Why Raj Nayak feels subscription is the only way forward for online video platforms

By Anirban Roy Choudhury , afaqs!, Mumbai | In Digital | March 22, 2017
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On the sidelines of FICCI-Frames 2017 we spoke to Raj Nayak, CEO, Colors about the future of online video in this market.

Do the lions still roar: Reality check for the media and entertainment industry and its contribution? This is a session that took place on day one of FICCI-Frames 2017. One of the panellists in the session was Raj Nayak, chief executive officer, Colors - Viacom. His statements were a reality check for those who are buoyant about the online video wave.

"If we look at monetisation, 85 percent of ad dollars are spent on Google and Facebook and the remaining 15 percent on all other platforms. Now that 15 percent is also so fragmented that everybody is losing money... unless these players (video on demand platforms) crack the subscription model, they will find it really difficult to survive," were his eyebrow raising statements.

Nayak in the past, was founder and managing director of Aidem Ventures (a media ad sales company) and CEO of NDTV Media. He spent over 10 years in Star TV where he was the executive vice president, sales & marketing. Why does Raj Nayak, who is renowned for revolutionising advertising in the media and entertainment space feel advertising revenue cannot be a sustainable revenue model for online video players?

We caught him on the sidelines of FICCI-Frames to find out why the media veteran feels subscription is the only way forward for online video:

Edited excerpts:

What makes the ecosystem fragmented according to you? Is it too many players trying to do too many things?

Television alone has 847 channels and that too where you need a license to have one. On the internet, imagine the number of players, plus the number of OTT players. The entry barrier is so low that anyone can start a channel or upload content. Almost 80 to 85 percent of advertising revenue is taken by Google and Facebook and the rest has to be shared amongst all others. So independents who have to create content and compete will find it difficult to survive unless they can crack an SVOD model.

What about brand integration in web series? Don't you think it can be a sustainable revenue model for online content creators?

Not really. The euphoria is dying down. Initially the brand manager was happy to either do a 2- 5 minute commercial or an ad funded integrated series which would help him / her showcase it to the board as innovation and send it for awards entries. But once you have done it a couple of times, you realise that its novelty has worn off and you really don't get your bang for the buck.

What do you think is the biggest challenge for an AVOD model in India when it comes to digital?

The numbers are not validated by a third party, so there's no transparency. You can actually pay and buy views. Compared to television, the numbers are too small individually, unless it is Live sports or breaking news. Even then, the impact of advertising is not the same on the small screen as it is on the big screen. So for example, even for a sporting event like IPL, a client will look at the ticket size for TV and digital with different prisms.

We have not made a whole lot of changes to the pricing of our TV channels; People in India are not used to paying for content. They pay very little or nothing at all. Do you see the SVOD model tasting any success in the foreseeable future (next 3 years)?

I hope the SVOD model clicks because it will be good for the industry. The first real test will come with Alt Balaji where the entire platform is expected to give original content for as little as 60 Rs. per month. I guess we will have to wait and watch. Unless you get a large number of app downloads and active engagement, the business model won't be viable. I am hoping and praying for its success as it will then open the flood gates and encourage others to go full stream.

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