OTT players in India struggle in telco partnerships

Telecom partnerships, which generate 50-70% of overall revenues of OTT platforms [1.] in India, have failed to live up to expectations amid subscription pressure. As a result, many OTT services have adopted revenue sharing models, particularly for smaller platforms that struggle to attract viewership.  Payments are currently based on the number of views a specific content receives. In a competitive scenario with high customer acquisition costs, OTT platforms have to offer significant discounts to be available on telco aggregators, limiting their revenues.  Telcos are increasingly becoming resellers instead of using OTT bundles as acquisition tools.

Note 1.  An over-the-top (OTT) application is any application or service that provides a product over the Internet and bypasses traditional distribution. •Services that come over the top are most typically related to media and communication and are generally, if not always, lower in cost than the traditional method of delivery

“In case of a fixed upfront fee, irrespective of the number of subscriber additions annually, a certain amount is paid to the OTT, providing more stable monetization. With a revenue sharing arrangement, the amount keeps fluctuating depending on customer churn,” said Sourjya Mohanty, chief operating officer at IN10 Media Network’s OTT service, EPIC ON. He said the company takes a fixed fee for all its deals that helps in sizeable monetization and has stayed away from revenue sharing arrangements that aren’t stable. Eyeballs for OTT content may also depend on whether the aggregator is investing enough in marketing, he added.

Amit Dhanuka, EVP at Hollywood streaming service Lionsgate, noted that telcos and OTT complement each other and form a competitive offer for the consumer when combined with data. “Telcos want to monetize data and increase data consumption, where OTT plays an important role. For an OTT platform, an offer coupled with data forms a competitive offering for the consumer and helps drive subscriptions,” Dhanuka said. However, several media industry experts believe that the revenue figures generated from telco partnerships don’t justify the costs of customer acquisition. “65-70% of the customer base of a telco like Jio is on cheap, pre-paid plans that do not really offer compelling OTT bundles. Technically, tying up with a telco brings in reach and data on user behaviour at a time that costs of customer acquisition are very high but revenue figures are not that great,” said an anonymous senior media analyst.

Revenue sharing models have arisen as telcos seek to reduce minimum guarantee payments and restructure partnerships with smaller platforms that don’t generate significant viewership. “A SonyLIV would be making far more revenue than say, an aha with the same telco. Also, OTTs have to offer steep discounts as part of these deals, which could range between 50-70% of their Arpus (average revenue per user). They don’t have a choice at the moment; India is a price-sensitive market and the only alternative to high spends on customer acquisition is telco deals,” said a senior executive at a streaming platform.

Nonetheless, for OTTs, telcos remain an essential distribution medium, especially for those platforms without a strong standalone proposition, said Neeraj Sharma, MD, communications, media, and technology at Accenture India. Increasingly, telcos are becoming resellers instead of using OTT bundles as acquisition tools, Sharma said. However, a key challenge is the limited scope for differentiation as similar content is available across telcos.


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