There is a wind of change with subscription-based video-on-demand (SVoD) platforms upping its monthly or annual charges across international markets except India. For instance, Netflix, post its password crackdown in the USA, has axed its basic plan on July 20, 2023. The cheapest ad-free plan for the USA market is $15.49 per month (Rs 1284.96- current exchange rate). Moreover, Disney+ also introduced a second hike in a single year on August 9. The ad-free subscription plan for Disney+ would cost approximately $13.99 (Rs 1160.53) per month as compared to its previous pricing of $10.99 (Rs 911.67). It is believed that in India price hike may not work as this is an extremely price-sensitive market. “Case in point is Netflix. The platform initially had price a fee of Rs 799 (premium plan), 649 (standard Plan) and 499. This was later reduced to to Rs 649, Rs 499 and as low as Rs 199 mainly to woo users from tier-2 and 3 towns. In a country where AV0D (Advertising video-on-demand) rules and is plagued with password sharing, value pricing is the only viable model in SVoD. Price hikes or premium pricing will be detrimental to achieving large subscription numbers,” Sanjay Chhabria, founder, Everest Entertainment, an independent media and entertainment studio, told BrandWagon Online.
Growing up!
Currently, there are two kinds of narratives which the over-the-top (OTT) industry has managed to build. On one hand, the industry continues to grow, while on the other, it is going through the process of consolidation. Revenue in the OTT video market is expected to reach Rs 29,930 crore in 2023, according to market intelligence platform, Statista. The revenue is projected to grow at a compound annual growth rate of 11.78% to reach Rs 46,730 billion by 2027. Industry experts opine that currently one of the big reasons for a drop in paid subscribers is the availability of live sports too cricket, for free “Overall while there has been significant growth in OTT viewership, the same hasn’t been reflected to that extent on subscription numbers, thanks to the Indian Premier League (IPL) this year moving from SVoD to AVoD. Also, a lot of films and premium content on Jio cinema are being offered for free. However in the long term, due to revenue pressures, all this will get paid and eventually will start eating shares from TV, which is a while away,” Ashish Golwalkar, a media consultant, highlighted.
Similarity versus Differences
To be sure, India is a diverse market, where every customer uses or purchases her own product in different stock-keeping units (SKUs) or pack sizes. This is also a reason why many years back large Fast Moving Consumer Goods (FMCG) companies launched products in sachets. This strategy is understood to have benefitted the FMCG industry in many ways. First, it has not only allowed consumers to pay as per need, thereby fueling sales, but the purchase experience is pocket-friendly. Perhaps the video streaming industry can draw a leaf from this exercise and create a similar strategy to drive such impulse purchases. “OTT platforms will have to devise multiple offerings to cater to the country’s diverse economic range. Amazon has already taken the lead, it has been smart enough to take note of the immense potential. It has Amazon Prime Video the SVoD service offering premium web series and the latest movies while on the other hand MiniTV is a free and ad-supported service inside its shopping app. Another interesting phenomenon is the emergence of FAST (Free Ad-Supported streaming TV) channels on smart TVs,” Chhabria added.
Acquire to retain!
China leads the number of SVOD users in the Asia-Pacific region (APAC) as of 2022 with 381.77 million users with India at a distant second with 67.85 million users, according to latest findings of Statista. Subscription video-on-demand accounted for 67% of revenue, with advertising video-on-demand accounting for 24.67%. This also draws attention to the way users are acquired in a market like India. While discounting is one part of the game, bundling with telecom players too has played a significant role. For instance, Amazon Prime has tied with telecom operators such as Airtel and Vodafone to offer its services to postpaid users. Moreover, typically customer acquisition cost (CAC) is divided into two buckets two buckets – paid and organic. Organic CAC is always zero and can be based on multiple environmental and brand or content-driven factors that come into play. “CAC is always a drain on the P&L and remains negative till the time it is not measured against metrics of the quality of consumer acquired, intent of customer to come back organically – lifetime value (LTV) and affinity of a customer cohort that has been targeted basis particular genre content bucket that is the moat of the platform. If these three metrics are optimised then the CAC can be efficient. If the customer acquisition strategy is based on the strong returning user percent, then CAC becomes an afterthought,” Abhishek Joshi, head, ShemarooME, explained.
According to an EY-FICCI report, the number of households paying for one or more SVoD services would grow to 52 million from 45 million if the current pricing is maintained. The report further added that a consumer subscribing to three large video OTT platforms would spend approximately Rs 3,000 per year which could limit the growth of OTT subscribing households to 52 million by 2025, accounting for 114 million. However, in the event large platforms launch more affordable packages (approximately Re 1 per day, for example) or aggregators bring the bundled price down to Rs 1,500 or so per year it is estimated that the number of households paying for one or more SVoD service can reach 100 million, and total digital video subscription can increase to around Rs 11,000 crore by 2025.
To turn a subscription business profitable, it is important not only to acquire but also to retain. However, in India, this become a big challenge as viewers are not loyal to any particular platform other than content. . “OTT platforms are retaining customers by offering them three things: content cohorts based on interest and consumption, value in terms of offerings and differentiation, and fear of missing out (FOMO). But in reality, customers are platform agnostic when it comes to content because they are content loyal and not platform loyal,” highlighted Joshi.
Despite an increase in disposable income, industry experts believe it is the value proposition which continues to drive growth.“ Indian audience is largely driven by value and OTTs cater to them with both AVoD and SVoD models. Eventually, the objective is to provide viewers with high quality, value-driven OTT service that keeps them engaged and entertained with what they desire,” Manish Kalra, chief business officer, ZEE5 India, said.
So far, the Indian OTT business hasn’t witnessed a price war, but critics opine that perhaps there will come a time for this but for the time being the aim is to continue to grow the market through the acquisition of users.