India telco-OTT partnerships to deepen following video streaming boom

In January 2021, Amazon partnered with Airtel to offer a new standard definition mobile-only Prime Video subscription with a 6GB mobile data quota at INR89 (USD1.2) per month. This move is just the latest in the ongoing battle of foreign OTT platforms in establishing a greater foothold in the competitive Indian OTT video space. It is also a clear deepening of an existing relationship between the US company and the Indian telco; Amazon Web Services (AWS) already works with Airtel to develop their joint capabilities in the Indian enterprise segment.

The OTT-telco partnership model in India is expected to evolve further from a simple bundling strategy to one which will feature deeper collaboration, including joint product development and co-branded products in order to grow sustainably. Relying solely on their telecom partners for distribution and to tap into new user segments is becoming increasingly unsustainable for OTT players as operators now bundle access to many different OTT platforms with their own telecom services, leading to a commoditisation of these services; subscribers now shuffle between the various streaming platforms with little loyalty to any one particular service, making it challenging for platforms to secure long-term paid revenue streams.

Among others, Reliance Jio offers its higher-value Jio Fiber customers access to OTT services including Netflix, Zee5 and several others on top of its own entertainment platforms, while Airtel, through its AirtelThanks programme also offers its higher-value postpaid subscribers free OTT access, including Prime Video and Netflix. The two operators also offer both prepaid and postpaid users generous mobile data allocations together with access to OTT services. Through bundling, operators have nonetheless benefited from bundling in the form of reduced churn and marginally higher ARPUs, as Indian mobile subscribers appear willing to pay slightly increased prices for access to a wide range of paid content.

In the absence of deeper partnerships with telecoms operators, the path forward for OTT players in India is challenging, given that the vast majority of India’s 600mn Internet users continue to consume free, ad-supported content. At the same time, the income profile across Indian households has been slow to grow. Streaming companies have been forced to resort to new plans for the Indian market with tailored functionality to attract users. For instance, Netflix in 2019 launched an INR199 (USD2.5) monthly standard definition mobile-only subscription in India, and appears to be testing an INR349 (USD4.8) mobile and PC-only subscription to cater to households which do not own television sets – a sizeable portion of India’s population. Despite revenues of its Indian unit doubling in FY2019/20 (April-March) to INR9.24bn (USD126.5mn) compared to FY2018/19, it remains insignificant relative to the USD21.4bn that Netflix generated globally over the same period.

e/f = Fitch Solutions estimate/forecast. Source: Operators, national sources, Fitch Solutions
Premium-focused services, such as Apple’sTV+ will unlikely find much traction in India without an operator partner. Domestic sales of iPhones, iPads and Macs – which have been the key channel for Apple to distribute its streaming service – continue to pale in comparison to the shipment of their lower-priced, Chinese- and locally-made smartphone, tablet, and PC counterparts, making it challenging for the US company to grow the adoption of its service. Its low pricing of its service at INR99 (USD1.4) monthly, relative to its US pricing of USD4.99 also appears to not have improved the uptake of its service in the country.

Covid-19-related lockdowns, which have led consumers to resort to streaming services for entertainment, have accelerated the growth of OTT players in India; estimates by the India Brand Equity Foundation (IBEF) suggest that paid video subscriptions jumped by close to 30% over the March-July 2020 period to 29.0mn, as more Indians warmed up to the prospect of paying for streamed entertainment. OTT players have continued to explore new ways to attract and monetise their users; for instance, streaming players have sought to acquire rights to premiere new Bollywood films on their platforms to attract users as the closure of cinemas prevented new theatrical releases. With the effects of the pandemic likely to linger for much of 2021, OTT platforms will have to differentiate themselves further by collaborating more closely with their operator partners to drive their growth. Fitch