OTTs first started getting relevance with the introduction of smart-phones. It became bigger with the launch of the 4G network and now the third wave has begun. Covid 19 has shifted our views of the digital platform in terms, of shopping, social interaction and of course, entertainment. And if there is one industry that will be keeping an eye on this rising phenomenon, it is the Indian Advertising Industry.
OTT platforms ideally make money through customer subscriptions & renewals and the reinvesting of some of their profits to create better quality content. This is called Subscription Video on Demand (SVOD). There are few major traits like easy-access anytime-anywhere viewing, quality content, cost of subscription being worth the investment (when compared to watching in theaters) and of course ad-free viewing, that is driving it’s growth (in any country). Netflix is one such platform, being one of the most popular subscription-based OTTs with over 182 million subscribers, having a net profit of $1.9 billion in 2019 alone.
But that subscription model hasn’t worked quite well in India, where the highest amount of subscriptions can be boasted by Hotstar + Disney (with 50 million paying customers worldwide) with over 300 million active viewers and 8 million subscribers. Netflix, in comparison, had just over 2 million subscribers at the end of 2019.
Companies like Hotstar and Youtube doesn’t even follow Netflix or Amazon’s model of being ad-free. Hotstar has a hybrid freemium model while Youtube has advertisements with their videos, both having success in their business models.
With the amount of content available across different platforms online, Advertising-based Video On Demand (AVOD) seems to be leading against (SVOD). This comes down to primarily that AVOD are cheaper (or even free in some cases) when compared to SVOD. Netflix offers one of the more expensive OTTs subscription in India with less than 10 million users while Youtube and MX player boasts around 200 million while being free. Plus, as per a study conducted by KPMG, only 10 percent of the viewers access these platforms for original content. This indicates Original content is far from being the primary driving force of OTT subscriptions.
In such situations, advertising will become an enabler for such platforms than a necessary evil for the OTT platform to be relevant to the masses. This gives a lot of scope for advertising companies that are shifting from cable network to OTTs. This also opens up a lot of creativity as OTT companies will have to find different ways to keep reach their audience and keep them engaged while branding. And delivering content through brand focus can help boost the OTT’s relevance in today’s market.
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