OTT ad growth hits speed bump in AMJ quarter due to second covid wave
For OTT platforms, the festive quarter of October-November-December had marked the recovery in ad spends followed by decent growth in the January-February-March quarter
For OTT platforms, the festive quarter of October-November-December had marked the recovery in ad spends followed by decent growth in the January-February-March quarter. The months of April and May have been very tough for OTT even as hopes are pinned on June to bring back the lost momentum.
It has been a double whammy of sorts for the OTT platforms as AMJ is anyway a weak quarter from an advertising perspective. However, the pandemic has made it worst as corporates shifted their focus to the well-being of their employees and business partners while sales targets took a backseat.
"JFM was very good for everyone while AMJ has been a disaster. June seems to be promising but promises are yet to come true. Compared to June 2020, June 2021 is looking better. Some brands are not spending because their demand has anyway increased while some brands are not spending because there is no demand due to supply chain-related issues. AMJ is anyway not a good quarter and generally sees a dip after JFM. This ad slowdown is like a double whammy," says the revenue head of a leading OTT platform.
Chief Client Officer & head - West, Wavemaker India Shekhar Banerjee enunciated two key reasons why AVOD platforms are taking a hit. The ROI delivered by OTT platforms has come into question even as tech giants are resorting to aggressive pricing.
“2021 has been much kinder on AdEx v/s the first wave. However, the revenue growth of the AVOD platform is challenged by 2 factors. First is the role of the platform and advertisers are questioning the benefit and incrementality that OTT platforms are bringing in. Somewhere linked to the same is the second factor of pricing, walled gardens have a very aggressive pricing strategy on Video ad inventory and AVOD platforms need to rethink their pricing strategy to stay competitive. Given the cost model of OTT we are likely to see them pivot fully towards SVOD, they may not be able to sustain the Ad game beyond live events and sports," Banerjee noted.
"I think the trend can be pinned to the regular degrowth in the JFM after the festive season. My assessment is that the impact is higher on the advertising revenues and not on the subscription revenue. Multiple factors like the 2nd wave of COVID leading to essentials only, budget planning etc, may be the reason. Once, life is back to normal, I expect OTT ad revenues to grow exponentially again," he added.
Mirum India Director of Media Preetam Thingalaya noted that the second wave has dashed everyone's hope of recovering lost growth in 2021. "Everyone was banking on the year 2021 to cover up for the lost time last year. We saw a minor upward trend at the start of the year 2021 across video platforms and other digital platforms and with IPL 21 in the pipeline, things were looking great and promising. However, the March lockdown and then IPL getting cancelled was a big hit at least for the platform that had the streaming rights. We saw major brand pausing or going slow on investments on digital."
He observed that the ad de-growth has been uniform across platforms and formats. He further stated that SVOD platforms have seen a lesser compared to AVOD platforms. "Also, I am sure AVOD might have suffered a bit but SVOD grew almost 2X or more in these times and we have enough and more data to prove this. Titles like Scam 1992 on SonyLiv and Mirzapur Season 2 on Prime which released on October 20 literally boosted their SVOD growth. Currently with titles like Radhe ( Salman’s movie) and Friends Reunion on ZEE5 have also helped to push SVOD. All these titles have only driven higher “Paid Subscription” to the OTT platforms. So while yes, there might be a de-growth in AVOD revenue; SVOD revenue might have grown substantially," he elaborated.
"Our economy has failed to fully recover from the pandemic downslide & same is the case for ad spends. Although, all market leaders were bullish with 20%+ growth during the start of the year, however with ongoing uncertainty & volatility brands are still worried as buyers become more cautious on purchase decisions. On the content side, IPL 2021 supposed to the biggest money-spinning league for Star & Indian Adex also got suspended mid way due to the ongoing Covid19 second wave has massively contributed to the de-growth, as most of the budgets were planned & locked on the sports league," Khatri said.
Interactive Avenues EVP Harish Iyer estimated that the OTT platforms will take a 15-20% hit in ad revenue in the AMJ quarter. He pointed out that other OTT platforms were anyway struggling as Disney+ Hotstar had sucked out a lot of ad monies from the market. He believes that the IPL cancellation will have an adverse impact on Disney+ Hotstar's revenue.
"In JFM, the impact on OTT was that the IPL was about to start. IPL had managed to attract a lot of sponsors on Disney+ Hotstar. In my estimate, if Disney+ Hotstar was expected to make Rs 400-500 crore they would have roughly booked 30% of that revenue. Nobody knows if the remaining 70% advertising will come back or not," he said.
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