By Asmita Dey
A clutch of four over-the-top (OTT) players are understood to have mopped up about `3,084.7 crore collectively in funding from their parent companies in the last two years. Hotstar received funding to the tune of `1,749.3 crore in 2017-18 from Star India and Star US Holdings Subsidiary, data sourced from business signals platform paper.vc showed. AltBalaji, the OTT platform owned by Balaji Telefilms, got `300 crore in funding from its parent in 2017-18.
Audio OTT platform Gaana, which claims to have 100 million users in the country, received close to `1,000 crore in funding from parent Times Internet and Aceville Pte in 2018 while Bharti Airtel-owned Wynk received `35.4 crore from Nettle Infrastructure Investments, a wholly-owned subsidiary of the company, in March 2018.
As Reliance Jio’s cheaper tariff plans led to an explosion of internet consumption in the country, consumers are increasingly taking to viewing content on smartphones. Of the three billion smartphones across the world currently, the Indian market accounts for over 450 million, estimate analysts at Boston Consulting Group (BCG). Overall, it is estimated that 16% of media consumption in India is already on digital media. However, for the Indian youth, 25% of media consumption is digital, analysts at BCG said in a report.
“In the OTT space, the two biggest areas in which the funds are invested are customer acquisition cost and producing content,” said Raghav Anand, segment leader, digital, media & convergence at EY.
While OTT platforms (video) typically spend anywhere between $3-8 to acquire a customer, the number is around $1.5-$6.5 for audio. As far as content is concerned, the original content cost per hour is three times to four times the cost of TV content. The equation in OTT is customer acquisition cost plus content cost should be equal to or less than the lifetime value of a consumer, said Anand.
Simply put, lifetime value is an estimate of the average revenue that a customer will generate throughout his/her life span as a customer. “Currently, this is so lopsided that most of the OTT players are challenged to balance growth and profitability,” added Anand.
Around 300-400 million people watch television and so it gets ad revenues while mere five million people on an average watch content on OTT platforms. Mass players like Hotstar which has about 300 million users need to scale up , an analyst said on the condition of anonymity. Since Hotstar has live cricket, customer acquisition becomes easier. “OTT is not really taking the digital advertising chunk, except for Hotstar,” the analyst said.
Currently about, 18-20% of the total advertising (media) spend is on digital. Almost 75-80% of that spend is on Google and Facebook. The last 10% is divided among other things, including OTT, analysts said.