OTT players
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.
References:
https://www.itu.int/en/ITU-D/Regional-Presence/AsiaPacific/Documents/Events/2016/Jul-RR-ITP/OTT_Rony_Mamur_Bishry.pdf
India’s COAI joins 4 European telcos in demanding OTT players pay to use their networks
Big 4 European network operators call for content platforms to fund telecom infrastructure
Several large European network operators are calling for OTT platforms and cloud giants to contribute towards the cost of the telecom infrastructure they use to deliver content to end users. In an open letter published in the Financial Times, the CEOs of Vodafone, Telefónica, Deutsche Telekom, and Orange have expressed their serious concern that content platforms should contribute towards building the connectivity infrastructure they rely on.
“The current situation is simply not sustainable. The investment burden must be shared in a more proportionate way. Today, video streaming, gaming, and social media – originated by a few digital content platforms – account for over 70 percent of all traffic running over the networks. Digital platforms are profiting from hyper scaling business models at little cost while network operators are taking on the investment required for network connectivity. At the same time, our retail market profitability has been declining.”
The CEOs note that data traffic increasing by up to 50 percent annually and claim they’re unable to make a viable return on their investments. They say it puts further infrastructure development at risk. They cite Sandvine’s Global Internet Phenomena Report, released in January 2022, stating that video streaming, gaming and social media “generated by a handful of digital content platforms” account for more than 70 percent of all traffic on the web.
Source: Sandvine
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Despite being the leading providers of mobile services throughout the continent, the executives claim they are no match for the “strong market positions, asymmetric bargaining power, and the lack of a level regulatory playing field” enjoyed by tech giants.
“Consequently, we cannot make a viable return on our very significant investments, putting further infrastructure development at risk,” the CEOs added. “If we don’t fix this unbalanced situation Europe will fall behind other world regions, ultimately degrading the quality of experience for all consumers.”
They noted that South Korea is discussing a national law that would create regulatory conditions for a more equitable sharing of internet costs — in part because of the popularity of Netflix’s “Game of Squids.” Following that success, South Korean network operator SK Telecom sued Netflix over the costs it claims to have incurred from increased network traffic and maintenance work
“In the U.S., policymakers are also turning to universal services that are also funded by digital platforms,” the CEOs added.
While the joint statement did not explicitly mention net neutrality, the CEOs complained that “network operators are unable to negotiate with these mega-platforms due to their own strong market positions, asymmetric bargaining power between the parties and lack of a level regulatory playing field. Fair terms.”
The joint statement also echoes recent comments by Marc Allera, chief executive of BT’s consumer division, who noted “a complete lack of coordination on many data-intensive events.” Allera said, “Every operator’s network is suffering from stress, everyone’s internet has become more unstable than before.”
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References:
https://www.ft.com/content/68f989f5-96e6-440e-90f4-2a11840d9c99
https://min.news/en/tech/c3e4e694a7c423425fbdbefa8de94c01.html
European operators want platforms to contribute towards infrastructure
https://digital-strategy.ec.europa.eu/en/policies/digital-principles