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Ad-supported freemium models work in India, say OTT players

15-April-2015
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Ad-supported freemium models work in India, say OTT players

OTT (Over-the-Top) content providers have increased in their relevance in the Indian market in recent times with content increasingly being consumed over second screen devices. With smart phone proliferation and internet penetration, people accessing and watching content on OTT services is expected to increase significantly. However, the question is how will they monetize this in a country where people are used to viewing content for free.

There are mainly three types of models that are used by OTT players in India. One is a fully advertising based model, the second is a freemium model in which most content is free except for premium content which people need to pay to watch and the subscription based model. The free model makes use of advertising to gain revenues. There are OTT players such as Zenga, Ditto TV and many others that use such a model to bring in revenues. However, there are other OTT content providers that prefer the freemium model such as Spuul, NexGTV among others that offer certain content free but charge for premium content. Subscription based models such as like Netflix have yet to take off in India as there are still a few takers for it.

We asked a few OTT players which model is the optimum revenue generating model for them. While some felt that a free model worked, many other felt that there should be certain premium content that needs to paid for in order for content creators to invest in better content. So for instance in OTT players such as Spuul and NexGTV there is certain content which may be old which is available free to viewers but content that is new would have to paid for by the viewer.

“The model is a hybrid model, I think the better term for it is a freemium model. Because no matter which part of the world you stay in if you are Indian you want your free content. But if you have watched the free content and enjoy the service then a lot of people end up subscribing. And the free content is ad supported,” says Ravi Bhushan, VP, Spuul Global. He further said that though advertising brings in a significant amount of the revenue it isn’t enough as you need enough scale to be entirely dependent on it. He said that subscription still drives a major portion of their revenues.

So are people willing to pay for content in India? “To be perfectly honest the propensity is a little less in India as compared to the US as it is a more developed and richer market. But it is not like Indian’s are not willing to pay, so for example before we used to had a standard $5 subscription worldwide, but now in India we came up with innovations like the consumer goods concept like sachet pricing,” he said. In this people pay a small sum of money for a few hours of content. This allows them to consume more content and spend more without having the feeling of paying a lot.

According GD Singh, Director & CEO, Digivive.com (NexGTV) a lot of things depend on the type of content that an OTT player puts on his platform. For instance he says if something is shot with very low resources then that can be supported by advertising. But if it is premium content that such as the show House of Cards created by OTT player Netflix which has used a lot resources to create such content then it can be charged from the viewer in order to monetize them. “I think there will always be a balance of ad based models and subscription led models depending on the type of content which is produced,” Singh said.

However, Shabir Momin, MD & CTO, Zenga Media said, “Most people do not prefer paying especially when they have options of that content available for free. We follow a free model where we depend entirely on advertising”. When asked about the advertisers that spend on such platforms he said that the categories include FMCG, automobiles, banks and all the other brand categories that cater to the youth target audience. “Among the OTT players we are the only profit making and have been profitable for three years now and we started in 2009,” he said. In fact the company had closed its top line revenues at about $5 million in FY2014 say media reports.

Though there were some OTT platforms like Starsports.com that had come up with pure subscription based models, it has changed to more free or freemium models. As Indian viewers are still used to watching content free online it a hybrid model such as the freemium model works well among Indian audiences.

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