Battle of OTT Aggregation: Who will be the Winner?

Source: Business Today

OTT — Now & The Future

Media & Entertainment is one of the fast-growing industries in India today and prominently within it, OTT has been a segment that has witnessed tremendous growth in the last 3–4 years. The Covid-19 pandemic has aided the consumer behavior shift from linear to non-linear. YouTube has seen a 20.5 percent increase in subscribers just one month post the first nationwide lockdown. NASSCOM stated that OTT viewership in India is at an all-time high now and is set to become the next base station for international OTT players boosting their subscriber base. However, these growth rates may taper-down as the pandemic has created a ‘bring-forward affect’ to the adoption of OTT by the Indian consumer base.

A Deloitte report suggest that the OTT market with grow at 20% CAGR over the next decade to reach to a size of USD 13–15 billion. Currently in India, the AVoD revenue dominates the SVoD revenue and with major players in the market like Netflix planning to enter the AVoD business, this trend is likely to stay the same in coming years. Revenue generated from AVoD business is expected to grow from USD 1.1 billion to USD 2.4 billion by 2026 and in the same time period, the SVoD revenue is expected to grow from USD 800 million to USD 2.1 billion. However, the Indian subscriber base of OTT seems to be going forward on a rise and is expected to grow at 17% CAGR to reach 224 million by 2026.

Source: Kannongurus

For the first time, the OTT space has seen involvement of regulatory authorities with the Telecommunication Bill 2022, drafted by Telecom Regulatory Authority of India (TRAI) which also regulates the larger broadcasting media category. The regulatory frameworks has included OTT players in the scope of licensing while mean that they would also need to pay a license free. This may result in costs for consumers may rise with the subscriptions of free OTT apps may be coming downwards. Also this may hinder the growth and innovation space in OTT as the budding Indian start-up ecosystem is built on this. On a whole, OTT has grown from being a nascent sector in Media & Entertainment to one of its growth pillars today in the Indian market.

What is OTT Competition for?

The growth of OTT into one of the major sectors in Media & Entertainment comes at the cost of it also tapping into other sectors of the broader industry which is inevitable. As aforementioned, the key difference that OTT offers a consumer non-linear content which can be watched anywhere anytime at their convenience. Henceforth it is seen as a contender to the Television Industry as the subscriber move away from traditional linear TV on convenience factor. Another major industry that has been looking at OTT as a competitor is the Film Industry, in particular Theatrical business. The closure of movie theatres and multiplexes across the country during pandemic has forced various film studios to release their new movies on OTT platforms.

A research paper presented at the 14th International Telecommunications Society Asia Pacific Conference has performed a competitive analysis between traditional TV and OTT. The results of the research indicate that the OTT platforms score higher than traditional TV in all dimensions, with the major difference being the convenience dimension. The findings of the research also show that OTT & traditional TV do share a high level of comparability on amusement and ease of use. Overall, the research paper concludes that OTT is competitively superior to traditional TV, indicating that the TV content consumers will inevitably be shifting in longer term to OTT platforms.

Source: Callis

Another research article published on the Academy of Marketing Studies Journal studies if the OTT space is a disruption to the Movie Theatre industry. About 50% of the respondents in the research agree that the OTT platforms will be a disruption to theatres citing factors of cost effectiveness, convenience of service, smartphone penetration and others. However, the article also indicates that various theatre factors of screen size, sound quality, theatrical ambience may not be provided by the OTT platforms. The study concludes that OTT platforms and movie theatres will coexist in the longer run as the viewers would be ready to pay extra amount for immersive experience in theatres.

Transforming TV Distribution

The Indian television industry is the second largest global market with more than 170 million TV households valued at USD 11.61 billion in FY 2020. The market is expected to reach USD 19.06 billion by FY 2026 with favorable regulations, technological advancements serving as growth factors in the market. The distribution players of the Indian market comprise of Local Cable Operators (LCOs), Multi-System Operators (MSOs), Direct-to-Home (DTH) service providers, IPTV service provider and Terrestrial TV service provider, Doordarshan, who play a key role acting as intermediaries between broadcasters and end consumers.

As of information provided by the Ministry of Information and Broadcasting (MIB) on 30th June, 2022 there are 1756 MSOs, 5 DTH service providers and 21 IPTV players and about 100,000 LCOs in the country. As per the data, there are 12 MSOs & 1 HITS operator who have a subscriber base of greater than one million. Major players in the market are Siti Networks, DEN Networks, GTPL Hathway, Tata Play (earlier Tata Sky), Sun Direct TV, Dish TV, Bharti Telemedia, Asianet Satellite Communications, NXTDIGITAL and others. Cable & Satellite television dominate the market with a share of more than 98% of the revenue generated.

Source: MediaNews4U

Limited bandwidth availability and lack of subscriber addressability over the years has led to higher bargaining power with the LCOs as they provide the last mile connectivity to the subscriber base. The implementation of digitally addressable cable TV system (DAS) mandated by MIB across four phases is expected to plug these existing gaps in the distribution value chain to improved subscriber addressability and thereby improve the monetization for distributors with higher bandwidth availability. Under DAS, MSOs decrypt the signals provided the by broadcasters transmit them to LCOs who serve as a local retailers offering last mile connectivity through the set-top boxes (STBs).

Bundling of OTTs

One of the major trends which acting as a cross over between various sub-segments in the broader Media & Entertainment industry is creation of OTT bundles by various players. From a consumer point of view, the main advantage with OTT bundle subscriptions is the amount of money one would save as they would be little less concerned on the subscription of each OTT platform. Plus, the additional benefit would be to not miss any type of entertainment one would want to consume. Companies also benefit greatly from OTT bundles as large chunk of customer can be onboarded relatively at lower costs and the retention rate also being on the higher side compared to individual OTT subscriptions.

Tata Play, a major DTH service provider in the market are offering OTT bundled subscription through their Binge platform providing users access to various OTTs through their television sets. The following list provides the details of various OTT bundles offered through Tata Play Binge, all these plans are supported on 2 mobile devices so that one can share subscription service with friends and family.

List of OTT Bundled Subscriptions provided by Tata Play:

1. Rs.59 per month — MX Player, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi
2. Rs.59 per month — Zee5, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi
3. Rs.59 per month — Voot Select, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi
4. Rs.99 per month — MX Player, Zee5, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi, Docubay, Epic On
5. Rs.99 per month — MX Player, Voot Select, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi, Docubay, Epic On
6. Rs.175 per month — Disney+ Hotstar, Zee5, Voot Select, Hungama, Eros Now, Shemaroo, Voot Kids, Epic On, MX Player, Docubay, Hoichoi, Namma Flix, Chaupal
7. Rs.299 per month — Disney+ Hotstar, Voot Select, Zee5, Hungama, Sony Liv, Eros Now, Shemaroo, Voot Kids, Epic On, MX Player, Docubay, Hoichoi, Namma Flix, Chaupal, Curiosity,
8. Rs.999 per year — Disney+ Hotstar, Zee5, Chaupal, Planet Marathi, Namma Flix, Hungama, Eros Now, Shemaroo, Hoichoi, Docubay, Epic On

Source: Tata Play DTH

Telecom operators in the country offer a variety of pre-paid and post-paid mobile plans providing data services, calling and messaging services. However, Average Revenue Per User (ARPU) generated from these services is very low and therefore telecom players have started foraying into variety of value added services to improve their monetization. OTT bundling has become their source of revenue with players like Jio and Airtel providing high-speed broadband plans bundles with OTT platforms. To provide an example, the following list provides details of subscriptions offered by JioFiber.

List of OTT Bundled Subscriptions provided by JioFiber:

1. Rs 999 per month — 150Mbps internet data speed with unlimited data usage for 30 days. Includes free voice calling and free subscription to OTT apps including Amazon Prime Video, Disney+ Hotstar, Voot Select, Sony Liv, Zee 5 and 10 more OTT channels
2. Rs 1499 per month — Unlimited internet at 300 Mbps speed for 30 days validity. Includes a free subscription to Netflix, Amazon Prime Video, Disney+ Hotstar and 14 more OTT channels.
3. Rs. 2499 per month — 500Mbps speed of internet with unlimited data for 30 days. Includes Netflix, Amazon Prime, Disney+ Hotstar and free subscription to 14 more OTT channels.
4. Rs 3999 per month — Unlimited 1Gbps data for 30 days with free subscription to Netflix, Amazon Prime and 15 more OTT channels.
5. Rs 8499 per month — 6600GB data at 1Gbps speed for 30 days. Includes free access to Netflix, Amazon Prime Video and 15 more OTT channels.

Industry Outlook Ahead

OTT has witnessed a major growth and is expected to grow rapidly in the upcoming years as well. The advent of 4G reducing data charges with a strong youth population of the country acted as a strong boost to the sector, and the global pandemic has accelerated this growth transforming it into one of the major segments in the Media space. Content consumption patterns amongst audience has witnessed changes through influx of new content and delivery methods with emphasis being on OTT for non-linear broadcasting. However, subscribing to every major OTT platform is difficult for any consumer and bundled offerings have been on the rise to support these consumer challenges.

Source: tstudios

Various traditional and non-traditional players have been foraying into this space from TV distribution players like Tata Play to Telecom service providers like Jio Fiber and Airtel. Going forward many other players are expected to enter this market like Internet Service Providers (ISPs) and IPTV players and is going to be a key trend that will transform the landscape of industry. Telecom players possess perhaps the largest subscriber bases in the country than any business does, and ISPs would come with the strength of broadband service to deliver higher bandwidth for OTT streaming on large screens.

While many players would be fighting for capturing audience attention, the clear players in advantage today are the TV distribution players who currently are acting as aggregators of the traditional TV. These players would potentially be transforming themselves into aggregators of OTT to support the consumer shift from linear to non-linear content. The key factors supporting these players would be know-how of consumer interests and consumption patterns being long time players in the market. Existing partnerships with content providers such as broadcasters and film studios would play a pivotal role, giving them advantageous position on both sides of value chain aiding them become the winners.

Co-Authored By — Kiran Teja Kunapareddi