The increasing craze for OTT platforms continues to dominate the entertainment space in India. The leading OTT providers in India have incorporated several successful business models over the last decade. One might be amazed at the variety of business plans for these OTT providers. When you think of OTT solutions, you need to think beyond Amazon, Netflix of Hotstar. Several new regional platforms, focusing on the popular TV channels are also coming to the table. With the demand for OTT solutions rising in India, these platforms are coming up with different business models.
OTT solutions have gained acceptability in India, primarily due to two reasons. First comes the quality and variety of shows and programs they cater with. Next comes their business models, or how they price their offerings. Presently, you will come across different types of OTT programs flocking the market. The variety of video and TV services had never been so diverse in the past. Of course, the business plans of leading OTT providers need to be meticulous and strategic to keep them afloat amidst soaring competition.
Breaking down different types of Business models for OTT Platforms
Presently, the entertainment world has witnessed the inception of hundreds of OTT platforms. It would be virtually impossible to cover the business model of each of these platforms. However, one might notice three broad categories while considering the business models for OTT platforms. These include:
- Ad-based video on demand (AVOD)
- Subscription video on demand (SVOD)
- Transactional video on demand (TVOD)
- AVOD model: The primary source of revenue of OTT providers in India following the AVOD model is advertisements. These platforms earn a substantial part of their revenue through ads. The videos on these OTT platforms come free of cost to the users. However, the platform charges a certain amount of fee from advertisers, who can place their ads through commercial breaks within the videos. There are different categories of advertisements, such as sponsored content, sponsor screens, video ads, etc.
- Benefits of AVOD business Model: The prime advantage of the AVOD business model for OTT providers is that, they can reach out to a large number of viewers. The users need not shell out any charge, and do not have any kind of barrier whatsoever to enter the platform. Eventually, they do not face any kind of monetary or other hurdles to get hooked with video content on these platforms. This leads to a fast growth of the OTT platforms. Besides, when these OTT solutions are designed to cater a particular interest or demographic group, the advertisement rates can be even higher.
- Disadvantages of AVOD Business Model: As compared to other models of business, these platforms get lesser monetary returns per user. This indicates that such platforms need to develop a massive audience base, before they can actually earn something substantial. At the same time, it is critical to allocate time for enough advertisements, without messing up with the viewer experience.
- business model for OTT Providers in India, the users need to pay a fee in order to get access to the respective platforms. Once they shell out this fee, they can get a complete access to the platforms. Eventually, they can stream the programs they like. This is one of the most common business models for OTT providers, including Netflix and Apple TV.
- Benefits of SVOD Business Model: This business model has already gained popularity among the customers. In the US, more than half the households shell out a subscription for the SVOD model. This trend is gradually rising in India as well. Therefore, OTT platforms with this kind of a business model can earn a steady flow of income from their customers. Most importantly, new viewers can enjoy discounts through different pricing incentives.
- Disadvantages of SVOD Business Model: Chances are high for customers to leave in such a business model. Often, the subscribers may be lured by other platforms. Other factors that might affect the subscriber base include changes in economy, price or content. Moreover, it becomes difficult to acquire new subscribers when the barrier to entry is high. In a nutshell, these platforms need to come up with exceptional quality of content to make the viewers pay for the same.
3. TVOD model: Many OTT Solution providers follow the TVOD business model. This is a simple model, where the viewers can rent or purchase videos one by one. This model is also referred to as PPV (pay-per-view) model or PPD (pay-per-download) model.
- Benefits of TVOD Business Model: This is a simple model, where the viewers need to pay only for the videos they would like to watch. Besides, the OTT providers lacking significant funds can launch this kind of a platform. It would serve as a great platform for sporting events, fil, debuts and instructional videos.
- Disadvantages of TVOD Business Model: TVOD models lack consistency in terms of revenue generation, as compared to the other two models. Besides, many viewers consider it to be frustrating to shell out an additional amount for each program. Moreover, it might be difficult to access these platforms from OTT boxes and smart TVs.
Mainstreaming of OTT Platforms in India
It was back in 1995, that the first live program was streamed on an OTT platform. This was hosted by ESPN and the event was a Major League Baseball game. Leading technology giants like Apple and Microsoft followed up the suit soon after this. By the end of the first decade of the millennium, OTT platforms started going mainstream overseas, with Amazon and Netflix leading from the front.
However, it was just recent that the OTT platforms tasted their success in India. Although Hotstar came up in 2015, leading the trend in India, it was only during the lockdown in 2020 following Covid that the OTT providers in India started gaining substantially. Evidently, these platforms have introduced a new way altogether in which people would get access to their favourite entertainment shows and movies. Most importantly, viewers in India got an alternative to expensive satellite and cable options, that used to come up with several restrictions. OTT platforms are here to stay, and the mainstreaming process is likely to be slow but steady over the coming years.