Why expensive OTT platforms are finding it hard to woo Indian consumers

After enjoying a boom in the past few years, the 60-odd over-the-top media (OTT) platforms in India are now faced with a challenge: How to scale up their costly content business in the entertainment-crazy but price-conscious Indian market, especially when viewers are spoilt for choice. After all, the world’s most populous nation’s estimated Rs 13,000-crore video OTT market has a 60-40 split in favour of revenues from advertising-based video-on-demand (AVoD), or low-cost ad-supported platforms.

Manish Kalra, Chief Business Officer of ZEE5, says the challenge now is the customer’s intent to pay. “On the AVoD side, we have 100 million MAUs (monthly average users). How do we convert them into paid users?” The platform offers the first episode of its original shows for free to get viewers to subscribe, but he admits the conversion rate is in the low single digits.

The average Indian viewer is used to paying around Rs 300 a month for cable or direct-to-home (DTH) subscriptions. Even a top-end telecom-bundled pack of 10-12 OTT apps costs Rs 1,000-1,200 a month. On the other hand, subscribing even to the top two or three OTT platforms costs upwards of Rs 3,000 a year. And there are around 60 platforms on offer currently.

“Eventually, how many subscriptions will a person get? On an average, people have two to three subscriptions. We are the local OTT [player], then there are national and international ones,” says Ajit Thakur, Co-founder and Director at aha, a regional content streaming platform, adding that their hyperlocal regional content holds them in good stead.

It’s an expensive proposition even for urban users, while the yet-to-be-tapped viewers from smaller cities and towns of India are typically conservative spenders. “Indian consumers are value conscious and not price conscious. They are not subscribing to a service because it’s cheaper than the rest, but because of its value proposition,” says Sushant Sreeram, Country Director at Amazon Prime Video, India. He adds that a single Amazon Prime membership gives customers shopping, savings, and entertainment benefits.

The recently released FICCI-EY Media & Entertainment Report 2023 pegs the number of households paying for at least one subscription video-on-demand (SVoD) service inching up to only 52 million by 2025 from 45 million currently, if the current pricing is maintained. The report’s author and EY’s Media & Entertainment Leader Ashish Pherwani says OTT is a relatively expensive product in India, and the market can be doubled if the prices are reduced. “Cutting content costs is not much of an option because that will always be a platform’s USP. It will have to be on customer acquisition, tech, content mix and other costs. We need bundling [of more offerings] for the OTT segment to reach scale.”

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