OTT platforms operate within defined ethical and legal parameters.
OTT service providers are already regulated under the Information Technology Act, 2000, along with the accompanying Rules. TRAI has no authority to regulate OTT services. Additionally, a draft data protection law is set to be tabled in Parliament during the Monsoon Session of 2023. Furthermore, the IT Rules, 2021 govern the operations of OTT platforms. There is no unequal playing field between TSPs and OTT service providers, as they operate in different realms. OTT service providers cannot put TSPs out of business, as OTT services rely on TSPs for internet access. Any concerns about unfair regulation of TSPs need to be addressed separately. At the outset, it is important to state that OTT Service Providers should not be subjected to the same licensing standards or frameworks as TSPs.
TSPs and OTT services operate in distinct domains and should not be regulated under the same restrictions, as they are 9 https://corporate. cyrilamarchandblogs. com/2023/05/over-the-top-interference-with-curated-content-inindia/#_ftn1
not direct competitors. Imposing surveillance or interception requirements on OTT communication platforms would jeopardize the right to privacy, freedom of speech and expression, and the entire digital economy of the country. Encryption, which forms the backbone of the digital economy, relies heavily on trust. If a country mandates the weakening of encryption or the creation of backdoors, the security and reliability of encryption and security products from that country would be compromised, making them untrustworthy for handling personal data. • Obligations for Lawful Interception: Section 69 of the IT Act empowers the Government to intercept, monitor, or decrypt any computer resource. This provision also includes a penalty of up to seven years of imprisonment for intermediaries who do not assist the Government in these activities.
Additionally, Section 69B of the IT Act grants the Government authority to monitor and collect traffic data or information from any computer resource for cybersecurity purposes. The interception of messages has significant privacy implications for users and must be exercised with extreme caution. If further regulation of OTT platforms is considered, it is crucial that it does not increase user surveillance. Licensing should not mandate the breaking of encryption or grant the Government extensive interception powers. • Obligations for Privacy and Cybersecurity: The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, require every service provider to have a comprehensive privacy policy for all users. This policy must detail the nature and type of data collected, its purpose, retention, and further use.
Additionally, India has consumer protection laws, financial regulations, and competition laws to protect various aspects of user interests. Section 72A of the IT Act provides penalties for the disclosure of information in violation of lawful contracts. The Unified Licence mechanism prohibits the use of bulk encryption, and similar requirements should not be imposed on OTT Communication Platforms. TRAI can regulate the use of the spectrum by TSPs, but it has no authority to regulate the OTT service providers. Their regulation is managed through a separate law—the Information Technology Act, 2000—along with certain sections of the Indian Penal Code, the Criminal Procedure Code, and sectoral laws, among others. Intermediaries,
such as OTT service providers (including TSPs when they offer OTT services), must comply with the Information Technology (Intermediaries Guidelines) Rules, 2021, under Section 87(2)(zg) in conjunction with Section 79(2) of the Information Technology Act, 2000.
GLOBAL OTT MARKET DYNAMICS
Revenue in the global OTT Video market is forecasted to reach US $316. 40 billion in 2024. This revenue is expected to grow at an annual rate (CAGR 2024-2029) of 6. 30%, leading to a projected market volume of US $429. 40 billion by 2029. The largest segment within this market is OTT Video Advertising, which is projected to achieve a market volume of US91. 30 billion in 2024. The United States is anticipated to generate the highest revenue globally, with a forecasted US 32. 90 billion in 2024. By 2029, the number of users in the OTT Video market is expected to reach 4. 9 billion, with user penetration increasing from 50. 6% in 2024 to 61. 0% by 2029. The average revenue per user (ARPU) is estimated to be US $80. 70 in 2024. The worldwide OTT Video market is experiencing significant growth, particularly in subscriptionbased services, as streaming giants compete for global dominance.
10 Global Over The Top (OTT) Services Market by Monetization Model (Subscription-Based, Advertising-Based, and Transaction-Based), Type (Online Gaming, Music Streaming, Video on Demand, Communication, and Others), Streaming Device (Smartphones and Tablets, Desktops and Laptops, and Internet Protocol Television and Consoles), Service Vertical (Media and Entertainment, Education and Learning, Gaming, and Service Utilities), Content Type (Voice Over Internet Protocol, Text, Image, and Video), Platform (Smart Devices, Laptops, Desktops, Tablets, Set-Top Box, and Gaming Consoles), Service Type (Consulting, Installation, Maintenance, Training, Support, and Managed Services), User Type (Small Office Home Office, Small Enterprises, Medium Enterprises, and Large Enterprises) – Industry Trends and Forecast to 2030.
Over-The-Top (OTT) services represent a relatively new and rapidly evolving segment of the digital media landscape, characterized by significant growth potential. This sector encompasses a variety of services delivered directly to consumers via the internet, bypassing traditional cable or satellite television providers. As a result, the OTT industry is gaining widespread acceptance
10 https://www.statista.com/outlook/amo/media/tv-video/ott-video/worldwide
among numerous companies, offering users diverse viewing options while providing advertisers with expanded opportunities for content promotion. This shift is largely driven by the increasing preference for internet-based media services over conventional cable subscriptions. Several factors contribute to the robust growth of the global OTT services market. Firstly, there is an expanding availability of high-quality content on the internet. This surge in new and engaging content has made OTT platforms more appealing to a broader audience. Secondly, there is a growing awareness of both new and existing video streaming services and platforms. As consumers become more knowledgeable about the range of OTT options available, their adoption rates increase correspondingly.
Thirdly, the proliferation of smartphones and highspeed internet, fueled by rapid globalisation, has played a crucial role in facilitating access to OTT services. These technological advancements enable consumers to stream content seamlessly from any location, thereby enhancing the overall user experience. According to Data Bridge Market Research, the global OTT services market, which was valued at USD 89. 24 billion in 2022, is projected to reach USD 339. 66 billion by 2030. This growth trajectory corresponds to a compound annual growth rate (CAGR) of 15. 66% during the forecast period from 2023 to 2030. 11 A significant driver of this market expansion is the subscription-based segment, which dominates due to its numerous advantages. Subscriptionbased OTT services are favoured for their ability to foster increased customer loyalty and a strong customer base.
Additionally, these services contribute to reduced churn rates and better customer retention, making them a sustainable model for long-term growth. The market analysis provided by Data Bridge Market Research offers comprehensive insights into various aspects of the OTT services market, including market value, growth rate, market segments, geographical coverage, and the competitive landscape. The report also incorporates in-depth expert analysis, import/export analysis, pricing analysis, and production consumption analysis, along with PESTLE analysis. This detailed examination helps in understanding the market dynamics and the factors influencing its growth, providing stakeholders with valuable information for strategic decision-making. 11 https://www. databridgemarketresearch.
com/reports/global-over-the-top-ott-servicesmarket#:~:text=Global%20Over%20The%20Top%20(OTT)%20Services%20Market%2C%20By%20Monetizat ion,Internet%20Protocol%20Television%20and%20Consoles
MAJOR OTT MERGER CASES
AT&T’s WarnerMedia and Discovery Inc. (United States) Market Definition for OTT Streaming Services as discussed in this case The Federal Communications Commission introduced a communications marketplace report in 2020. As per the said report, it was the first time that the definition pertaining to an online video distributor was made a part of such a report. The report provided the definition as “an OVD is an entity that distributes video programming to consumers over the Internet, not as a component of an MVPD* subscription, and not solely to customers of an ISP owned or operated by the entity or its affiliates. OVD content typically is available to U. S. consumers on a nationwide basis, although in some cases (e. g. , OVDs that offer cable and broadcast channels) geographic availability of OVD content can be limited.
”12 “Using a variety of business models, including advertising-supported video offerings; a subscription model for access to an entire video library; and a transactional approach where consumers pay to view a movie or television episode on a per-program basis, OVDs continue to offer consumers a range of options. In addition to these models, virtual multichannel video programming distributors (vMVPDs), which deliver packages of streaming linear channels to subscribers similar to those offered by traditional MVPDs, continue to carve a foothold in the marketplace and to attract consumers away from traditional MVPDs. While OVDs often provide access to content from third-party producers, some OVDs continue to increase the amount of original and owned content they provide as a means of differentiating themselves from competitors.
Subscription based OVDs and vMVPD subscriptions have risen in recent years, appearing to capture attention from consumers at the expense of traditional MVPDs. OVDs use the Internet to deliver video content to consumers. OVDs include Netflix, Hulu, Amazon Prime Video, YouTube TV, Disney+, AT&T TV Now, and Sling TV, as well as numerous other providers tending to focus on small or niche audiences. ”13
12 Federal Communications Commission, 2020 Communications Marketplace Report, FCC 20-188, at 113
(2020), https://docs.fcc.gov/public/attachments/FCC-20-188A1.pdf. *MPVD: Multichannel Video Programming Distributors
13 Federal Communications Commission, 2020 Communications Marketplace Report, FCC 20-188, at 104
(2020), https://docs.fcc.gov/public/attachments/FCC-20-188A1.pdf.
About the Merger AT&T and Discovery have announced a definitive agreement to merge WarnerMedia’s premium entertainment, sports, and news assets with Discovery’s leading nonfiction and international entertainment and sports businesses. This merger aims to create a premier, standalone global entertainment company. The transaction is structured as an all-stock, Reverse Morris Trust deal, where AT&T will receive $43 billion in a mix of cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T’s shareholders will hold 71% of the new company, while Discovery’s shareholders will own 29%. The Boards of Directors of both AT&T and Discovery have approved the transaction.
14 This merger is expected to generate substantial value for AT&T and Discovery shareholders by integrating the strongest leadership teams, content creators, and extensive libraries of highquality series and films in the media industry. It aims to accelerate both companies’ direct-toconsumer (DTC) streaming services for a global audience. By uniting WarnerMedia’s robust studios and iconic scripted entertainment, animation, news, and sports with Discovery’s global leadership in unscripted and international entertainment and sports, the new company will offer a diverse content portfolio with broad appeal. The combined entity is projected to have significant scale and investment resources, with expected 2023 revenue of approximately $52 billion, adjusted EBITDA of about 4 billion, and a leading free cash flow conversion rate of approximately 60%.
Additionally, the merger is anticipated to create at least $3 billion in annual cost synergies, enabling increased investment in content and digital innovation and scaling its global DTC business. 15 For AT&T and its shareholders, this transaction provides an opportunity to unlock value in its media assets and better position the media business to capitalize on the growing DTC trends. The merger allows AT&T to enhance its long-term connectivity demand, benefiting shareholders by participating in a leading media company with a broad global portfolio of brands and strong DTC potential. This deal also promises substantial value creation through increased investment in growth areas such as mobile and fixed broadband. Post-merger, AT&T’s improved capital structure will position it as one of the best-capitalized 5G and fiber broadband companies in the United States.
The transaction will result in the formation of two
14 https://www.sec.gov/Archives/edgar/data/732717/000119312521162721/d176202dex991.htm
15 Id
independent companies—one focusing on broadband connectivity and the other on media— thereby sharpening investment focus and attracting the best investor base for each company. This strategic move is designed to enhance both companies’ competitive positioning and growth potential in their respective markets. A Stronger Competitor in Global Streaming
The new company formed by the merger of WarnerMedia and Discovery will compete on a global scale in the rapidly growing direct-to-consumer (DTC) market. This merger aims to deliver compelling content to DTC subscribers through platforms such as HBO Max and discovery+. By combining WarnerMedia's extensive content library, which includes popular and valuable intellectual properties (IP), with Discovery's global reach, local-language content, and regional expertise across more than 200 countries and territories, the new entity will be well-positioned to expand its audience. 16 The new company will be able to make significant investments in original content for its streaming services, enhancing its offerings for subscribers.
This investment will not only enrich the programming available on its global linear pay TV and broadcast channels but also introduce more innovative video experiences and choices for consumers. The merger is expected to leverage the strengths of both companies, creating a comprehensive content portfolio that appeals to a wide range of viewers. By doing so, the new company aims to solidify its position as a leader in the global entertainment industry, driving growth and competition in the DTC market.
MARKET SHARE (PRE AND POST-MERGER)17
PEACOCK
2%
STARZ
5%
SHOWTIME
4%
PARAMOUNT+
7% Discovery+ 2%
HBO MAX (WarnerMedia) 11%
NETFLIX
28%
ESPN+
6%
DISNEY+
15%
HULU
18%
POST-MERGER
OTT PLATFORMS
(MARKET SHARES) *
2021 (Post-Merger)
The merger between WarnerMedia and Discovery Inc. is set to create the third-largest entity in the U. S. streaming market by share of total subscriptions. This strategic consolidation will integrate WarnerMedia's extensive array of content, including renowned franchises and popular series, with Discovery Inc. 's vast repository of non-fiction programming and international reach. This combined entity will not only bolster its content library but also significantly expand its subscriber base, positioning it as a formidable competitor in the streaming industry. WarnerMedia's assets, such as HBO Max, known for its high-quality scripted content, and Discovery's platforms, like Discovery+, recognized for its diverse, reality-based content, will complement each other.
This merger will allow the new entity to offer a broad spectrum of content that caters to varied consumer preferences, from premium dramas and blockbuster movies to documentaries and lifestyle programming. The combined operational strengths and resources of WarnerMedia and Discovery Inc. will enhance their ability to invest in innovative content and technology. This is expected to drive subscriber growth and engagement, further solidifying their market position. The merger aims to leverage economies of scale, resulting in cost efficiencies and the ability to compete more effectively against other major streaming services. This new powerhouse in the streaming market is anticipated to play a crucial role in shaping the future landscape of digital entertainment in the United States.
U-Next and Paravi Merger (Japan) The subscription video-on-demand (SVoD) market in Japan has historically been dominated by two prominent international corporations, Amazon Prime Video and Netflix. These global entities have maintained a significant market share, leveraging their extensive content libraries and advanced recommendation algorithms to attract and retain subscribers. Their influence has set a high benchmark in terms of content variety, quality, and technological innovation, making them formidable competitors within the Japanese market. 18 However, the competitive landscape of the Japanese SVoD market witnessed a notable shift in 2023. In a strategic move aimed at challenging the dominance of Amazon Prime Video and Netflix, two major domestic SVoD providers, U-Next and Paravi, merged their operations.
This consolidation was driven by the recognition of the need for a robust domestic alternative capable of meeting the diverse 18 https://www. ampereanalysis. com/insight/japanese-svod-u-next-targets-netflix-and-amazon-aftermerger#:~:text=The%20Japanese%20subscription%20video%2Don,with%20the%20two%20global%20players.
and evolving preferences of Japanese consumers. The merger of U-Next and Paravi is a significant development, as it combines their respective strengths, resources, and content libraries to offer a more comprehensive and competitive service. U-Next, known for its extensive collection of Japanese films, dramas, and anime, and Paravi, which has carved a niche with its exclusive Japanese TV shows and local content, together aim to leverage their combined assets to attract a broader audience. This merger not only enhances their content offerings but also allows for greater investment in technology and user experience improvements, positioning them as a formidable competitor to the international giants.
The alliance between U-Next and Paravi reflects a broader trend in the SVoD industry, where local providers are increasingly seeking to consolidate and collaborate to withstand the pressures of globalization. This move is expected to foster greater diversity in content, catering to the unique cultural and entertainment preferences of Japanese viewers. 19 As a result, the competitive dynamics of the Japanese SVoD market are likely to evolve, potentially leading to increased innovation and improved service quality across the board. U-Next, a subsidiary of the entertainment conglomerate Usen-Next, has long distinguished itself by offering the largest catalogue among all SVoD platforms in Japan. Despite this extensive content library, U-Next's higher subscription fee of JPY 2,189 per month has been a significant barrier to its subscriber growth.
In contrast, Paravi, a smaller SVoD service established by prominent Japanese broadcasters TBS and TV Tokyo, offers a more affordable subscription rate of JPY 1,017 per month. Paravi's content primarily features popular titles from its parent broadcasters, attracting a dedicated user base seeking access to exclusive Japanese TV shows. The merger of U-Next and Paravi in the second quarter of 2023 marked a strategic consolidation in the Japanese SVoD market. This merger enabled U-Next to enhance its already substantial content offerings by integrating Paravi's popular titles, while simultaneously absorbing approximately 0. 8 million Paravi subscribers. This strategic move increased U- Next's total subscriber base to 3. 9 million.
To facilitate a smooth transition and retain the Paravi subscriber base, U-Next offered legacy pricing to former Paravi users, maintaining their subscription fee at JPY 1,017 until the end of 2023, after which it would rise to JPY 1,430. Meanwhile, existing U-Next subscribers continued to enjoy the enriched content catalogue
19 Id
without any increase in their subscription fees. This approach not only retained the majority of Paravi’s users but also strengthened U-Next's market position through an expanded and diversified content library.
MARKET SHARE (PRE AND POST-MERGER)20
OTT PLATFORMS
2022 (Pre-Merger)
2023 (Post-Merger)
(MARKET SHARES) *
NETFLIX
22.3% 21.7%
U-NEXT
12.6% (pre-merger) 15.0% (post-merger with Paravi)
AMAZON PRIME VIDEO
11.8% 12.9%
DAZN
11.4% 9.7%
DISNEY+
9.4% 8.9%
HULU
6.8% 6.3%
LEMINO
4. 2% 4. 0% In conclusion, while U-Next’s subscriber base constitutes approximately 60% of Netflix's and 40% of Amazon Prime Video’s, its higher Average Revenue Per User (ARPU) has enabled U- Next to achieve substantial financial success. In 2023, U-Next generated JPY 90 billion (approximately $636 million), which is 76% of Netflix’s revenue in Japan and double that of Amazon Prime Video. This financial performance underscores U-Next's strategic advantage derived from its pricing model and expansive content offerings. The merger with Paravi has significantly bolstered U-Next’s market position by expanding its content catalogue and subscriber base. With a larger and more diverse library, U-Next is better equipped to meet the varied preferences of Japanese viewers, enhancing its competitive edge.
The integration of Paravi’s popular titles has also facilitated subscriber retention and growth, further solidifying U-Next’s foothold in the market. Overall, U-Next’s enhanced catalogue,
20 https://gem-standard.com/p/en/column_786
In this, the market size is defined as the total amount paid by subscribers to VOD service providers.
increased subscriber base, and substantial revenue generation position it as the most formidable domestic competitor to the international giants, Amazon Prime Video and Netflix. This strengthened position enables U-Next to challenge the dominance of these global players and promotes increased competition within the broader Japanese streaming market. As a result, U- Next is poised to play a pivotal role in shaping the future dynamics of the SVoD industry in Japan. Amazon Prime Video – MGM Merger (European Union) Market Definition for OTT Streaming Services as per this case The Body of European Regulators for Electronic Communications (BEREC) defined OTT in its report published on OTT services. BEREC defines OTT service as “content, a service or an application that is provided to the end user over the public internet.
” Including in the definition that what is provided can be either content, a service or an application, means that anything provided over the public Internet is an OTT service. This provision generally occurs without involvement of the IAP* in the control or distribution of the service. OTT services include the provision of content and applications such as voice services provided over the Internet, webbased content (news sites, social media etc. ), search engines, hosting services, email services, instant messaging, video and multimedia content, etc. 21 Content can be streaming services like Netflix, broadcasting commercial content, such as those provided by BBC and CNN, broadcasting user-generated content via YouTube and online newspaper and magazine content. 22 About the Merger
Blonde. The acquisition of such a prestigious studio underscores Amazon's strategic move to enhance its content offerings and bolster its competitive position in the rapidly evolving media and streaming landscape. 23 This acquisition is part of a broader trend of significant mergers and acquisitions in the media and streaming industry. For instance, last year, AT&T announced a merger of WarnerMedia with Discovery, consolidating major networks such as HBO, CNN, and HGTV under one umbrella to form a new streaming powerhouse. This merger received approval from the U. S. government in the previous month, highlighting regulatory acknowledgment of the shifting dynamics within the industry. The regulatory landscape for Amazon's acquisition of MGM has also been notable.
The European Commission, after thorough review, concluded that the merger would not significantly reduce competition in the relevant markets, thereby giving it the green light. However, as of now, the U. S. government has yet to make a definitive ruling on the merger. Despite this pending regulatory approval, Amazon and MGM proceeded to finalize the deal, reflecting their confidence in the strategic and competitive benefits of the acquisition. In conclusion, Amazon's acquisition of MGM represents a significant consolidation within the media and entertainment sector. By integrating MGM's vast and valuable content library, Amazon aims to fortify its streaming service, Prime Video, against formidable competitors in the industry.
This move is indicative of a broader trend towards consolidation as companies seek to enhance their content offerings and competitive standing in an increasingly crowded market. The ongoing regulatory reviews and approvals will continue to shape media mergers' landscape, impacting major industry players' strategies and operations. The Commission’s Investigation
of AV content, the investigation revealed that the combined entity's market share would remain relatively modest, given the presence of numerous other robust competitors. 24 Similarly, in the wholesale supply of TV channels, the transaction was not expected to diminish competition, as a variety of channel providers continue to operate effectively within the market. For the retail supply of AV services, the Commission found that consumers would still have access to a broad array of streaming options, ensuring that competitive pressure remains strong. In the realm of production and licensing of distribution rights to third-party distributors for theatrical releases, the market investigation indicated that the combined entity's influence would be limited, thus not posing a significant threat to competition.
25 Lastly, in the provision of marketplace services, the assessment concluded that Amazon’s acquisition of MGM would not substantially alter the competitive dynamics, as the market includes several other significant players. The Commission's findings indicate that these markets are likely national in scope, and the transaction does not appreciably alter competitive conditions at the national level. Therefore, the merger is unlikely to result in a significant impediment to effective competition in any of the relevant markets under scrutiny. This thorough assessment led the Commission to grant unconditional approval for the transaction, recognising that the merger would not substantially harm competition within the specified sectors.
INDIAN MARKET
The Indian OTT audience universe currently stands at 481.1 million individuals, representing a penetration rate of 34%. This figure encompasses individuals who have watched at least one online video, whether free or paid, in the past month. According to the latest edition of our annual report, the Indian OTT market experienced a significant surge during the pandemic years of 2020 and 2021. However, growth has since stabilized to more moderate levels. Specifically, the Indian OTT audience base grew by 20% from 2021 to 2022, but has increased by only 13.5% over the past year.26 This deceleration indicates that the market is transitioning past its peak growth phase observed during the earlier pandemic years.
24 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1762
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26 https://www.financialexpress.com/business/brandwagon-india-has-481-million-ott-users-and-102-millionactive-paid-subscriptions-reveals-ormax-report-3298029/
Additionally, the report highlights that there are currently 101. 8 million active paid OTT subscriptions in India, distributed among 36. 4 million SVoD (Subscription Video on Demand) audiences. This results in an average of 2. 8 subscriptions per paying audience member. 27 It is important to distinguish that B2C (Business-to-Consumer) subscriptions refer to memberships directly obtained from the OTT platforms, as opposed to B2B (Business-to-Business) subscriptions, which are bundled with telecom packages offered by various operators. Geographically, Mumbai, Delhi, and Bengaluru emerge as the top three cities in terms of paid subscriptions, each boasting more than six million active paid subscriptions.
These findings underscore the significant yet stabilising growth trajectory of the Indian OTT market and provide insights into the distribution and preferences of the paying subscriber base. This data is crucial for understanding market dynamics and guiding future strategies for content providers and platform operators in India's evolving digital entertainment landscape. The current Indian OTT streaming landscape is also going through a major shift which is reflected through the cases of Sony-Zee. Sony Group Corp. has reportedly withdrawn its agreement to merge its Indian operations with Zee Entertainment Enterprises Ltd. from a local company court. This decision marks the final step in scrapping the plan, which had been in the works for two years and aimed to create a 0 billion media giant.
The merger was initially seen as a strategic move to combine Sony’s extensive portfolio with Zee’s strong local presence, thereby establishing a dominant entity in the Indian media landscape. However, various regulatory and legal challenges, along with shifting market dynamics, may have influenced Sony's decision to retract the agreement. The cancellation of this merger highlights the complexities and uncertainties involved in large-scale corporate consolidations, particularly in the rapidly evolving media industry. The original merger announcement had promised significant synergies and enhanced competitive positioning in the Indian market, but the withdrawal underscores the difficulties in navigating regulatory frameworks and aligning corporate strategies in such endeavours. The other major recent Indian case of Jio and Disney has become crucial.
The reported upcoming merger between JioCinema and Disney+ Hotstar is anticipated to create the largest OTT platform in India. This merger, while promising significant market advantages, must be evaluated in the context of potential challenges and regulatory considerations. The role of the
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Competition Commission of India (CCI) is crucial in reviewing and approving such mergers to ensure fair competition and prevent any adverse market effects. For the Jio-Disney merger, regulatory scrutiny is expected to focus particularly on their streaming businesses and the substantial influence they wield over advertising during cricket events. Cricket holds immense value in India’s media landscape due to its massive popularity. Disney+ Hotstar, India’s largest streaming app with a user base of 38 million, holds the exclusive rights for International Cricket Council (ICC) matches in India until 2027. Conversely, Reliance’s JioCinema app has secured the rights for the highly popular Indian Premier League (IPL).
The combined power of these two platforms in the cricket broadcasting domain could potentially lead to significant market control, which necessitates careful examination by regulatory authorities to maintain a balanced and competitive OTT market in India.
CONCLUSION - WAY FORWARD
The proliferation of Over-The-Top (OTT) services in India, as well as globally, indicates significant market development. The Indian OTT landscape has witnessed rapid growth, particularly during and after the pandemic years of 2020 and 2021, which catalysed a substantial increase in both audience numbers and paid subscriptions. This growth trajectory is further evidenced by high-profile mergers and acquisitions, reflecting the competitive efforts of various entities to establish themselves as dominant players in the market. Despite this substantial growth, India currently lacks a comprehensive regulatory framework for OTT services. The existing guidelines are not sufficiently robust to address the complexities and competitive dynamics of the rapidly evolving OTT sector.
The Telecom Regulatory Authority of India (TRAI), which oversees telecom services, does not extend its regulatory purview to encompass OTT platforms. This regulatory gap highlights the need for a more structured approach to govern the sector effectively. The absence of concrete regulations poses potential risks and uncertainties for both consumers and service providers. As the market continues to mature, the importance of establishing clear and enforceable regulations becomes increasingly evident. A well-defined regulatory framework would ensure fair competition, protect consumer interests, and provide a level playing field for all market participants. It would also address issues related to content regulation, data privacy, and consumer protection, which are critical in the context of digital services. The significant mergers within the OTT industry underscore the necessity for
regulatory oversight. These mergers can lead to increased market concentration, potentially stifling competition and innovation. A regulatory framework could include provisions for monitoring such mergers and acquisitions to prevent anti-competitive practices and ensure that the market remains dynamic and open to new entrants. India can benefit from examining the regulatory frameworks of other jurisdictions with wellestablished OTT regulations and adopting similar mechanisms to enhance its own regulatory landscape. For instance, the European Union's Audiovisual Media Services Directive (AVMSD) provides a comprehensive framework for regulating OTT services. The AVMSD mandates that video-on-demand services adhere to content standards similar to traditional broadcasters, ensuring the protection of minors and combating hate speech.
Additionally, the directive enforces quotas for European content, promoting local production and cultural diversity (European Commission, 2018). 28 In the United States, the Federal Communications Commission (FCC) oversees aspects of OTT services under the Communications Act of 1934, although its regulatory reach is limited compared to traditional broadcasting. The FCC focuses on issues such as net neutrality, which affects the delivery of OTT services by ensuring equal access to online content without preferential treatment (Federal Communications Commission, 2015). Australia offers another example with its Broadcasting Services Act 1992, which has been adapted to cover online content.
The Australian Communications and Media Authority (ACMA) regulates OTT services, ensuring compliance with content standards and classifications to protect consumers, particularly minors, from harmful content (ACMA, 2019). 29 By studying these models, India can develop a nuanced regulatory framework for OTT services that balances innovation with consumer protection. Implementing such a framework would involve establishing clear content standards, safeguarding net neutrality, and promoting local content production. These measures would ensure a level playing field for OTT providers and traditional broadcasters while addressing concerns related to content quality, accessibility, and cultural representation. This approach can provide a robust foundation for the growth and
28 European Commission. (2018). Audiovisual Media Services Directive.
29 Australian Communications and Media Authority. (2019). Broadcasting Services Act 1992.
regulation of the OTT sector in India, aligning it with global best practices and enhancing its competitiveness in the international market. Given the current state of the Indian OTT market, it is evident that the sector has moved beyond its nascent stage. The rapid growth and substantial investments signal a level of maturity that warrants regulatory attention. Therefore, from a competition law perspective, it is timely and appropriate to propose regulatory changes. These changes should aim to foster a healthy competitive environment, promote transparency, and safeguard the interests of all stakeholders involved. In conclusion, the Indian OTT market has achieved a significant level of maturity, necessitating the development of a comprehensive regulatory framework.
Such a framework would address the current regulatory deficiencies, support sustained growth, and ensure that the benefits of OTT services are maximised for both consumers and service providers. This regulatory evolution is essential for maintaining the momentum of growth and innovation in the Indian OTT sector, positioning it to compete effectively on a global scale.