McKinsey reports that globally about 2.5 billion less-than-25-years-old digital customers spend 315 minutes daily on an average online. Keeping up with the trend, OTT subscribers in India is also witnessing a growing trend. According to a report by Ernst & Young, India had 250 million video consumers in 2017, of which 190 million were aged between 15 – 34.
Low-cost smartphones coupled with fall in data tariffs and increased internet speed will continue to drive greater demand for online content across India. EY estimates that with the evolving OTT service consumption of the Indian audience video consumption can reach 500 million by 2020.
However, these opportunities have also thrown some strategic challenges to the OTT service providers in India. We list below four such challenges that the OTT providers need to address to succeed in the game:
Reports predict that the Indian digital advertising market will grow by 30 percent Y-o-Y to ₹120 billion in 2018, of which approximately ₹18 billion will be spent on the video. Despite the growth of online advertising, it comprises only about a fifth of TV advertising.
OTT players are exploring various revenue models – advertising, subscriptions, and freemium to achieve profitability. With the decrease in profitability from 90% to 40% despite the increase in advertising spends, OTT players need to provide a personalized quality viewing experience on a robust technology platform to ensure monetization.
With traditional TV, the audience paid a fixed amount for a choice of 200+ channels across genres, languages, and domains. As the paradigm shifts to ‘pay-for-what-you-watch,’ generating relevant content that will grab the audience attention and continue to get them hooked is a challenge. With the millennial getting into the habit of binge-watching, many often complain that after their favorite shows are over, not much is left to watch.
For OTT players in India, the fact that ‘content is king’ is now truer than ever. Though global players like Netflix are streaming global content, the need for quality regional content drives the viewership and subscriber rate.
Moreover, with a variety of content to choose from, OTT players are challenged to provide a personalized experience to the audience. Services need to improve content discovery and mapping functionalities to suggest content based on the viewer’s preference.
For OTT services to rival broadcast television, they need to provide optimal viewing experience to the consumers without jitters or buffers. However, the current broadband infrastructure of India does not allow for that seamless experience everywhere. With the lower than average Internet speed, buffering does cost the OTT players almost a quarter of their audience.
OTT players are collaborating with telcos to bundle their entertainment offerings with 4G services to address this challenge.
Privacy & licensing
Streaming of live TV channels contributes to a bulk of traffic for the Indian OTT players. Live streaming also exposes them to privacy issues. With the growth of broadband, it is becoming increasingly difficult for OTT players to track piracy and illegal streaming.
Moreover, complex IP protocols, royalty definition, character rights, geographical restrictions, and platform diversity are not only impacting their revenue but also exposing them to copyright infringement risks.
OTT players are here to stay and grow in the coming years. Content and user experience will be the key for wider adoption of the service. For monetization the value needs to be shown with respect to viewer numbers for the advertisers.