Something’s got to give, as they say. Edtech has course corrected. A couple of meat D2C brands have burnt their fingers and investor money. Any loss-making business cannot go on forever. Either the business changes course towards sustainability or there will be consolidation and exits. Is OTT next?
We asked stakeholders and industry watchers: With a bevy of OTT players, most said to be making losses, is consolidation inevitable? Could bundling be the answer or does it devalue OTT brands?
‘Consolidation is one of the ways forward for OTT’
We believe consolidation is indeed one of the ways forward for OTT. Thanks to an ever-increasing share of population across geographies, getting access to higher data speeds that ever, it is important to have a library that cuts across languages and cultures. For long-tailing, to cater to niche audiences, platforms coming together will definitely help bring out content that transcends languages and cultures to a much wider untapped audience.
User preferences can vary greatly depending on factors such as age, location, interests, and budget, among others.
In general, bundling can provide users with a more comprehensive entertainment experience, allowing them to access a wider range of content and features. This can be particularly attractive to users who are looking for a one-stop-shop for their entertainment needs.
However, bundling can also lead to issues such as higher subscription costs, redundant content, or a lack of focus on specialised content. In some cases, users may prefer to subscribe to individual OTT platforms that specialise in a specific type of content, such as horror movies or foreign films.
Overall, the impact of bundling on user attractiveness will depend on a variety of factors, including the specific offerings, pricing, user preferences, and competition in the OTT market.
– Siva S, CEO, Mainstream TV
‘A necessity sooner or later’
Yes… as there is a wide range of new OTT platforms, each of them entertaining the users with diverse content from across the world. Consolidation would become a necessity sooner or later. And as OTT giants have already started bringing in niche content providers under their umbrella..this model might have a long tail.
When the supply becomes surplus under one umbrella any player would face the challenge of user acquisition.
– Karthik Balladi, MD, Balladi Studios
‘Bundling brings efficiency in the ecosystem’
Consolidation and partnership is a way forward for the long tail, reason being that the market dominance is happening by few players. Close to 70 to 75pc of the market is dominated by YouTube, MX player and sports-led OTT platforms. It’s going to be a challenge for every other OTT platform to have sports or any differentiated content to actually build a big subscriber base, which can attract a good amount of ad revenues. So the long tail consolidation is definitely the way ahead because currently, in the last three to five years, we have seen few things which worked favourably for the industry. One was the cheapest data cost in India, so that actually led to a big surge in terms of consumption eyeballs. And most of these platforms are spending hefty amount around content because the market is beginning to pick up. Covid too was like icing on the cake where everything worked very favourably for OTT and digital platforms. They were investing very aggressively on content, whether it was original shows, large scale web series, or movies going direct.
The last one year has been troublesome in two ways. One is the advertising front, where we have started to see pressure on digital advertising in India, which was probably growing at 30pc is now somewhere close to 23 to 24pc. That is the expectation for CY23 because a lot of the new age and internet companies have actually seen an issue in terms of funding and valuations. All these companies have seen corrections and are eventually now chasing profitability and not just growth. So that is impacting digital ad spends and the AVOD market. It is going to have a significant impact on the smaller OTT platforms’ revenue growth. Second, from an OTT standpoint also, many of these OTT platforms were also backed by global companies. So all of them are really spending a big amount of money. Eventually they will (have to) make economic sense to see sustenance in this OTT business model.
Most OTT platforms – more than 90pc – today are making losses. Currently, with everything happening in this kind of a macro environment, profitability is a focus area for these platforms in the next one or two years. It looks highly unlikely because the market is very fragmented. We have got 45-plus OTT platforms. So the other route is to do partnerships with larger apps, as Hoichoi, other smaller apps have done with Amazon. But even that has not made a big difference in terms of sheer size of paid subscriber base or in terms of the overall AVOD revenue. Consolidation is too early to speak, but fragmentation has definitely stopped for sure. Maybe towards the end of the year, we might see early signs of consolidation also.
Bundling is a way ahead, you can leverage on each others’ strength, content and customer strength, where your target market is. Bundling is actually a good thing because it brings efficiency in the ecosystem. The only negative impact is on ARPUs. When you bundle with telcos and OEMs, the ARPUs that you are getting paid are at steep discounts, close to 60 to 70pc discount versus your card rate. So it has a steep negative impact in terms of overall ARPUs because of over-dependence on your bundling ecosystem partner.
– Karan Taurani, Senior Vice President, Elara Capital
