Eventually, all OTT services will go hybrid to tap ad and subscriber revenue. It will launch its ad-supported tiers, already available in Brazil, the US and UK
With JioCinema soft-launching its ₹999 annual package for HBO, Warner Bros and Max Original content on its platform, the contours of over-the top (OTT) video-on-demand services in the immediate future are getting clearer. There will be no free lunches as OTT services build hybrid business models to maximize revenue. The industry will also see mergers and acquisitions leading to consolidation with large players buying out the smaller ones to expand their subscriber base. Lastly, regional language content on these services will increase, a point made in the April 2023 Ficci-EY report on the media and entertainment industry.
Hybrid model, regional content will drive OTTs
After pushing its app free during the cricket Indian Premier League (IPL), Viacom18, that has signed exclusive and pricey multi-year deal with Warner Bros. Discovery that owns popular shows like Succession, The Last of Us, Game of Thrones and The Flight Attendant, has put it behind a paywall to lure the affluent, paying customer.
Disney+ Hotstar, which hosted the HBO content earlier, did not renew its deal saying the 460,000 subscribers watching such shows did not justify the money it was spending on acquiring the content. The deal clinched by Viacom18 last month may help the service build a hybrid model which is a mix of SVOD (subscription driven video-on-demand and AVOD (advertising led-video on demand) in streaming parlance.
“Hybrid is the only way to go for streaming platforms in a value-conscious market like India. It’s true that majority of people go for free content and do not mind the ads. But for an OTT service, the ad money is not enough to cover the cost of creating content and investments in technology,” said a media industry executive.
India’s AVOD service MX Player, owned by Times Internet, is on the block and in talks with Amazon to sell. “In video streaming, a large chunk of advertising is taken away by YouTube as it offers extremely low ad rates for sizeable eyeballs,” the executive said. As a result, OTT services are unable to charge a premium and ad revenue generation becomes a challenge.
Of the total online video viewership, YouTube has 88% share while the premium video-on-demand (VOD) category has 12%, said a new report by research and consulting firm Media Partners Asia (MPA). It defines ‘premium VOD’ as online video-on-demand platforms that curate long-form content for consumers with free and paid tiers (freemium) or solely paid tiers (SVOD). Premium VOD excludes User Generated Content and social video platforms such as YouTube.
Eventually, all OTT services will go hybrid to tap both advertising and subscription revenue. Currently, Netflix is SVOD in India. However, in due course it will launch its ad-supported tiers which are already available in markets like the US, UK, Australia, and Brazil, among others.
The industry is also ripe for consolidation which may kick off if the MX Player and Amazon deal goes through. Viacom18 is also merging its two OTT apps – Voot and JioCinema – where the former will cease to exist. After the Zee-Sony merger, the combined entity may also stick to a single streaming app instead of two -- Zee5 and SonyLiv -- though the companies haven’t disclosed their plan.
Media experts also foresee smaller, regional language OTT services being acquired by the big daddies in the business much like large television broadcasters like Star India acquired regional channels Maa TV and Asianet and Viacom18 bought out Eenadu TV channels in the south.
Scale is required to sustain a streaming business and regional or smaller platforms with loyal audiences are sitting targets for larger services to expand their base.
Lastly, as Ficci-EY report said, regional language content will become bigger on these platforms. In 2020, 30% of OTT originals were in regional languages, increasing to 50% in 2022. The share of vernacular content will increase to over 62% of total content produced as regional OTTs flourish on the back of dubbing and subtitling, it said.
The report said digital subscription revenue will also grow at the rate of 11%. However, it noted that across segments, subscription is focused on the top end of the consumer pyramid resulting in a heavily concentrated subscription base
In 2022, almost 3,000 hours of fresh, original content was produced for streaming platforms, which was 19% higher than 2021. Demand for original content will increase from 3,000 hours to over 4,000 hours by 2025.
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