India is fine with ads, as long as content is free

As it ever happened, while watching content on an over-the-top (OTT) platform an ad is played? Remind us, of the good old TV days, when ad breaks were part of the staple diet. Interestingly, the Indian consumer does not mind an ad or two between a show aired on any OTT platform. Perhaps this is a reason why the growth in SVoD (Subscription video-on-demand) services in India has slowed down for the time being. “Indians are fine with advertisements when they get their preferred content for free.  Nowadays streaming platforms like YouTube also have something for every age group. Earlier it was restricted to youngsters, but now even older people can discover various content. I think a majority of people watch YouTube with ads which is a free model,” Ashish Golwalkar, senior media expert, told BrandWagon Online.

Even as the future may appear bright, in the current scheme of things, not all seems fine.

To be sure,  India has almost 547 million OTT users but active paid subscriptions remain stagnant at 99.6 million, as per a recent study as per Ormax OTT Audience Report 2024.  While AVoD has grown at 21%, SVoD has reported a growth of just  13.8% compared to the previous year,   It is believed that the reason behind this stagnation is the ability to pay. “In mature markets, growth is slowing down because most people who can afford subscriptions already have them. To keep growing, companies need to attract new audiences and encourage current subscribers to buy more subscriptions. In cities, people already have an average of four subscriptions each,” Keerat Grewal, head – business development (streaming, TV, and brands), Ormax Media said.

It is believed that there are several factors, besides the saturation in the ability to pay behind the stagnation in growth of SVoD. of the paying market behind this phenomenon. It is believed, that users are exhausted from managing too many subscriptions, besides an overall increase in the monthly cost. For instance, consumers typically pay anywhere between Rs 300-500 as a monthly recharge for any direct-to-home (DTH) service. Add to this, the average cost of a Netflix monthly subscription at about Rs 499, another Rs 29 for Jio Cinema, Rs 299 for Amazon Prime Video, and another Rs 299 for Hotstar premium, among others, and finally the cost of broadband service which again is about Rs 1000-1,500. And the list does not end here. This shows that the cost of home entertainment ranges between Rs 1,500-2,500 a month for an average Indian consumer. Interestingly, this does not account for cost of entertainment at movie theatres. If that is added assuming that a consumer watches two movies with her partner then the total cost would increase to Rs 3,500-5,000, excluding food and beverage costs.  “These subscriptions are expensive because cable and DTH services are still prevalent. Hence, a price point allows premium positioning. Apart from the money matters, managing several subscriptions is also tiresome for many users.  In the good old television era, people used to spend only Rs 300 per month to watch all channels and that model sustained for the longest period. So, in a cost-conscious market like India, it is going to be tough for SVoD,” Golwalkar added.

To reduce the subscription cost, OTT platforms have made several strategic moves. Bundling of services with telecom operators is one such way besides the launch of free-to-watch content platforms. For example, Amazon launched MiniTV, its free-to-watch content platform. “Bundling with telecom operators is a strategic approach to reduce costs and boosting user reach, especially in price-sensitive markets like India. By combining OTT subscriptions with telecom services, platforms can access a large user base and offer affordable, bundled content. This reduces acquisition costs while adding value for consumers. However, it’s important to balance this with direct-to-consumer growth objectives to ensure sustainable, long-term success,” Rakesh CK, EVP and head – SVoD and Marketing, Aha, explained.

The affordable factor?
Even as OTT platforms have resorted to various schemes to drive subscription revenue, in the end, habit and affordability are some of the most crucial parts of the service. e. “The biggest reason is habit. For people, who have grown up watching long commercial breaks on TV, ads on OTT are not a deal breaker. Apart from that, affordability is also a key concern for many Indian consumers.  AVoD platforms provide free access to content in exchange for watching ads, making them highly attractive to price-sensitive consumers who prioritise cost over uninterrupted viewing. Once they experience seamless content over some time, they will make different choices. If a consumer goes to an SVoD-only platform – over time they will probably buy YouTube Premium as well,” Saurabh Srivastava, COO – digital business, Shemaroo Entertainment Limited said.

Interestingly, it has been observed that the Hindi-speaking market reported heavy consumption of AVoD content. “Hindi-speaking markets have lower TV penetration when compared with  South and West and therefore recorded heavier consumption across AVoD platforms. AVoOD platforms, which are mostly supported by big tech companies, have been able to speed up their growth and attract more viewers. Rural and tier-2 and tier-3 cities areas have a critical mass for this and are still growing,” Srivastava added.

Meanwhile, as per the Ormax report, while 150.6 million SVoD audiences have access to paid content, only 39.3 million users have paid for at least one subscription, themselves directly. Experts believe that OTT platforms need to think out of the box to grow subscribers. “To grow direct-to-consumer subscriptions, OTT platforms should offer a compelling value proposition that users are willing to pay for. This involves consistently providing relevant and high-quality content while ensuring an exceptional user experience. Key factors include seamless navigation, personalised recommendations, and a smooth payment process, all of which contribute to attracting and retaining direct subscribers,” Rakesh CK added. Financial Express