Are advertising and hybrid the only viable business models for OTTs in India?

Indian OTT players are going all guns blazing when it comes to investing in content. From the production to actors, players are leaving no stone unturned to impress the masses with shows at a time when the audience have a plethora of options to choose from. 

While the investments towards content keep increasing, are they actually proving to be profitable for Indian OTT players given that India is still a price-sensitive market? 

A panel of leaders from the OTT industry were speaking at the FICCI Frames 2023, at a session titled, 'Digital Media: What is the right revenue model?' The panel included Ambesh Tiwari, business head, audio & studio, pratilipi; Aamir Mulani, founder & CEO, Playbox TV; Praveen Chaudhary, director, retention engagement & growth strategy, DTC marketing, Warner Bros Discovery, APAC; Amit Dhanuka, executive VP, Lionsgate; Nachiket Pantvaidya, ex group CEO, Balaji Telefilms; Ajay Chacko, co-founder, Arré; Nitin Burman, vice president & head- non subscription. The panel was discussing what business model will be the most viable for the OTT industry in the future. 

This comes at a time, when even the big names in the OTT business like Netflix and Amazon Prime have experimented with their business models in India. While some players are thinking of going AVOD, others have introduced micro payments and pay-per-view options for viewers. 

As per Chacko of Arré, in the last 7-8 years, the business models have changed a lot in India and there is  no definite answer currently for what would work. 

“It started with SVOD, then players like Jio and Amazon bundled the content. Currently the answer about what business models work for each player differs from player to player,” he says. 

Mulani of Playbox TV says that the biggest challenge for OTT players today is the customer acquisition cost. “Everyone in the ecosystem is chasing the same player and everyone has content. However, I have seen players spending Rs. 1000 on a customer who will pay them Rs 500. What we are saying is that India already has an established business model that is available for players to leverage.”

“India has 130 mn CTV homes (Cable TV homes) who are paying for content. According to what we have seen over the past 15-20 years is that offering a bundle, buffet rather than asking them to pay for different things works. The Indian mentality is simple, we want to pay for something that will give us everything.” 

“We work with 600 internet service providers and these are connected to more than 60,000 cable operators which are connected to almost 60 lakh homes in the country. We are empowering these internet providers by teaching them how they can bundle OTTs along with their broadband,” he explains. 

When asked if the content they make and produce is actually profitable given its scale, Chaudhary of Warner Bros Discovery says that they are quite convinced about the opportunities in India. We are looking at long-term metrics and we have reached a place where we have seen the business model become profitable.” 

Adding to this,Dhanuka of Lionsgate suggests that not every player needs to be at the same level in the market. “ I don’t think all of us need to be at the same level as Disney+Hotstar to become successful. There is a place for everyone. Disney+ Hotstar and Discovery are completely different propositions and both of them have their own place in the ecosystem.” 

Burman of aha explains how the brand moved from being pure SVOD to a hybrid player. “We started off as a subscription-based platform, we wanted to give a premium experience to them. When we started off our audience was also the tier 1 audience who knew what OTT  platforms are. Going to them with their novelty of language was easy, however further we realised that national platforms have their reach limited to the top tier 1 and 2 cities. If we want to reach out to the rural audience in AP and Telangana, we will have to pivot to a hybrid model while not differentiating with the content.”

“We offered 4K, Dolby, etc to the subscribers, however, if you want to watch the same shows you can also watch ads and pay Rs 99. In the end, the Indian audience is familiar and okay with paying for content on TV and also watching ads,” he explains. 

“Today the non-subscription revenue for us is 30-40%,” adds Burman.

Pantvaidya further explains why advertising-based models will be viable in the Indian market.  “In terms of pure potential, there is a straight crease towards advertising. The biggest OTT property that is the IPL which costed them 30,000 crores is being given free today. If you want a business of scale today, you need advertising, subscription can be a small shop for you. If you look at the trends today, publicly declared numbers from companies, everything points that people are giving things away for free. The Indian consumer will say that if I am watching the IPL for free, why should I pay for anything else. In the next 2-3 months, after IPL people will look forward to free content,” he elaborates.