Prime Video gets into marketplace mode to grab a larger share of OTT pie

Prime Video, the over-the-top (OTT) arm of Amazon Inc, is replicating the marketplace model that is the mainstay in its e-commerce business. Late last month, it tied up with eight global and Indian premium content providers to create the country’s first subscription video-on-demand (VOD) marketplace, adding 10,000 hours of additional content on the same platform. It includes channels such as Lionsgate Play, Eros Now, Discovery+, Hoichoi, Docubay and Shorts TV.

India is the 13th country and the second market in Asia after Japan where the US company has launched the service.

The move marks a significant change in strategy in that the e-commerce platform is not looking at Prime Video only as a customer retention channel for its e-commerce business, but also as a way to straddle the revenue spectrum of the video subscription business — distribution revenue (through the new offering) and advertising (through mini TV, which shows short films supported by advertising on its e-commerce app). “With 60 online video services, there is a long tail of OTT services in the country that may not possess the marketing muscle. Larger players with scale can become gatekeepers for these services allowing them to win new subscribers for a commission,” Mihir Shah, vice president of Media Partners Asia (MPA), explained. After the advertising-driven mini TV launched earlier this year, the new marketplace model is another way to broaden its monetisation streams, he added.

Prime Video is clearly leveraging its paid subscriber base to attract other OTT players — according to the MPA, it is projected to have 21.8 million paid subscribers by December this year, a fourth of the 88.7 million video subscription viewers in India (see chart: Watching brief). That apart, the subscription video-on-demand (VoD) market is concentrated in the hands of the top three. That means the smaller OTT players will find it difficult to increase subscribers and revenue.

Gaurav Gandhi, country manager of Amazon Prime in India, said globally the Seattle-headquartered giant has tie-ups with over 350 OTT channels and he is confident more players will join in India. “Our aim is to help these OTT platforms expand their subscription base within India. We will be a distributor and manage the back-end, technology innovations, billing and so on. Prime is already seen in 99 per cent of the pin codes in the country in 4,400 cities, and our partners will get access to that,” he said.

The marketplace for Prime is part of a game-plan to grab a larger share of the OTT pie in India, where Amazon battles its global competitors. MPA estimates that India’s revenue share in the Asia Pacific subscription VoD market will double to 6 per cent between 2020 and 2025.

Naturally, revenues would depend on who offers the best content. The pandemic opened up a huge opportunity here with cinema halls closed or restricted. Prime has moved aggressively into producing originals and licensing movies (it has shown 28 originals and movies across languages) many of which were looking at theatre releases earlier. Gandhi said Prime provides a huge plus to production houses releasing their films. Pre-pandemic, the biggest films would attract 1 per cent to 1.5 per cent of the population to theaters. The rest of the viewership would come from such modes as streaming or broadcast. Also, southern movies used to find it challenging to find distributors in the north. Now, the same local language movies released directly on Prime see half their viewership coming from outside their home states thanks to dubbing and subtitles.

That apart, world premieres on Prime are released in over 240 countries on the same day. In pre-OTT days, Hindi movies would typically release in 15-20 countries. Gandhi added that regional movies are now being watched in over 170 countries with international viewers accounting for 15-20 per cent.

In a sense, the strategy is no different from that of its rivals. Netflix, for instance, has collectively shown 25 originals and licensed movies across languages this year. Overall, OTT platforms will spend $1 billion for content, of which the top three will account for the bulk of the expenditure. For original content, the spend could top $300 million.

But Prime is also taking the content strategy to the next stage: It is entering film production for the big screen, after which it will be shown on its platform, giving it control over content. Netflix also makes films (dubbed “Originals”), but only for its OTT platforms in India. Prime is making its debut with Akshay Kumar-starrer Ram Setu in association with Abundantia Entertainment, which is meant for the big screen and then on to OTT. “Prime, by building scale, has provided production houses like us a sustainable and viable alternative to the big screen,” said Vikram Malhotra, CEO and founder, Abundantia, which launched Shakuntala on the OTT platform. “The choice of where to release will depend on what consumers want. So Ram Setu, with its budget and scale, is being made first for the big screen,” he added.

It is also entering the lucrative sports content arena. But it has tough competition as it will be locking horns with Disney+ Hotstar and SonyLIV, which lord over this space, and new entrant Viacom18. It has taken the first steps by winning the rights of New Zealand cricket and Women’s National Basketball Association games, neither of which are blockbusters. Prime is non-committal, but sources said it may bid for the hottest OTT property, Indian Premier League (IPL), which comes under the hammer early next year.

Many analysts argue that its new marketplace model is no different from what telecom operators such as Airtel or Jio offer by aggregating OTT premium content on their platforms. And these telecom operators can offer cheaper services owing to their large subscriber bases.

But Gandhi countered: “For one, OTT players coming to the platform are dealing only with subscribers who are willing to pay for content. Two, unlike in a bundled offering where customers might have to pay for what he or she does not want to see, in Prime subscribers pay only for what they want and get seamless service.” That strategy is in for tough testing times. Business Standard