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OTT players ride piggyback on telcos to boost revenues

By Asmita Dey

With most OTT players running into losses, tying up with telcos is helping them garner revenues while also adding to their subscriber base. With a mere 1% of 225 million video OTT viewers paying for content, analysts believe telcos, with access to an estimated 425 million data subscribers, provide huge potential to reach viewers not covered by these platforms.

Manish Aggarwal, business head at Zee5 India, told FE that partnership with telcos helps in widening user and subscriber base, as well as adding to revenues. The association with telcos is definitely a win-win for both them and us. It helps us drive reach and gives us a surge in the AVOD (advertising video-on-demand) and SVOD (subscription video-on-demand) numbers, whereas telcos gain in terms of high average revenue per user (Arpu) through high data consumption, Aggarwal said.

Zee5 has partnered with all the three telecom majors Jio, Airtel and Vodafone Idea. The deal term varies in case of each. For instance, in case of the pact with Airtel, users can view about 30% of the premium content on Airtel TV, Aggarwal said, adding, There is a revenue share arrangement with all the three telcos.

Almost all OTT platforms including Hooq, Hungama and Shemaroo have tie-ups with one or more telecom operator. Even Netflix is available on Airtel network, while Amazon Prime is available both on Airtel and Vodafone Idea.

Hanish Bhatia, senior analyst at Counterpoint Research, said telecom operators pay OTT platforms like Zee5 for their content and the payment terms are dependent on the amount of traffic the OTT platforms are able to drive. Bhatia said OTT players usually have a set budget and viewership target. If the number of viewers accessing the platform exceeds the set target, then the telecom operators generally pay them extra for the additional users.

In most cases, the subscription revenues that the OTT platforms are generating through their own platforms are not that high. Any additional revenue stream is good enough for them as most of the revenues they are getting is from advertising. Telco is very significant when it comes to overall OTT viewership, Bhatia said. Just for perspective, Hotstar, which is the top app in terms of monthly active users and downloads, posted losses of Rs 389.02 crore in FY18 on revenues of Rs 571.50 crore.

The company s FY17 losses were higher at Rs 489.33 crore on revenues of Rs 320.78 crore.

Of the 225 million video viewers in India, there are only 2-2.4 million SVOD viewers who have directly subscribed to the paid platforms (the figure excludes Amazon Prime video subscribers or subscriptions garnered through telecom operators), as per a 2018 KPMG report.

While most of the catch-up TV content is monetised through AVOD model, original content usually warrants the SVOD to recoup the investments. Convergence allows an additional outlet for monetisation, especially for syndication or subscription based revenues, analysts at KPMG said.

Telco pacts also spare OTT platforms the need to spend on customer acquisition. Customer acquisition cost (CAC) for video OTT players can range anywhere from $3 to $8, industry experts said.

One of the cheapest and legitimate way to get new subscribers is through telecom, said Sumit Saxena, partner at Pixights Consulting. Saxena said it also adds up to OTT players’ ad revenues, as viewers watching the ad-supported content goes up when platforms merge with telcos. He gives the example of ALTBalaji, which has very successfully used this partnership model. Most of their subscribers have come through the telco route.