According to EY’s 2023 report on the Media & Entertainment sector, the top six metros contributed 33% to total paid subscriptions in India.
In order to expand subscription video-on-demand (SVOD) penetration in India, beyond tier 1 and affluent audiences, OTT platforms must embrace strategic measures including the release of regional content and catering to the diverse preferences of Tier 2, 3, and 4 audiences, according to industry experts.
As per the EY report, half the original content produced was in Hindi, down from 70% of the content in 2022, showing a clear shift towards regional language audiences; platforms claimed their content was viewed across 99% of Indian pin codes.
The report further stated that the share of vernacular content will increase to over 62% of total content produced as regional OTTs flourish and achieve scale on the back of dubbing and subtitling. This could also lead to increased costs for regional content production.
Additionally, industry experts said that OTT platforms should diversify their offerings beyond video content by venturing into gaming, esports, and other related areas. Partnerships with telecom and internet service providers can also be beneficial in terms of expanding reach and affordability.
Speaking about some key challenges faced by OTT platforms when it comes to increasing SVOD penetration in India, Nitin Burman, Vice-President and Head- Non-Subscription Revenue, Arha Media, said that one of the biggest challenges that happened post-COVID is the wallet size. During COVID times everybody was at home and whatever money people were to spend outside was being spent on only OTTs because that was the only form of entertainment people had.
“Today, each one of the individuals has a maximum of one or two OTT subscriptions. Nobody wants to buy an annual subscription rather people want to buy short-term subscriptions mainly because there are so many options. So, if there is a content piece that they want to watch on one particular OTT, they will buy a monthly plan for that. In order to keep yourself relevant you need to bring out the content pieces on a regular basis. You can't expect people not to have the variety coming. You also need to show them what future lies for them if you want to hold them for a year,” Burman stated.
Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, said that the challenge is very clear that India as a market is very price sensitive.
As per EY report, a consumer subscribing to three large OTT video subscriptions today will spend around Rs 3,000 per year, which is a significant amount and could well limit the growth of OTT subscribing households to 52 million by 2025, accounting for 114 million subscriptions.
Taurani further said that another challenge is that TV’s average revenue per user (ARPU) is very low as compared to digital. The next challenge is that the data cost is very low but data speeds are not that great. Also, if we look at the wired broadband penetration that way, it's a very small number and a lot of people also would like to watch content at home on a larger screen. So, on the larger screen they require fibre internet and its penetration is very low.
“These are the reasons due to why the SVOD revenue base is not growing as such. Moreover, audiences’ habit to pay for online video content needs to develop. Given what we have seen right now over the last six months wherein IPL was offered for free and now Star is offering cricket content free on digital, it's going to be a bigger challenge for SVOD revenue to scale up because if premium content is offered for free there is a very low likelihood of audience paying for other content. So, this is something which is a risk for the overall SVOD penetration and growth in India,” he added.
According to Avinash Mudaliar, Co-founder and CEO, OTTplay, some of the primary obstacles for OTT platforms include content localisation. India is linguistically diverse, with numerous regional languages. OTT platforms need to address the challenge of producing and curating content in multiple languages to cater to diverse audiences effectively. Localisation efforts require substantial investments and resources, posing a barrier for SVOD platforms.
“Another challenge is pricing and affordability. Affordability is a critical factor in a country where a large population still falls in the lower-income bracket. High subscription fees for SVOD services can limit adoption among price-conscious consumers. OTT platforms need to offer flexible pricing plans and affordable subscription options to overcome this challenge,” Mudaliar stated.
In the event large platforms launch more affordable packages (at around Rs 1 per day, for example) or aggregators bring the bundled price down to Rs 1,500 or so per year, EY estimates that the number of households paying for one or more SVOD services can reach 100 million, and total digital video subscription can increase to around Rs 110 billion by 2025.
“Another key challenge is piracy and copyright infringement. India has a significant issue with online piracy, which undermines the revenues and growth of SVOD platforms. The availability of pirated content and illegal streaming websites attracts users who are reluctant to pay for legitimate services, posing a challenge for OTT platforms to compete effectively,” he added.
Furthermore, he went on to say that the cost of data is another big challenge. Despite decreasing data costs in recent years, data pricing remains a concern for many users, particularly in lower-income segments. SVOD services consume a significant amount of data, and the associated costs may deter potential subscribers, especially in a price-sensitive market like India. Other challenges include internet infrastructure and competition from free platforms.
The industry experts suggested various solutions for OTT platforms to overcome these challenges and further expand their penetration in India and reach a wider audience.
Chandrashekhar Mantha, Partner, Media and Entertainment Sector Leader, Deloitte India, believes that OTT penetration is dependent on key factors like availability of broadband connection (fibre and mobile), affordable smartphones, bundling with telcos and other aggregator platforms and cost of broadband data.
"India performs well on almost all the enabling factors to promote the OTT industry. The industry is growing at a very healthy pace and its revenues were estimated at $2.35 billion in 2022. It is forecasted to reach $5.3 billion by 2027. Audience universe was at 430 million viewers of which 30%-35% is contributed by SVOD in India. Thus, our market shows a higher preference for AVOD-based content consumption which is a softer problem for the growth of the SVOD market," Mantha added.
Burman said that “Being from a regional OTT platform, we are not limited to tier 1 or affluent audiences. One of the reasons is we are very localised. Currently, bigger OTT platforms’ focus area of releasing content is in Hindi, then they have doubled it in multiple other languages and they have put it across on their platform.”
“The share of vernacular content in the line-up released by a lot of OTTs for the year is very limited. So that is where the difference lies. I think what would be important for every OTT player is to reach out to these tier 2, tier 3 and tier 4 audiences by releasing content in their own language and by picking up stories which are relatable to them,” he added.
Speaking on similar lines, Taurani said that OTT platforms are currently catering to Tier 1 and in order to expand their reach and get to a wider target audience, 2-3 strategic things that can be done include a wider content experience.
“In terms of content, they are currently more limited to Hindi and English content. So, they need to really deep dive into various regional genres of content, whether it is Tamil, Telugu, Marathi, Gujarati, everything put together to have a larger target audience base. So, as we know that a larger portion of the Indian market lives in the rural markets where a lot of consumption happens for the regional content,” Taurani said.
Furthermore, he went on to say that another strategic move is that OTT platforms need to expand their horizons beyond just video content.
“Most of these platforms need to become a platform which ventures into gaming, esports and various other kinds of things in terms of offerings. You can't just have video as a preparation and really look to scale up. So, most of the platforms need to expand and move beyond pure play video content in terms of their offerings apart from the overall content strategy which is there. Some of these platforms can also introduce pricing which is even more affordable in nature,” he added.
Mudaliar said that in order to expand their penetration in India and reach a wider audience, OTT platforms can employ several strategies. A few key approaches include partnerships with telecom and internet service providers. Collaborating with internet service providers can be beneficial in expanding reach and affordability for all the stakeholders.
“We at OTTplay, have made several such partnerships and our goal of reaching over one million subscribers by the end of this year will be achieved, while allowing users to access content without incurring substantial data charges,” Mudaliar stated.
“Second strategy is enhanced content curation and personalisation. By leveraging data analytics and user insights, OTT platforms can improve content curation and personalisation. OTTplay has been a leader in the same. Our recommendations based on user preferences and viewing habits have enhanced the overall user experience and kept audiences engaged,” he added.
Furthermore, he said that another strategy is pricing and subscription models. To attract a wider range of viewers, OTT platforms can introduce flexible pricing plans and subscription models. For example, OTTplay has monthly plans starting from Rs. 199 and going all the way up to Rs. 2499 for annual plans. This includes several affordable subscription tiers based on users’ tastes and preferences. Other strategies include regional and vernacular content, offline access and download options and targeted marketing and promotions.