Currently, there are over 40 OTT platforms in India run by various entities, with Disney Hotstar, Amazon Prime Video, Netflix, and some regional players being the larger players in the space.
Given the high fixed costs, intense competition, low switching costs, it is likely that the industry would undergo consolidation.
With the growth of low-cost smartphones and data content, consumption has gone up multi-fold in India. For many in India and across the globe, content streaming platforms have replaced television and other modes of content consumption. As a result, several domestic and international companies have entered the Indian market.
Growing Competition in the Space
The larger players in the space are Disney Hotstar, Amazon Prime Video, Netflix, and some regional players. Currently, there are over 40 OTT platforms in India run by various entities. Growth in premium content consumption comes from tier two and three cities and not just from urban areas.
A 2019 KPMG report highlighted that users spent 70 minutes a day on average on OTT platforms, with a single session having an average time of 40 minutes. Users accessed the platforms more than once a day, with the average access frequency standing at around 12.5 times a week. Most respondents used more than two platforms as well – indicating the possibility of multiple players surviving in the market.
With intense competition, the strategies to attract paying subscribers have varied from cutting prices, bundling services, creating original content, acquiring new content, building niches etc.
India is a price sensitive market where high prices can result in lower adoption by users. A higher price point has been a problem for Netflix in particular. Before it cut prices in December, Netflix had higher prices compared to its peers.
In addition, the service was not bundled with another service, nor did it have a niche that could help it price itself higher. As a result, the company dropped its price for its basic plan from Rs 499 to Rs 199 in order to appeal to a wider audience.
The standard plan saw the rates decline from Rs 649 a month to Rs 499 a month. Whether the large cuts in pricing would help it bring lure audiences away from other platforms remains to be seen.
Focus on Differentiated and Original Content
Another strategy used to attract audience has been to build a niche that would act as a hook to attract larger audiences. For instance, Star paid up $2.55 billion for the digital and television rights of the Indian Premier League.
While the price paid for the digital rights make up a smaller amount of the total money paid, it does indicate the massive interest in the digital space. As a result, Disney Hotstar now has the highest number of subscribers compared to Amazon Prime Video and Netflix. With Disney Hotstar’s success, Amazon has ventured into buying digital rights for cricket matches as well, attempting to increase its subscriber base.
However, such niche-building has worked for regional content as well. According to a Bengali language streaming platform, Hoichoi, it has 1.3 crore subscribers. The number is almost at par with large platforms such as Amazon Prime Video which has around 1.6 crore customers. In order to differentiate their content, several OTT platforms have tied up with studios to produce interesting regional content exclusively for their platform.
Original content creation, however, remains an important aspect of running an OTT platform. Netflix has spent billions annually to produce original content for its international platform. In India, OTT platforms spent over Rs 2,000 crore on production of original content in 2021. However, some shows receive higher funding than others.
Often called “tent-pole” releases, premium originals with strong star power and a high budget are meant to attract new users to the platform. For instance, according to reports, Sacred Games’ Season 2 was produced at a cost of Rs 12 crores for each episode on average.
Bundling Services to Attract Viewers
For Amazon Prime, apart from a low price, another selling point has been the bundling of various services such as video content, music, and free deliveries. An Amazon Prime customer is eligible for free deliveries on Amazon’s sales platform, making the package enticing. With every new customer, the marginal cost of offering content goes lower, allowing Amazon to bundle several services together.
JioCinema has been bundled with several other Jio offerings such as music, newspapers, medical platform, e-commerce and others, creating an ecosystem accessible to the user at a low cost – the monthly bill payment.
Nevertheless, OTT platforms majorly remain loss-making entities as they continue investing heavily on content acquisition. It is likely that some platforms with popular content would do better than platforms that have smaller audiences.
Given the high fixed costs, intense competition, low switching costs, it is likely that the industry would undergo consolidation. Industry experts expect the number of platforms to come down to ten or lower from the current forty plus. It is likely that bigger players would decide to acquire smaller players. Nevertheless, the OTT wars have a positive impact – audiences have witnessed a boom in diverse, high-quality content.
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