The term OTT was initially referred to that which goes over a cable box to give the user access to TV content. Now an accepted everyday term, content from OTT (over-the-top) channels is delivered via an internet connection rather than through a traditional cable or broadcast provider. Earlier popular with the millennials, office goers and night hawks, in the COVID period, it has gained acceptance as a platform.
The major revenue of an OTT service provider comes from the subscriber. With most of the people are now staying at home due to the nationwide lockdown, the OTT audio service providers are expected to see a major jump in revenue. To be profitable, OTT platforms will need to increase the proportion of paid subscribers to about six percent of total users in future, said a recent report from a management consulting firm.
OTT audio platforms in India are typically operating on three monetization models. Currently, the ad-based model and bundled model are the major sources of revenue. However, there is an increasing focus on subscription-based model, that constitute only 1 percent of the total user base, and majority of revenue is driven by in-app advertisements. The average revenue from subscription/user is almost 80x that of revenue from advertisements per user. Therefore, players are focusing on increasing their subscription user base to achieve profitability, and the current COVID-19 scenario is expected to provide a massive spike in usage of these platforms, thus giving a strong one-time boost to subscriber additions as well.
For increasing the percentage of paid subscribers and differentiating rivals, players are focusing on original content. In India, most users are likely to switch to a paid OTT audio subscription, only if the charges are approximately Rs 25 per month, said the report, adding that, 62 percent of the consumers surveyed are willing to switch to paid-subscription model. Besides original content, there is a possibility for OTT audio platforms to tap into other sources of revenue, including selling merchandise or tickets via their platforms.
The Indian scenario is very different from that in developed countries. In a country, where we own fewer number of smart TVs than smartphones, most platforms have tried to capture the youngsters using the smartphones. Each of these platforms has their own mobile app with full range of services. This has ensured the reach to even the remotest corners of the country and shown a major increase in numbers.
Currently, there are only two major ways of garnering revenue from viewers. First is the conventional way of showing ads, in between videos. The other and more popular one is the subscription model. The user is asked to pay some amount upfront and then can enjoy limitless, ad-free content. Each OTT service provider has tried to be innovative. Netflix offers shared account, where more than one person can plug on. It offers a mobile only subscription at just Rs 199. Hotstar offers a sports only subscription, owing to its massive sports broadcasting segment. Sony Liv offers subscription on daily and weekly basis as well.
This looks very promising, but there is a catch. The platforms do not just telecast their own movies or shows; they need to offer content from other production houses as well. Hence, they spend a lot of money in acquiring the rights. And no service provider is spared. Even Netflix, an international giant, and extremely popular, spends huge sums of money to provide local content to Indian viewers.
Thus, though ultimately it may become a profitable business, it is largely a negative cash flow one. That is, first the OTT service provider spends money on producing its own content or buying telecast rights from others. And later, receives money from subscribers that pay the fees, which may finally translate into profits.