The cost of user acquisition in a bundled pack today is borne by the telcos who also pay the OTT platforms a certain amount per active subscriber.
With the lockdown completely changing video viewing habits, subscription revenues from OTT (over the top) platforms could cross $1 billion well within the next three years. Prior to the pandemic, streaming platforms were expected to contribute about 25% to the overall video consumption by FY23. However, with many more Bollywood and regional films now premiering on them, that share could be much higher.
Indeed, the variety of content now available on OTT platforms has prompted experts to believe Indians would soon be willing to pay for content. Some feel that subscription revenues might match those from advertising in the not too distant future. Raghav Anand, partner at EY, believes that once 6-10% of the user base is converted into subscribers, revenues from subscriptions could rival the advertising potential. “This could happen in two to three years. The growth potential for subscription revenues, especially around premium content like sports and movies, is high,” Anand said.
To be sure, as Jehil Thakkar, partner at Deloitte, points out that OTT direct subscriptions are still low even though the user base has increased manifold and many are going behind the paywall. This, in a market where OTT players have largely priced their packs at affordable rates. In late 2018, analysts at Kotak Institutional Equities (KIE) estimated paid subscriptions would grow to over 65 million by FY23. Today, consumers in India are more accustomed to consuming consent via bundled telco packs and believe they are paying not for content but for data.
While consumption of OTT was expected to grow by an annual compounded 50% between 2019-24, the pandemic will probably see it growing at a faster pace. With cheap smartphones flooding the market and data more affordable, players are capitalising on the opportunity. Netflix is testing a new mobile plus plan in India, a year after it launched the first mobile-only pack in the market at a monthly price of `199. Others like Zee5 recently added a cheaper variant of its yearly premium pack. An annual pack costs `365 and offers select original content besides giving access to TV shows prior to their telecast.
Ajay Gupta, partner at AT Kearney, believes prices could go up in a couple of years once consumers form a “habit” of viewing OTT content.
“Eventually, pricing will go up. But, I will be surprised if it happens in the near term with most players,” Jehil Thakkar, Partner at Deloitte concedes that OTT users have increased manifold and that many are going behind the paywall. He points out that if aggregator models like Jio Tv+ work, subscription revenues are sure to see a big jump. “However, it could take a good five to six years for revenues to become significant,” Thakkar said.
The cost of user acquisition in a bundled pack today is borne by the telcos who also pay the OTT platforms a certain amount per active subscriber. As many as 260 million consumers consumed video content through data bundles in 2019. Depending on the nature of the association, platforms could source as much as 80% of their viewers through bundles, Siddhartha Roy, COO at Hungama Digital Media, said.
Monetisation of content has to happen through subscription, according to Ajay Gupta, partner at AT Kearney who feels rebalancing of subscription and advertising revenues is bound to happen sooner than later. “Mobile subscriptions will keep on increasing as the bulk of the population consumes video over smartphones. OTTs have fairly penetrated into the urban household and the ploy now is to expand the subscriber base,” Gupta said. OTT users have increased manifold and many are going behind the paywall.