OTT platforms tying up with telecom companies to expand their market

Telecom companies are offering a big push to OTT (over the top) platforms to expand their reach and provide them with new avenues for revenue.

The reason for the video streaming platforms’ high dependence on telcos is simple: while the number of TV screens in the country is pegged at 200 million, the number of smart phone mobile screens is double that size — 400 million, and growing.  

According to industry estimates, the number of screens in the country would hit 1 billion to 1.1 billion by 2025, but nearly 75-80 per cent of that would be smart phone screens.

Last week, Amazon Prime tied the knot with Airtel for an exclusive, only- mobile offer for pre-paid subscribers at a rock bottom price of Rs 89 a month — a first-of-its-kind move meant to expand its market. Its chief rival, Netflix, already has a similar offer, but it is telecom service agnostic at Rs 199 per month. And Reliance Jio has bundled various offerings, including Amazon Prime, Netflix and others, with its post-paid mobile tariffs.

BofA Global Research estimates that out of the 400 million OTT users in the country, as many as 300 million come from partnerships with telcos. Currently, the total number of paid subscribers is a mere 15 million. Most users don’t want to pay for subscriptions because there is a huge difference in tariffs between cable and OTT together with broadband. Cable is available at Rs 200-250 a month, with hundreds of channels thrown in. On the other hand, OTT channels with fixed broadband would be not less than Rs 600-700 per month.

The challenge before OTT players is that while costs are going up as they increase investments in original content, the scope for generating revenues from subscription is limited. And though advertising accounts for the bulk of the revenues, the yields are low.

According to Media Partners Asia (MPA), the online video industry in India generated an estimated $1.4 billion in revenue in 2020, with advertising contributing 64 per cent and subscription 36 per cent. Yet last year they forked out over $600 million on content for India. 

In this scenario, telcos provide a way to expand the market as well as generate revenues. For instance, firms like Reliance, Airtel and VIL either aggregate content on their own platforms from various OTTs (like Airtel Xtreme and VI Movies and TV) or bundle the entire OTT platform offering in a tariff plan.

As a result, subscribers do not have to pay for the content. It is the telecom service providers who pay, depending on the various models of revenue sharing. It’s a win-win for the telcos — they not only get a sticky customer, but also charge 40-50 per cent commission from the OTTs to allow them access to their subscribers. 

But BofA says that this equation will change in the OTTs’ favour once they have scale and the demand for their content goes up. For instance, Disney-Hotstar, which controls the bulk of the cricket broadcast rights for which there is huge viewership, is able to attract a premium on its content from telcos. Similarly, the rights of popular movies acquired by OTTs (as Hotstar, Netflix and Prime did during the cinema hall lock down) is an attractive proposition for them.

Telcos like Reliance Jio and Airtel are also cashing in on the opportunity to bundle offers of OTT platforms as they roll out fibre to the home. Airtel plans to take on Jio and reach over 40 million households in over 1000 cities across the country in the next 12-18 months with its fibre-to-the-home service.