Is free sports streaming disrupting the OTT model?

Sports content is considered a significant driver of subscription-based over-the-Top (OTT) services. However, if free sports streaming persists in India, consumers may be less inclined to pay for subscriptions in the future and ad-supported models may become the standard, warns a WARC paper. 

As two media giants-Viacom18 and Disney Star-are set for a merger, the ongoing trend of free sports content by their streaming platforms Hotstar and JioCinema, could negatively impact the average revenue per user (ARPU) for other OTT platforms, the paper titled "Scoring Big with Indian Sports Streaming” noted further. 

The fault lines are already visible. As per the latest Ormax OTT Audience Report 2024, the average number of platforms subscribed to per paying user fell from 2.8 to 2.5 in a year and the active paid subscriptions remain stagnant at about 100 million. 

Commercial viability and monetization are key concerns. MX Player, the Times group-owned platform, for instance, has been recently sold to Amazon Prime Video. Amazon has merged MiniTV with MX Player to launch Amazon MX Player. While global streamer Netflix and Amazon have maintained their growth in India riding on premium content, homegrown platforms ZEE5 reported operating losses of ₹178 crore in Q1 FY25, despite a 15% revenue increase to ₹224 crore. 

Zee Entertainment CEO Punit Goenka emphasized that ZEE5's immediate goal is to establish a “balanced cost structure for long-term profitability”. Similarly, Balaji Telefilms' OTT platform ALTT posted Rs 21 crore losses in FY24. Regional platforms Aha (Rs 92 crore) and Hoi Choi (Rs 1.5 crore) also reported losses in FY23.

This situation is despite the fact that the OTT streaming market in India reached an all-time high in 2023, with about 707 million internet users, as per ‘Internet in India Report 2023’. 

Leading streaming platforms in India include Disney+Hotstar with a 26% market share, Amazon Prime Video with 23%, Netflix with 13%, ZEE5 with 11%, JioCinema with 7%, and Sony LIV with 4%, according to industry estimates. 

“Previously, major media companies funnelled their profits into OTT.  As competition intensifies and subscriber growth stagnates, aggressive OTT investments, both internal and external, have slowed down,” industry leaders said, adding that “Economics are not working out and OTTs are making severe losses due to increasing content cost and distribution cost.” 

The entry of JioCinema is believed to have disrupted the ecosystem. In the last two years, JioCinema has made significant strides in digital sports and entertainment. The IPL 2024 on JioCinema reached 620 million Indians, a 38% increase from the previous season. Also, Disney+ Hotstar has set in motion its $8.5 Bn merger with the Reliance-backed streaming platform.

The ‘Internet in India Report 2023’ reveals that the industry is set to grow at a CAGR of 11.1% to become a $2.77 billion opportunity by 2027. However, most of the growth would be focussed around free sports streamers like JioCinema and global giants such as Netflix and Amazon, industry watchers said. 

Karan Taurani, Media Sector Analyst, Elara Capital, emphasizes the unique nature of sports content, noting that it is primarily consumed live, setting it apart from on-demand programming. 

Taurani, however, insists, “Subscription charges for sports are essential, though determining the right timing for implementation is crucial. Jio Cinema's strategy of offering free IPL matches was an effective way to capture audience attention, but the long-term sustainability of such free offerings is questionable, especially as it now owns both TV and digital rights.”

Taurani anticipates that Jio Cinema's average revenue per user (ARPU) will range between ₹20 and ₹60 per month, allowing for lower pricing due to their extensive user base. In comparison, he notes that while Disney Hotstar's realization per customer might be around ₹60, Jio Cinema's distribution model will lead to a realization of about ₹50.

Regarding non-sports content, he asserts that platforms like Netflix and Prime Video will continue to thrive independently, thanks to their unique offerings and user experiences. Lastly, Taurani highlights that sports currently accounts for 10-15% of digital ad revenue, a figure he expects to grow as sports consumption increases. He predicts that in the future, about 70% of sports monetization will come from advertising, with subscriptions contributing less than 25%.

Deleise Ross, Senior VP, Mudramax, says, “In markets like India where sports, particularly cricket, has a massive following, the rise of free sports streaming could lead to shifts in viewer behaviour, drawing audiences away from non-sports content on OTT platforms. Since Indian consumers are often cost-sensitive, they prefer free sports streaming over paid non – sports content.” 

Ross feels that both Netflix and Prime Video have invested heavily in high-quality original content, which sets them apart from other streaming services. “Their ability to offer a mix of global and regional content, including Bollywood films, regional series, and award-winning documentaries, also ensures they cater to a wide range of tastes. Their strategy is not to compete directly with sports but to offer a complementary, curated space for entertainment seekers,” said Ross. 

Divya Dixit, OTT expert, has a different point of view on the matter. According to her, “Free sports streaming’s impact is a minor blip and of late that aberration has also been optimized due to plenty of cricket events as well as national interest in other sports as well. Also, some large platforms also choose to launch big-ticket products especially Bollywood movies to counter the impact at times.” 

According to Dixit, Netflix will stay afloat as their catalogue of content is far more premium and therefore not or barely affected by sports, and Amazon prime video relies heavily on its e-commerce ecosystem pushing wider adopts.

While free streaming draws large audiences, the focus on ads instead of subscriptions limits revenue growth, though the mass audience viewership balances the ship, says, Anil Solanki, Senior Director, Media Lead, dentsuX, adding, “However to maintain the ARPU, the OTT platforms need to constantly acquire newer properties to keep the viewership flowing.”