According to the FICCI-KPMG 2017 report, a subscription-based revenue model is key for the Over-The-Top (OTT) space. ‘With increasing competition amongst OTT players, a subscription-based revenue model is key to sustainability in future,’ the report mentions. And industry experts in this space believe that exclusive original content is the key to that.
Nachiket Pantvaidya, CEO, ALT Digital Media Entertainment (the Balaji subsidiary that runs the OTT platform ALTBalaji) sees the SVOD (Subscription Video-on-Demand) space growing to USD 1.5 billion (Rs 150 crore) to USD 2 billion (Rs 200 crore) market size by 2020. “But this will happen when the industry recognizes the need to deliver original, exclusive content to the Indian consumer,” he pointed out earlier.
Nitesh Kripalani, Director and Country Head, Amazon Prime Video India, believes that original content in partnership with top production houses, availability of latest TV shows and movies, customer-centric products like data saver video playback quality, and local payment methods will result in large customer base sampling SVOD services.
The fact that SVOD has a long way to go is apparent from its minimum contribution of 13 per cent to Hotstar’s revenues amounting to Rs 24 crore. Meanwhile its ad revenue was at Rs 139 crore (or 75 per cent) out of total revenue of Rs 186 crore in fiscal 2016.
Ashwin Suresh, Co-Founder of Pocket Aces, feels that India will take three to five years to be ready for the SVOD model. “There needs to be high-quality exclusive original content coming out of SVOD platforms. In a few years, long-form content will be supported by subscribers because advertisers will not be able to support its scale and budget.”
Subrat Kar, Co-founder at Vidooly, says, “The subscription model will only go up when you have more content.” According to Vidooly’s research, the consumption, viewership, and watch time in this space has increased by 40 per cent after the launch of Jio. He adds, “If other telecom players bring down their price, subscription will receive a jump.”
Subin Subaiah, CEO, Spuul, shares that in the next 18–24 months, India will see a lot of experimentation. He adds, “In two years, my forecast is AVOD (Advertiser Video-on-Demand) will shift to SVOD, given what Netflix and Amazon are doing here. It’s going to be very difficult for AVOD to generate consumption at levels where it’s going to be sustainable.”
Plan of Action for SVOD platforms
Strategies in place
Almost all players from the international ones like Netflix and Amazon Prime Video to the local ones like ALTBalaji, Eros Now, and DittoTV are tying up with telecom players, DTH platforms, and digital wallets for seamless payments and to tap into their user base. Last month, Amazon Prime Video went one step further and offered Vodafone customers Rs 250 cashback on their Amazon Pay Balance on the purchase of Amazon Prime membership via MyVodafone app. Eros Now recently tied up with BSNL-owned SpeedPay to bundle the former’s content on the telco’s data packs for new and existing users.
Netflix also emphasized on the importance of its partnerships with Airtel Digital TV, Videocon, and Vodafone to reach the diverse Indian market. “Together, Airtel Digital TV, Videocon, and Vodafone make up millions of users and teaming up with them will make it much easier for the Indian consumer to watch Netflix, whether on a set-top box or on mobile,” shared a Netflix spokesperson in our previous interaction.
Pantvaidya also stressed on a similar thought process. He says, “When we work with them, we understand their target groups. That enables us to market our shows and in effect, our platform more effectively to these partners’ consumers. We believe there is a growth story emerging for handset manufacturers and that with data usage, for telecom players. We hope to ride on that growth story.” ALTBalaji’s tie-ups include Micromax, carrier billing payments company Fortumo, mobile wallet MobiKwik and more recently Airtel.
Siddhartha Roy, CEO, Hungama Play, also informed us that the tie-up with Vodafone Play is one of the drivers for the increase of the platform’s user base. “Telecom wallets play an important role. So, we continue to build on those services. We are working on paid consumers who are consuming content and building consumer habit.” He shares that last year, post Jio launch, Hungama Play witnessed a 100 per cent growth in its usage. He adds, “Now the subscriber base is growing at a healthy double digit quarterly.”
“We are focusing on shorter format of content. It’s a mobile-first ecosystem. We brought in sachet billing. These are core values that drive our service," he says. More recently, Videocon d2h has partnered with Hungama Play for its HD Smart Connect Set Top Box.
Suresh approves of the strategic tie-ups with telecoms and digital wallets as they make subscription easier. “Telecoms have good distribution and tie-ups open up that route. And that’s extremely important for an SVOD player.”
However, Subaiah of Singapore-based VOD player Spuul thinks that the above strategy is not the only solution to lure subscribers. “There’s no evidence that OTT apps sitting on a telecom-bundled package is flying off the shelves. If telecoms allow the content to be bundled with data (which Jio is doing) then there’s a certain chance,” he says. Having said that, Subaiah is quick to mention that he is not averse to partnership and is in talks with D2H players and expanding relations with telecom players ‘to explore other areas apart from carrier billing.’
In the past, the SVOD platform which claims to have 7 lakh subscriptions worldwide and 24 million active users worldwide has tied up with Vodafone and digital wallets. The co-founder points out that its sachet pricing (starting from Rs 30 for 5 days) and ‘tiny’ download functionality have worked for the platform to bring in users. After seeing a 50 per cent jump in the last financial year, Spuul is currently looking at 30–35 per cent increase in its user base y-o-y.
|OTT Players (driven by subscription and freemium mode)||Subscription Price (per month)|
|Amazon Prime Video India||Rs 42|
|Sony LIV||Rs 50|
|Ditto TV||Rs 20|
|Hungama Play||Rs 190|
|Eros Now||Rs 50|
|ALTBalaji||Rs 30 (for first three months)|
Due to challenges of low television subscription rates and still evolving data and digital payments ecosystem, the SVOD model is yet to gain traction in India. Suresh mentions that the current obstacles of SVOD players are to do with content, pricing, and distribution. He adds, “You need to build a good base for good quality content. The problem is there aren’t enough high-quality content creators in the ecosystem.”
The other obstacle, as Subaiah points out, is the overflow of free content ‘which is confusing to the consumer.’ “There are 14–15 OTT players with most of them offering content for free. How are you going to pick one over the others? Huge education needs to happen. Netflix has been a gift in many ways in the market. They have educated people that if you want to watch quality content you have to pay. There’s a hope that free users will convert to paying subscribers. But that shift is difficult to happen.”
Roy opines, “The first challenge is: how do you charge your consumer? All of us are working towards that. The second challenge is more of an opportunity sitting on the back of more than 300 million mobile internet users. There is a massive growth in consumption based on cheaper data.”
Let’s not rule out content costs. According to the FICCI report, a 20–30 minute of fiction content on digital can cost anywhere between Rs 12 lakh and Rs 15 lakh, higher than content costs on television. As Suresh rightly points out, “If you have to build a successful business and make multi-millionaire dollar worth of shows, you need people to pay Rs 500 a month. And that’s challenging right now. If you have the ability to sustain and are willing to bear the losses for a few years, you will eventually reach a point where subscribers are paying.”
Currently, only the big players, the likes of Netflix and Amazon Prime Video India have been able to do that as each has earmarked Rs 2,000 crore war chests for content alone.
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