OTT drive: Netflix, Hotstar, SonyLIV cut prices to woo subscribers
In a bid to increase their subscriber base, several over-the-top (OTT) players are looking to make their offerings easier on consumers’ pockets. The strategy is two-pronged: offer packages for shorter tenures — durations of even less than a month — and also allow consumers to buy subscriptions to select content. Consider this: Netflix has recently rolled out weekly and monthly ‘mobile-only’ plans starting at Rs 65 per week and Rs 250 per month for select mobile users. The new monthly plan is 50% cheaper than its current basic plan of Rs 500, but still expensive when compared to its rivals — Amazon Prime Video costs Rs 129 per month across screens while Hotstar Premium, which has global studio content, is available for subscribers at Rs 199 per month.
In March, Hotstar launched Hotstar VIP at Rs 365 per year, priced much lower than its existing Hotstar Premium service at Rs 999 per year, the key differentiating factor by the former being originals and sports content offered. Another player SonyLiv, which has a monthly plan of Rs 99, is also testing seven-day, 15-day and daily plans.
The cheaper plans strategy is not restricted to national OTT content. In December, last year, ZEE5 launched regional packs in Tamil, Telugu and Kannada starting at Rs 49 per month — a similar price offering to Sun NXt, which has content in Tamil, Telugu, Malayalam and Kannada. Sun NXt has a quarterly subscription plan of Rs 130.
The domestic OTT space is driven by AVOD or a freemium model currently, with only 2-2.4 million subscribers having directly subscribed to OTT platforms, in addition to those who are considered paid subscribers through telco-based access, as per a KPMG 2018 report.
In such a scenario, the reduction in pack prices and shorter duration plans are expected to help players mop up subscription revenues and improve bottomline, say experts. According to KPMG partner and head (media and entertainment) Girish Menon, at present, the ad revenues are not enough to sustain the bottomline and recover the cost of content, marketing and distribution.
While advertising will remain a key source of revenues for OTT players in India, currently YouTube and Facebook account for 70% of overall digital advertising revenue. OTT players, barring those purely on SVoD platforms such as ALTBalaji, Netflix, Amazon Prime Video and Hoichoi, are chasing the remaining 30% of the video advertising pie, indicating that players need to look beyond traditional advertising models to improve unit economics.
“With such price reductions and pack duration rationalising, OTT players are looking to expand their paid subscriber bases. Over time, these will graduate to higher priced packs and improve the bottomline,” says Menon. “For long-term sustainability, subscription is very critical,” he adds.
In India, unlike the West, OTT has a premium positioning compared with cable TV, but that could be changing with players launching lower value packs. For example, the benchmark entertainment cost in the US is $100 for a cable connection while Netflix is available for just $15. On the contrary, the wallet share available for in-house entertainment in India is around Rs 500. “With average cable bills of around Rs 300-400, consumers are left with lesser entertainment budgets to spend on OTT. So, there is pressure on pricing in the OTT space,” says Pixights Consulting co-founderSumit Saxena.
The average revenue per users (Arpu) in the SVoD (subscription video on demand) space is expected to be around $1-$2 (approximately Rs 100). “It is expected to increase to $2.5 (Rs 175) in a few years. However, for the ad supported model, Arpu will be much lower,” says The Boston Consulting Group principal Gaurav Jindal.
Small-value packs could help in hooking impulse users and in the sampling of content. “Most broadcasters in the OTT space have strong partnerships with advertisers. So, it is not very difficult to get advertising even for original content,” says Uday Sodhi, business head, digital business, Sony Pictures Networks India, which owns the digital streaming platform SonyLiv. “The idea behind lower value packs and putting paywalls for premium content is not just to recover cost, but to also induce the habit of paying amongst consumers.”
ZEE5, which partnered with Rail Yatri in November last year for its one-week sachet packs, is currently offering its annual subscription plan at a discounted price of Rs 349, and reported 56.3 MAUs (monthly active users) in December. “We are giving offers, creating partner associations, wallet integrations and personalising packages for regional users,” says ZEE5 India business head Manish Aggarwal .
In fact, with the Hotstar VIP subscription, Hotstar has gone a step further and launched a cash on delivery equivalent in the OTT space. Hotstar’s subscription revenue stood at Rs 192 crore for FY18 compared with a higher advertising revenue of Rs 315 crore. The market leader continues to remain in the red and losses for 2017-18 were at Rs 389 crore while overall revenues stood at Rs 571 crore, as per RoC data.