Traditional media—symbolised by print, radio, and television—has always suffered from the 50:50 dilemma where the advertisers bemoaned the fact that 50% of the money they spent on advertising was lost and they did not know which half. However, this traditional media age, characterised by scarcity, saw advertising ruling the roost, with ad revenues contributing disproportionately to the share of the overall revenue pie.
Come digital, and Google and Facebook defined what a modern-day media company looks like, with much greater power in the hands of the consumers, as also advertisers with sophisticated advertising tools. This precision-based personalised targeting at scale, with more accurate and powerful determinants linking advertising with results, catapulted Google and Facebook to create the ad duopoly in worldwide markets and relegate traditional media to a minion self of what it was at a point in time.
Television, however, continued to put up a good fight. That is till recently in the U.S. And perhaps not for long, in India. Television itself is now undergoing a metamorphosis of sorts with the substantial power of distribution as a key attribute of success plucked out by the OTT outrage.
The Netflix age changed everything. Netflix started streaming and challenged the age-old media model of ad-driven predominance and made the viewers a willing payer for world-class on-demand content. The OTT model bypassed the traditional distribution challenge by streaming directly over Internet connectivity and therefore changed the TV landscape.
Now streaming: Indian OTT
The Indian OTT landscape is seeing a scramble with a lot of players, fighting to attract and retain users, and create a tech-integrated immersive experience with new business models, new content strategy, and what not.
It has been forecast that India will have the third highest number of subscription-based video on demand (SVOD) users worldwide by the end of 2020 and will be a major player out of an expected billion-plus worldwide subscriptions within the next five years. However, the percentage of paying subscribers to total OTT consumers hovers at less than 5%.
Digital adoption, along with highly measurable advertising by using analytics and measurement technologies, also opens the door for advertising-based video on demand (AVOD) monetisation, where OTT offers a formidable combination of television's impact along with the power of digital. OTT is, therefore, evolving into a separate category within the media advertising landscape.
Now with Covid-19, you have more viewership, more subscribers, and newer audiences all flocking towards entertainment.
The telecom playbook
There was a time when value-added services accounted for a large play that created a major competitive differentiator and source of revenue for the telecom players. Over a period of time, the price wars and competition from digital and social media made such differentiation irrelevant and telecom went mostly the commoditised way.
OTT platforms are the contemporary version of the value-added services of the past for telecom players. It is Jio again which is leading the charge here. In the last one month, Jio has announced the bundling of 12 OTT platforms, which includes almost all major players, for its JioFiber broadband and most recently for postpaid-plus services. And there is a similar offer from Airtel Xstream broadband as well.
Does this position Jio as an aggregator for the OTT industry? What happens to the OTT players? Is the future of television just by another name then? Why are OTT players allowing an ‘outsider’ to come and disrupt the market? How do users benefit from the unified, aggregated content destination? And will Jio help or hurt the OTT platforms?
Jio solves major problems that users face on OTT platforms namely search, ease of payment, remembering multiple accounts and passwords, and a one-click login facility across platforms.
With content consumption being dependent on data connection, telecom players have a sure-shot way of realising enhanced average revenue per user. The OTT market also benefits with more and newer audiences from tier 2 and tier 3 cities as also older viewers. The OTT players get more penetration. While the consumer benefits with connectivity, which is today needed for both entertainment and work.
According to a 2020 EY-FICCI report on the media and entertainment industry, "India’s telecom industry is poised to become the primary platform for content distribution and consumption." OTT content has become the key selling point for telecom companies. What remains to be seen is whether all telcos offer the same package and we end up with a price war once again, or whether there will be some differentiation and customisation provided to consumers.
There is a mad rush out there for a projected $4 billion-$5 billion market by the year 2025. But that's not a big market size for so many or for some large and dominant players to struggle it out.
Are we missing something? The new-age business models driven by the success of platforms are all increasingly looking the same: aggregating the consumers, engaging the consumers, and monetising the consumers. That’s how sometimes you could either be the customer or the product. In a ‘venture capital driven’ modern world with deep pockets at one’s disposal, the two elements of aggregating the consumers and monetisation are easy to solve with the cost of acquisition and a customer's lifetime value. It is the engagement bit which is difficult to crack.
In an age of consumers increasingly spoilt by the offer of the best at the least price, the consumers are raking it all and harbour no loyalties. It is, therefore, important to keep them engaged as that is where the value creation and capture can finally be monetised. This is where content play becomes the sole differentiator. And so the fight is being played out at the OTT outpost.
The swords are out. By merging battlefields, Disney+Hotstar may survive because they have got most of it right: attractive pricing, sports rights, a super content mix of international, local and regional content, and powerful technology. Premium provider Netflix, on the other hand, is struggling with its India strategy where a price-sensitive Indian market contributes a minimalistic 2-million plus numbers out of 193 million worldwide. Amazon Prime and Jio both have deep pockets and are disruptors incarnate. It is the rest—ZEE5, MX Player, SonyLIV, Voot, and many others who will have to figure out their act before it is too late.
Views are personal. The author is Executive-in-Residence at UCLA, a Stanford Seed Consultant, a global CEO coach, and a C-Suite + Start-up advisor