India’s OTT market course corrects; growth in favour of ad-driven players

India’s OTT industry is going through a correction phase as the initial surge in OTT adoption, particularly during the pandemic, has plateaued. The Indian OTT audience base experienced a 20% increase during 2021-2022, but grew by only 13.5% last year, according to the Ormax OTT Audience Report 2023.

In a potential blow to competitors in the fragmented OTT market, Mukesh Ambani’s Reliance and The Walt Disney Company joined hands to create the country’s largest media network by merging Viacom18 and Star India — the joint venture (JV) is valued at $8.5 billion — in February this year. The merged entity’s streaming user base, a consolidated reach of 160 million monthly unique visitors, along with a broad, diversified content portfolio that includes rights for premier sporting events and strong last-mile distribution, has intensified the race to monopolise the OTT market.

A win-win for consumers
Jio Cinema has also recently introduced a new subscription offering ‘Jio Cinema Premium’ at a ‘market defining’ price of Rs 29 per month that will offer an ad-free experience and a ‘Family’ plan at Rs 89 per month which could potentially lead to increased churn rate among competitors.

“The OTT industry is going through a course correction, and there are various reasons for this. Premium content, including the Indian Premier League (IPL), being offered for free is a disruptive scenario. Additionally, JioCinema’s extremely low pricing, even for a global catalogue, will prevent international OTT giants from raising subscription rates beyond a limit,” says Karan Taurani, media sector analyst and senior vice-president at Elara Capital.

“Pricing is also witnessing a correction as platforms continue to face hefty losses. With poor pricing mechanisms amid increasing competitive intensity, the path to break-even is further delayed,” he adds. OTT giants with solid distribution mechanisms and synergies need no aggregators. But for standalone players, these aggregators are the glimmer of hope. From Tata Play’s Binge to Jio’s Jio TV+, India’s largest OTT aggregators are predominantly run by DTH and telecom companies where multiple OTT services are offered as a bundle for an affordable price.

Audiences, too, have shown interest in these bundled offerings and this has helped standalone players in retaining them. But it is too early to say if this could potentially turn out to be a sustainable model in the long run. “It’s a win-win scenario: consumers get more value for their money, while providers attract and retain customers through added benefits,” says Kavita Jaubin, vice-president, Content & Strategy at aha, which offers Telugu and Tamil-language content. “While this shift is exciting, it’s also a pivotal moment for the industry. The challenge lies in finding a sustainable model that balances revenue generation with consumer satisfaction,” she adds.

The market share of AVOD to go up
OTT players also face a dilemma when it comes to sticking to a business model — SVOD (Subscription Video On Demand) or AVOD (Advertising-based Video On Demand). SVOD OTTs face a challenge over scaling up further largely due to India being a price sensitive market where the audience inherently don’t believe in the concept of paying for entertainment. Data costs, too, are an additional challenge for OTT businesses trying to cater to tier-2 and tier-3 geographies where the audience largely operate on a per-day GB availability from their pre-paid plans.

“SVOD is quite challenging because the metros and over 10 lakh towns in India already have a per capita subscription of 4.9 and 3.4. For any new player to operate in these markets, the subscriber will mostly have to let go of an existing subscription. The growth is then likely to come from tier-2 and tier-3 cities,” underlines Keerat Grewal, head of business development, Ormax Media.

Grewal believes a freemium model is a more effective approach, especially for brands that have existing TV content enabling them to beat the first challenge of getting audiences to download their app. “With the mammoth reach of YouTube in India, a pure AVOD play is not sustainable for revenue optimization. Hence, the SVOD model has to be introduced but the pricing strategies will need a re-think,” Grewal adds.

However, Taurani sees AVOD driving the industry, but laments its low pricing. “SVOD will continue to stay as it is but is unlikely to witness exponential growth. The market share of AVOD will even go up to 70% from the current 60% levels in the medium term,” he adds.

As the industry navigates through a period of transition and adaptation, marked by both challenges and opportunities, it will be fascinating to observe how players in the OTT space continue to innovate and evolve in response to shifting consumer behaviours and market dynamics. The Federal