What will be the game-changing revenue strategy for OTT industry?

With over 50 platforms existing in India, the OTT market is likely to reach $ 5 billion in size by 2023, according to a 2022 BCG report. Amid the game of the survival of the fittest in the heavily cluttered OTT market, only the ones having the right revenue model - ones that align with the target audience while balancing business goals - will make it through. 

In a panel discussion held on day 1 of FICCI Frames 2023, Pankaj Krishna, Founder and CEO, Chrome Data Analytics, threw the floor open for the thought leaders in the OTT space to discuss the viability of existing business models available for – AVOD, SVOD, hybrid, and aggregation – and the prospects of new ones. 

Praveen Chaudhary, Director, Retention Engagement and Growth Strategy, DTC Marketing, Warner Bros Discovery, APAC, said, “While already running a profitable business in the OTT space in India, there is a huge opportunity of growth for us in India. Various payment options like UPI at the consumer’s disposal have improved things for the OTT players in the last 2-3 years. Making online transactions has become simpler. E-mandates and UPI autopay options solved the problem of renewals on cards for platforms. We no more look at short-term metrics but are focused on customer lifecycle in the long-term. We see value in the growth of OTT consumption and remain invested.”

To further set the context for his next question, Chrome’s Krishna said that content from Discovery and National Geographic was sold on the back of strong Networks like Sony and Star. National Geographic and Discovery alone as pay channels wouldn't have stood their ground. He then asked can comparatively smaller platforms like Lionsgate Play and others scale as big as Disney+ Hotstar and MX Player in India on their own.

Chaudhary from Warner Bros Discovery said, “Not all the OTT players have to be at the scale of MX Player and Hotstar to become successful. There is a place for everyone in the ecosystem. The bigger challenge is to figure out the consumers’ content preferences. An OTT platform only needs to reinvent itself if the consumers are not liking the content.” 

With the P&L of each OTT platform being different, Amit Dhanuka, Executive VP, Lionsgate, commented “An OTT can partner with a telco, collaborate with a marketplace building an aggregation model or even rely on AVOD strategy. There isn’t just one model that can work for all. Content investment dictates how an OTT platform will build its revenue model. Not everyone wants to have 100-200 million downloads.”

Talking about the state of revenue generation in the regional OTT space and how Arha Media is pivoting to increase its revenue pie, its Vice-President and Head- Non-Subscription Revenue, Nitin Burman, commented, “Creating content for the South market is not just about creating content in Telugu, Tamil, Malayalam and Kannada. When you actually deep dive, these are four different European countries in themselves with the kind of population they have. For us, Telugu is a 100 million+ user base market. For Aha, we already have 30 million app downloads and 3 million paid subscribers.”

He further said, “We too started off on the SVOD model. Via SVOD, it was easy for us to reach out to the tier-1 south audience. But to reach out to the rural audience, we had to pivot from SVOD to a hybrid model. We didn’t differentiate between our content offerings on AVOD or SVOD but asked our users to pay a little less and watch ads on the same content. Indian audience doesn’t mind watching ads in between. Similarly, we have various other subscription offerings with various ad frequencies in them. On top of various subscription offerings, we are also heavily focused on branded content. Non-subscription revenue contributes around 30-40% to the overall top line.”

According to Nachiket Pantvaidya, former Group CEO, Balaji Telefilms, OTT platforms cannot solely rely on subscriptions to scale the business. “Currently, the OTT industry is earning $2 billion from ads and $1 billion from subscriptions, excluding YouTube. This clearly shows the potential of growing business through ads. One of the biggest examples of the ad model is IPL, which is the biggest investment in content on OTT and is given away for free. Therefore, to scale, one needs to focus on the advertising model, the subscription model isn’t scalable.”

He added, “With IPL going free, the consumers will be habituated to free content viewing on OTT. Therefore, in the next 2-3 months OTT platforms need to prepare themselves for big investment play and give content for free and convince stockholders that money is not coming back for a while.”

Ajay Chacko, Co-Founder, Arré, seconded Pantvaidya’s point of view and said, “The difference between the past and the current situation is that a player like JioCinema is using a completely different disruption model to gain access. Once upon a time, a lot of broadcasters had control over access. For example, Zee had SITI Cable. The scenario of access has changed completely. Today, content creators have the power of access with themselves. Today, Amazon Prime, the access point, is bundling. It is giving free delivery and 50 other things along with it. In such a scenario, running your own shop through just a subscription is difficult. Huge capital is required to continue being in the game,” he said. 

The game-changer for OTTs would be having control over the access point of the content creator. “So many broadcasters have lost the content access power to telecom, e-commerce and UGC platforms,” said Chako. 

Pantvaidya then suggested that the real infection point for OTT possibly can be the marriage of OTT and commerce, just the way Amazon and Flipkart are doing. “In this model, the scale starts only from Rs 6 lakh crore.”

Adding to Pantvaidya’s statement, Ambesh Tiwari, Business Head, Audio and Studio, Pratilipi, said, “The way commerce is happening and brands reach consumers has changed today. Even if you look at the kind of disruption happening globally in the digital space. Meta and Google’s ad share has been dramatically eaten up by Amazon. Therefore, commerce + OTT can be the future.”

Warner Bros Discovery’s Chaudhary, however dissented and said that consumers don’t watch content to shop brands or vice-versa. “A successful model in OTT + commerce offering is yet to emerge. People in this model have time and again scaled back,” he said. 

Pratilipi’s Tiwari further said that while JioCinema has given away IPL to watch for free and acquire a customer base, the larger question is to sustain this. “Consumers are ready to pay. The challenge is to serve the right model and content to them. At Pratilipi, we have put everything behind the paywall and are about to break even any month now.”

Tiwari also said that two innovations left in the OTT space are the creator-led monetisation and micro-payments. Otherwise, in the future, OTT is only going to be the subset of e-commerce or telco, he said. 

Aamir Mulani, Founder and CEO, Playbox TV, said, “Every 2-3 months a new OTT is being launched. The biggest challenge for OTTs is to create a space for themselves in this cluttered market. So many times, OTTs spend Rs 2000 to acquire a Rs 500 customer, which is a really broken strategy. With over 130 million CTV homes that are willing to pay Rs 300 and more to watch content shows aggregation and bundling work really well for the Indian content consumer. Playbox TV works with 600 ISPs (internet service providers) which are connected to more than 60,000 cable operators that are connected to 50-70 lakh homes in the country. Playbox empowers ISPs to sell OTT bundles with broadband solutions.” 

Sharing his point of view on the future of OTT in India, Lionsgate’s Dhanuka said that consumers follow good content and would pay to watch it. He emphasised that aggregation, bundling and advertising models will play out massively in the future.

Playbox TV’s Mulani believes that the only way forward for OTTs is to crack the distribution game. He commented, “Before Jio, no one had bundled OTT with broadband. But it cracked the distribution game and the rest followed.”

For Pratilipi’s Mulani, creator loyalty to the platform is a risky affair for the OTTs. “Consumers follow the creators. Today, IPL is with JioCinema, tomorrow it could be with someone else,” he commented.

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