By Rameesh Kailasam and Dhiraj Gyani
The over-the-top (OTT) industry in India has witnessed tremendous growth in recent years, fuelled by increased internet penetration and the availability of affordable smartphones. However, the sustainability of OTT platforms’ business models is under question as more players begin to offer free content to attract viewership.
The growth of the OTT industry in India is driven by several factors. Firstly, the availability of free content on platforms like YouTube has contributed to increased video consumption, introducing users to the concept of OTT streaming. Secondly, the rise of affordable smartphones and internet connectivity has expanded the potential audience for OTT platforms. Lastly, the demand for regional and vernacular content has played a crucial role in driving growth in the Indian OTT market.
The availability of Hollywood content on OTT platforms in India attracts paying audiences and adds value to the overall content slate. Moreover, the rise of OTT platforms has transformed the Bollywood industry, as millennials increasingly use these platforms to watch the genres they prefer the most. The future of theatrical releases will likely be influenced by the success of OTT platforms and the changing preferences of viewers.
According to Media Partners Asia, Indians have spent an estimated 6.1 trillion minutes, equivalent to over 11 million years, watching videos from January 2022 to March 2023, out of which 88% was spent on free content on YouTube, with the remaining time allocated to OTT video streaming apps. Additionally, OTT players in India offer subscription plans that are 70-90% lower than those in the US, as per a recent report by the Confederation of Indian Industry and Boston Consulting Group.
OTT platforms in India have employed various strategies to enhance their subscription base. While some platforms offer competitive pricing plans, others focus on providing compelling content to differentiate themselves in the market. Additionally, partnerships, licensing agreements, and targeted personalization have become essential strategies to attract and retain subscribers.
Challenges to subscription services
While offering free content helps OTT platforms attract a larger audience, it poses challenges for the SVOD market. The availability of easily accessible free content diminishes the incentives for viewers to subscribe to paid services. As a result, the revenue growth rates for SVOD services are expected to decline due to the intensifying competition from free streaming platforms.
The strategy of making expensive content available for free may disrupt the working ecosystem of the emerging OTT industry. It stymies the prospects of SVOD business models in a price-sensitive market like India. This disruption may lead to consolidation, with smaller firms struggling to survive due to lower average revenue per user (ARPU) and the cost of producing new content. Market experts believe that this strategy may adversely impact revenue growth rates for subscription-based video-on-demand (SVOD) services in India this year.
They have pointed out that while providing free content to viewers can help OTT platforms attract a larger audience, sustainability in the long term depends on a combination of revenue streams, including subscriptions, advertising, partnerships, and licensing. The availability of easily accessible free content also poses a challenge for OTT platforms in acquiring paid subscriptions. There is a likelihood that subscription-based OTT market could be severely hit this year due to the intensifying free streaming competition in the OTT market.
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There will soon be a negative effect emerging on growth of OTT market due to premium content being offered for free. This would mean that the OTT market in India would continue to incur losses and may slowly wipe out most of emerging players who may get wiped out.
The prevalence of free content makes it necessary for OTT platforms to focus on value-conscious viewers rather than price-conscious ones. Platforms must offer compelling and exclusive content, coupled with reasonable pricing, to attract users who are willing to pay for premium experiences. By creating a distinct value proposition, platforms can retain and monetize their user base in the long run.
Building sustainable OTT strategies
To build sustainable strategies, OTT platforms need to think beyond views and focus on driving growth and monetization. Platforms should aim for a combination of high user engagement and revenue/profit growth to establish a healthy and successful business model. This can be achieved by offering a mix of appealing content, targeted marketing, and partnerships.
Some OTT platforms have demonstrated the importance of building a sustainable and profitable business rather than prioritizing rapid user acquisition. Accurate data analysis, targeted personalization, and diversified revenue streams, including subscriptions, advertising, partnerships, and licensing, are essential for long-term success. Profitability should be a central focus to ensure platforms can sustain themselves and continue to invest in high-quality content.
The sustainable growth of the OTT industry in India requires platforms to adapt to the evolving landscape, differentiate themselves through compelling content, and adopt profitable business models. While the availability of free content poses challenges, OTT platforms can leverage accurate data, targeted personalization, and diversified revenue streams to drive growth and monetization. By focusing on value-conscious viewers, the Indian OTT industry can thrive in the long run, ensuring profitability for both production and streaming entities while catering to the preferences of a wide range of audiences.
(The authors are respectively CEO of IndiaTech.org and Senior Director Policy & Operations at IndiaTech.org. Views expressed are personal.)