Is the subscription model paying for OTT and music streaming apps in India

Direct subscriptions for OTT contributed around 65-70% but for music streaming apps it is 10% . The subscription model is in a sorry state so players are betting on aggressive pricing, original content and social media partnerships

OTT and Audio Streaming app report

In 2019, Indians are devoting nearly a third of their overall time on media to digital formats. The growing digital consumption is being served by more than 30 over-the-top (OTT) players and over 10 music streaming apps in India. With growing demand being met, the focus is also on the monetisation of the content. Advertisement has been one of the monetisation models but businesses are trying to explore new avenues of monetisation.

Subscription revenue shaping up for OTT Video apps

With more than 30 OTT video platforms in the country, and a rapid growth in video consumption, the landscape has rapidly evolved. Regional markets are taking the baton forward(How regional is defining India’s digital future.)

According to the KPMG M&E India 2019 report, subscription revenues have registered nearly a 3x increase in FY19, totalling to INR12 billion, with contributions from both direct subscriptions and telco partnerships.

Direct subscriptions contributed around 65-70% and the rest were relaziantions from the telco partnerships

It is estimated that 11-14 million was gained from direct paid subscriptions in FY19. Netflix and Amazon Prime accounted for the bulk of direct subscription revenues. Backed by the robust live sports, international and live TV content Hotstar contributed a significant percentage to the overall direct subscription revenue.

Among the bunch of other monetization models, telco partnership is a significant one. It is estimated that 30-35% of revenues has come from such partnerships. Platforms like ALT Balaji, Eros Now, etc. are examples of players who have a substantial revenue contributing to direct subscriptions. Hotstar has an in-app partnership with Reliance Jio and content tie up with Hooq. Similarly Times MX Player has content tie-ups with Sony Liv, Arre and Hoichoi.

Subscription revenues are nascent for audio streaming apps

The audio streaming apps have seen a 50% healthy growth in terms of monthly active users – from 110 million in FY18 the base has jumped to 165 million in FY19. As a result we already see the market is flooded with local and international players. ByteDance, the owner of the popular video sharing app TikTok is the new entrant in the market.

Existing players like Gaana, JioSaavan, etc. have focused on both ad and subscription models. Music streaming’s share of overall music industry revenue was estimated at 70% in FY19 and that share is expected to go up to 82% by FY24. For now these revenues are powered by advertising.

Music streaming revenue in India

According to the IFPI-IMI Digital Music Report 2019: on an average internet user in India is listening 19 hours of music each week – over two and a half hours of music daily. But the state of subscription model isn’t ripe; 51% respondents preferred to use YouTube as anything they wanted to listen was available and it is free.

YouTube is the preferred streaming service across age-groups and also the main inhibitor stopping users from paying premium subscriptions

Way forward for OTT video and Audio streaming apps

The digital media market in India is set to become the second largest within M&E by FY22 when it reaches INR386 billion. Video will play a big role but it is going to take time. So what are OTT and streaming players doing to stay relevant in the consumer mindsset:

Aggressive pricing strategy

In addition to partnerships with telcos, OTT players are partnering with TV/broadband players, original equipment manufacturers including smartphones, smart TVs, streaming devices, gaming conceals, etc. and cross-platform partnerships such as tying up with social network platforms. For instance Arre has partnered with Sony Liv and Facebook for content distribution.

Pricing is a key strategy and you need to get it right when you are competing in such a diverse market like India. Netflix, one of the most expensive OTT players recently rebooked at its pricing strategy and launched a cheaper mobile-only subscription of ₹199 per month.

While the majority of the players have started to offer shorter duration packs(weekly or monthly), some players are bundling regional/international content separately to cater different user preferences. In December of 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.

ZEE5 also launched a sachet pack that offers seven days of premium service in association with RailYatri to drive volumes and increase user adoption. SonyLiv, which has a monthly plan of Rs 99, is also testing seven-day, 15-day and daily plans. 

Hotstar offers cash on delivery to mobile subscribers for its Hotstar VIP offering. Regional OTT player Hoichoi has adopted the telecom model of top-up cards.

OTT distribution models

Original content and growing regional focus

Original content is going to be one of the strong differentiation among the crowded space of OTT. The presence of originals across genres helps platform entice users to subscribe and quality helps to retain the users as well.

Among the Indian OTT players, Hotstar started experimenting with a greater amount of original programming in 2018-19, while the likes of ALT Balaji, Zee5 and Eros Now have also been building robust libraries of original content.

Hours India Original Content OTT

With the growing demand of originals, OTT players are creating content in regional languages since it is the future for consumption and commerce. For instance ZEE5 is planning to launch 72 originals (12 movies and 60 series) over a period of one year (till Mar 20) across genres and languages. 

The move towards regional is the need of the hour, besides regional content production is turning out to be cheap (almost 30 per cent lower to that of Hindi original content and per episode costs are approximately in the INR5-6 million range.) A small budget web series in the regional genre could cost INR2.5-3 million per episode.

Partnerships with social media platforms

Advertising is the key revenue business model for the Indian music industry and it is not going to change drastically. Direct subscription is in a very nascent stage. Indians definitely love music but the incentives for opting for a paid subscriptions are not enough.

One of the growth accelerators of the Indian music industry has been the exponential growth in user engagement apps (apps like TikTok wherein the user is allowed to use a visual input with audio input running in the background to create engaging content.)

TikTok Music Engagement

Earlier such content due to lack of licence deals were taken down, but not anymore. Hence a new source of revenue for the music industry. Partnerships with social media platforms, gaming consoles, etc. are helping the music industry to increase its distribution reach and also open up new monetisation avenues.

Following the success of TikTok, Facebook has signed music deals with T-Series, Zee Music and Yash Raj Films. Facebook has already a music deal in place with Universal Music Group. And recently music feature went live on Instagram(Stories.)

Spotify is now accessible on Sony’s gaming console platform PlayStation 3 and 4, months after its debut on Microsoft’s gaming console Xbox one, where it was available since its launch in February 2019. With this deal, more than 50 million songs and 3 billion playlists are now accessible to gamers in India.

Subscription model isn’t paying

The truth is subscription model is in a sorry state. OTT video is gaining some ground but the music streaming market is solely dependent on advertising. Indians love content but they want it for free. In fact Indians are ready to watch ads than pay for the content. According to 2019 Asia OTT Research Report, about 25% of the OTT population wants to pay nothing and watch ads while consuming content, 25% is willing to pay a lower fee with limited ads, 14% would like to pay a higher fee to be free from ads; and 14% would like an option where they can customise their price and ad packages.

Awareness of these services are also low and piracy is still a big concern for the M&E industry in India. According to a last year report piracy is costing $2.8 billion of M&E’s total revenues.

It is going to be the survival of the fittest and the projections sum it up.

OTT and Audio Streaming Apps Revenue Projections