Building the OTT ecosystem: Can telcos tango?

Building the OTT ecosystem: Can telcos tango?

Table of Contents:

1. Introduction
2. The Growth of OTT Platforms during the Pandemic
3. The Relationship between OTT Platforms and Telcos
4. The Role of Advertising in the OTT Ecosystem
5. The Importance of Subscription Revenue for OTT Platforms
6. The Impact of 5G and Fiber Connectivity on OTT Viewing
7. The Shift towards Family Viewing on OTT
8. The Hybrid Release Model for Movies and Shows
9. The Challenges of Direct-to-Consumer Approach for OTTs
10. The Future of the OTT Ecosystem

Introduction

The OTT (Over-The-Top) ecosystem has witnessed significant growth in recent years, with a particularly remarkable surge during the COVID-19 pandemic. This growth has prompted discussions about the various ways to build the OTT ecosystem and how it relates to telcos. In this article, we will explore the different aspects of the OTT ecosystem, including advertising, subscription revenues, connectivity, family viewing, hybrid release models, challenges, and future prospects.

The Growth of OTT Platforms during the Pandemic

The onset of the pandemic in 2020 led to a surge in the viewership of OTT platforms. With people confined to their homes due to lockdowns, television and OTT became the primary sources of entertainment. Reports indicate that the OTT segment has been experiencing a compounded annual growth rate of 25 to 30 percent. However, the majority of advertising spends on digital platforms are still divided between platforms like Twitter, Facebook, and Google. This raises the question of when OTT platforms will acquire a larger share of advertising and subscription revenues.

The Relationship between OTT Platforms and Telcos

OTT platforms and telcos share a symbiotic relationship. Telcos can utilize their distribution channels to reach a wide customer base, while OTT platforms can provide telcos with additional revenue streams. However, partnerships with telcos may not always result in significant digital reach for OTT platforms, as customers often recharge their smartphones through other digital channels like Paytm and PhonePe. Additionally, the offline reach of telcos can be leveraged for customer acquisition, but successful models are yet to emerge.

The Role of Advertising in the OTT Ecosystem

Advertising plays a crucial role in the OTT ecosystem. While the majority of revenue in the Indian media and entertainment landscape comes from advertising, the share of advertising spends on OTT platforms is still relatively small. To attract a larger share of advertising revenue, OTT platforms need to focus on increasing connectivity and penetration of fiber-to-home networks. As more devices like Firestick, Chromecast, and smart TVs penetrate households, OTT platforms can become a viable alternative to linear TV for advertisers.

The Importance of Subscription Revenue for OTT Platforms

Subscription revenues are a significant source of revenue for OTT platforms. With a growing audience base and increased consumption of local Hindi and regional content, OTT platforms have the potential to substantially increase their subscription revenues. While advertising will Continue to be a popular business model in India, a significant portion of revenue for OTT platforms will come from subscriptions. The challenge lies in providing inclusive programming and attractive bundles to entice viewers to subscribe.

The Impact of 5G and Fiber Connectivity on OTT Viewing

The widespread availability of 4G networks and the growth of smartphones have driven the consumption of OTT content. However, the experience of consuming OTT content on smartphones limits its audience to individuals rather than families. To cater to a larger audience, OTT platforms need to rely on higher-speed networks like 5G and the penetration of fiber connectivity to homes. This shift will enable family viewing and encourage more consumers to replace linear TV with OTT platforms.

The Shift towards Family Viewing on OTT

While OTT platforms have been largely associated with individual viewing experiences, there is a potential for a shift towards family viewing. This shift depends on infrastructure development, such as increasing fiber connectivity and providing larger screens for consumption. To cater to families, OTT platforms need to offer more inclusive and diverse programming that appeals to a wider audience. Bundling offers with telcos can also make OTT subscriptions more attractive to families.

The Hybrid Release Model for Movies and Shows

The pandemic has disrupted traditional theatrical releases, leading to the emergence of hybrid release models. Theatrical releases now often coincide with OTT releases, allowing audiences to choose between the big screen experience and the convenience of watching at home. This hybrid release model provides OTT platforms with additional acquisition of paying subscribers. The success of this model depends on the quality of the content and how attractively it is bundled with telco plans.

The Challenges of Direct-to-Consumer Approach for OTTs

Many OTTs have relied on telco partnerships to acquire a large customer base quickly. However, sustaining these partnerships in the long run may not be financially viable for OTTs due to the limited revenue they generate. Eventually, OTTs will need to shift towards acquiring customers directly and promoting their own subscription models. The transition will require effective marketing strategies, compelling content, and attractive pricing to compete with telco offerings.

The Future of the OTT Ecosystem

The future of the OTT ecosystem is a dynamic and evolving landscape. As connectivity and infrastructure improve, OTT platforms will have the opportunity to capture a larger share of advertising and subscription revenues. Effective self-regulation will also be essential to strike a balance between content diversity and consumer protection. The growth of the OTT ecosystem will be driven by consumer demand, technological advancements, and innovative business models.