Shreyas Kulkarni
Points of View

Has OTT content become the key selling point for telcos?

What does this say about the video consumption market, and the marketing strategy of telcos?

India's love for watching online content continues, like a never-ending playlist. And, it's not just on smartphones, as one may assume. There's a steady increase in the number of people consuming content via OTT apps on their television sets.

A key insight of the EY- FICCI report 2020 was that by 2020, OTT will be around 10 per cent of India’s total TV subscription market (without considering data charges). It estimates over 40 million connected TVs by 2025.

The report also said, "India’s telecom industry is poised to become the primary platform for content distribution and consumption." The report added that the country ranks as one of the fastest-growing app markets globally, where entertainment apps are driving significant consumer engagement.

Telcos are going to be catalysts for people in Tier-II and Tier-III markets for consuming OTT content, and even for people who wouldn't have watched this form of content earlier (older people).
Dr Kushal Sanghvi

It is then not surprising to see India's top telcos offer new plans that are aimed to bring the country's love for OTTs and TV together.

Last week, JioFiber, a broadband service from Reliance's Jio brand, revealed its price plans. Plans that start from Rs 999 per month will not only offer you a 4K set-top box that'll make your 'non-smart' TV 'smart', among other benefits, it has also bundled in over 10 OTT apps (the number increases as you choose a more expensive plan). Please note that with the JioFiber, you don't need to own individual subscriptions to these OTT apps because it's included in the plan you choose.

Airtel offered a similar plan with its Xstream bundle. It combines the power of Airtel Xstream Fiber with speeds of up to 1 Gbps, unlimited data, the first of its kind Airtel Xstream Android 4K TV box and access to all OTT content (10,000 movies and shows from the Airtel Xstream app, and complimentary subscription to Disney+ Hotstar, Amazon Prime Video and ZEE5).

It appears that OTT platforms – or bundling – are the equivalent of 'VAS' today.... What the telcos have done is take away the pain of individual subscriptions
Mohit Hira

It seems that OTTs have become the key selling point for telcos. We at afaqs! caught up with four industry experts to understand this trend better...

Edited excerpts:

Dr Kushal Sanghvi, India lead, Integral Ad Science (former business head, Reliance Entertainment and Digital)

Dr Kushal Sanghvi
Dr Kushal Sanghvi

All of us have consumed a huge amount of data, especially in the last five or six months. There's been a stupendous growth (increase) in the viewership of OTT platforms, and it's not just the five or six big names, but the smaller ones as well.

The price you're paying for telecom has grown, and they're pleased about the rise in the average revenue per user (APRU) in the last few months. There's a direct correlation between this growth and video streaming platforms.

We only have three players at the moment – Reliance, Airtel, and Vodafone Idea (now 'Vi'). The battle is between these three. They're going to forge a lot of alliances and bundling of offers, and currently, it seems to be the way to go. The 'sweet box' to give out, especially for new users.

What remains to be seen is whether all telcos offer the same packages and end up with a price war once again, or whether there will be some differentiation and customisation provided to consumers.
Ronita Mitra

Talking about OTT revenue subscription, though Netflix and Amazon have been in the country for over two years, in absolute terms of people who've subscribed for that individual service, it's still less. So this (OTT deal) becomes a formidable partnership...

Hypothetically, if Airtel can grow out another 20 million people with its offer (Xstream), it's a huge opportunity for smaller OTT platforms, which may have grown to one or two million organically, to use this partnership to come up and stand at 10 million (each platform) in a short while. At the back of that, we might also see more consolidation happening among OTT platforms.

It's a complete win-win for both telcos and OTT platforms. The telecom companies, because of the increasing per customer unit revenue, and the OTT platforms are benefitting from more users.

Smart TVs are here to stay. Pretty much what happened in the west, is the norm now. You're going to consume more content on these smart televisions. Telcos are going to be catalysts for people in Tier-II and Tier-III markets for consuming OTT content, and even for people who wouldn't have watched this form of content earlier (older people).

Mohit Hira, strategic brand and marketing consultant (former regional business leader, Airtel, and SVP, JWT)

Mohit Hira
Mohit Hira

Yes, it certainly seems so. If you look at the early days, there used to be 'VAS', i.e., value-added services, which were your ringtones and wallpapers... Telcos latched on to them at that point of time.

It appears that OTT platforms – or bundling – are the equivalent of 'VAS' today, and because the consumers are spending so much time at home, they're hooked to these platforms, such as Netflix or Amazon Prime. It is also the reason why channels like Hotstar and SonyLiv have gone big on mobile. In a sense, mobile is replacing TV. OTT allows me to watch what I want whenever, but mobile lets me do it wherever.

I (telcos) can offer you (OTTs) a lot more customers at no marketing costs. Therefore, you will offer it to me at a much lower (cost) than you would offer it to a customer.
KS Chakravarthy (chax)

It is clear that telcos have done enough research – or have analysed usage data – to realise that there's a demand for OTTs people are watching (back in the day, everyone wanted a wallpaper via VAS, now everyone is on OTT apps)... What the telcos have done is take away the pain of individual subscriptions (JioFiber and Airtel Xstream plans don't need you to pay for individual subscriptions). This aggregation is happening at content and payment levels (an OTT platform will only have to collect money from telcos). It's making the lives of the consumers easy, and that's what they want.

Also Read: How are OTT players fighting the distribution challenge?

Ronita Mitra, founder, Brand Eagle Consulting (former SVP and head of Brand, Media, Digital and Consumer Insights at Vodafone India, now 'Vi')

Ronita Mitra
Ronita Mitra

Telcos have historically been focused on developing and marketing 'plans' as products, involving various permutations and combinations of voice and data services.

By offering a bundle of OTT platforms as a package, they are now moving towards the space of contemporary value-added services.

For the consumer, content consumption is shifting towards OTT platforms. It is no longer confined to DTH platforms only. At present, when families are at home almost all the time, the arena for entertainment has shifted to home environment.

With movies being also released on OTT platforms, what would be viewed in multiplexes, will now be viewed at home. OTTs have expanded the entire gamut of content consumption and entertainment at home.

Offering OTT packages is, therefore, the logical next step for telcos, as content consumption is dependent on data connection.

What remains to be seen is whether all telcos offer the same packages and end up with a price war once again, or whether there will be some differentiation and customisation provided to consumers.What would be meaningful to consumers is if the OTT packages could be layered with an element of service and customisation.

KS Chakravarthy (chax), co-founder and CCO, Tidal7 (former creative head of FCB Ulka, worked on Tata Docomo)

Chax
Chax

... The need for entertainment has risen, because what are you, particularly youngsters, going to do at home? Telcos will have lots of data to say OTT is spiking and there's a good opportunity in it.

The other point to remember is that a lot of this makes economic sense. When Airtel goes and tells Amazon, I will offer your services on my subscription, it (Airtel) won't pay what the consumer is paying. Airtel will do a deal where it pays much less. Say, as a consumer, you're paying Rs 699 per month, whereas Airtel is getting it for Rs 300, or Rs 400. These kinds of tie-ups make a lot of sense for marketers because you appear to be offering more when you're paying less.

Behind the scenes, when brands tie up, there's a big benefit... Telcos go and tell these OTT players that you can reach more subscribers through me... For OTT platforms, it helps with penetration. They (telcos) are offering something of a higher perceived value than they're paying for.

Right now, there is a need for both. People need connectivity for work, and they also need entertainment – it's a perfect combination.

I (telcos) can offer you (OTTs) a lot more customers at no marketing costs. Therefore, you will offer it to me at a much lower (cost) than you would offer it to a customer.