Can India Be The Next Growth Market For Viacom ?

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Recently, Viacom (NASDAQ:VIA)  launched VOOT in India, which is a Video on Demand (VOD) platform available free of charge for customers using iOS- and  Android-based devices, or PCs. The company will drive revenues through advertising on this platform. Viacom has moved its entire content library in India (including MTV and Nick) to VOOT,which is aimed at curating the largest repository of kids characters in the Indian OTT (over the top content) space. Viacom operates in India as a joint venture with Reliance Industries, which is one of the largest media groups in the region. Its Video On Demand (VOD) platform launch comes shortly after Netflix was launched in India in January this year. India’s television market is expected to double in the next five years and is estimated grow to around $ 20 billion by 2020. Video On Demand is a huge growth opportunity in the region as the penetration of smartphones and fast interest access increases. Viacom is witnessing strong revenue growth in India.  As the company focuses on high quality content customized for local preferences, the region could be a growth driver for Viacom in future, in our view.

See our complete analysis for Viacom

Growing Smartphone Users, Better Connectivity Provides Huge Potential For Online Video In India

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Smartphone users in India are expected to reach 170 million by 2016 and the country already has more than 300 million internet users. According to a report by Deloitte, with improved networks and better access to the internet, media consumption will increasingly happen via mobile phones in the country. More than 70% of the internet users in the country are in the age bracket of 15-34 and this young audience prefers to watch videos online compared to traditional TVs.  Smartphone penetration in the region is expected to witness strong growth in the next five years,  increasing from 23% of the population in 2016 to nearly 60% of the population in 2020. This will also lead to an increase in data consumption on mobile phones.   These growth figures indicate that the VOD market in India has a huge growth potential.  While competition is intensifying in this market, with several new players looking to capitalize on the growth, Viacom with its focus on high quality content should be able to capture a decent share in this growing market.   While players such as Eros International, Times group, Netflix and HOOQ already operate in India, Balaji Telfilms and UDigital are planning to launch their VOD services in 2016.

Launching an advertisement based model instead of a subscription based model might also work in Viacom’s favour. Consumers in India prefer VOD services which are cheap or free.   Given that the price differential between TV subscription and VOD service such as Netflix is not significant, the cord cutting trend is not yet popular in the country.  The Indian market is still dominated by single TV households and as faster internet access becomes cheaper, the younger generation is likely to move towards VOD as an alternative to the second television. However, television is also under penetrated in the country and the television industry is expected to grow by more than 100% in the next five years and reach $20 billion by 2020.  While TV remains the dominant advertising medium in the country, accounting for nearly 50% of total ad spend, digital advertising is growing at a fast pace and is expected to be around 13% of total ad spend in 2016.  Viacom has the potential to grow its revenues both in traditional TV and the VOD market in India.

We believe the VOD market in India is at early stages of growth and Viacom has a competitive edge, given its original content and the company’s focus on high quality content. As this market expands in India, it could drive revenues for Viacom in the future.

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