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Vidnet 2021: Fairer margins needed for SVoD to boost ARPUs

While AVoD cannot be sustained, SVoD is here to stay and grow.

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NEW DELHI: The Indian OTT space is booming, more and more platforms are cropping up every day, leaving viewers spoilt for choice. It has also become a crowded and rather skewed market, where out of approximately 70 players, two or three bigwigs take the lion’s share of subscribers and revenue due to their deep pockets in terms of content and marketing. While existing and newly-launched SVoD services have registered significant uptake in 2020 off the back of the Covid2019 pandemic, they must now brace for a slowdown as life returns to normalcy. It is more important than ever before to cut through the clutter and stand out so as to reel in new users, retain existing ones and operate a sustainable business concurrently.

All these pressing concerns, trends, strategies and more were up for discussion during a special session titled ‘SVoD: How To Raise ARPUs And Rope In New Subscribers?’ on day two of Indiantelevision.com’s flagship property Vidnet 2021. The panel, moderated by Viu India ex-country head Vishal Maheshwari, included Siti Networks CEO Anil Malhotra, NXTDigital COO NK Rouse, Asianet Satellite Communications president & COO Sankaranarayana G, and Shemaroo Entertainment COO-digital Zubin Dubash.

While 2020 was an inflection point when it came to OTT becoming a staple of the consumer’s content consumption, 2021 will be about converting those customers into paying for the service. This is where SVoD takes off in the industry, opined Dubash.

For instance, during the lockdown period, ShemarooMe saw massive organic offtake on the b2c side that was 2-2.5X its pre-Covid stats. In the b2b space, ShemarooMe has built a rapport with brands across various sectors (e-commerce, ISPs, BFSIs, travel etc) to work with them on a CAS (content added service) model, where content is used as a “protagonist” to achieve the businesses’ objectives.

“SVoD is the game. AVoD is a great sampler but it’s not a business. It can’t be continued or sustained for long. SVoD is here to stay and grow,” he declared.

Sankaranarayana was of a similar mind, noting that there’s a revolution happening in the video streaming category. MSOs and cable TV operators need to look alive and adapt to these dynamic changes happening in the industry so they don’t lose out. So they’ve started to aggregate channels into the digital space and providing it from a single fountainhead to cater to different consumer needs, for both mobile devices and at-home viewing through hybrid set-top boxes. But is that enough?

“This is the transition that is happening. However, we also realise that we can’t just be an aggregator of channels and content deliverer. There is no money in that. Basically, we’re just innovating to keep abreast with what’s changing in the marketplace and to align with changing needs. We’re now looking at making our own content that’s being provided on our own platform services channels and bundling it on our apps,” he detailed.

Time to cut the cord?

Following this exchange, Maheshwari remarked that cord-cutting and conversion from television carriage to other means of accessing content is rapidly becoming the norm. Malhotra begged to differ, pointing out that cord-cutting is predominantly being seen in the US and other developed markets where the price point compared to linear TV was low. That’s not the case in India, where the penetration of high-speed broadband is still very low.

Said he: “No more than three to four million FTTH (fibre to the home) connections exist in India. There is a large gap to be filled. Some large telcos and MSOs have taken the initiative and started offering services in that. We’re talking of acquiring new subscribers but converting those subscribers who’re using linear video by providing high speed broadband and bundled offers that, of course, include OTTs.”

However, bundled offers are only being offered by telecom operators at the moment. MSOs missed the bus on that when they delayed in offering FTTH plans to the public.

Nevertheless, the cable industry is alive and kicking and TV broadcast will continue, asserted Rouse. There’s been a seven per cent growth in viewership and there is still humongous scope in cable TV. As for carriage costs, they will likely drop further once NTO 2.0 comes into force, giving a nudge to the subscription-driven model, he observed.

All about the ARPU

Before determining the pricing, the customer’s needs come first. And for the customer, the proof lies in the pudding: he or she will get to know about a series through a trailer or word of mouth, and be tempted to try the service – but will only subscribe to the lowest-priced package. Due to this trend, Dubash holds the view that the current form of SVoD is actually TVoD.

“People are content-loyal, they’re not platform-loyal yet. They’re chasing good content and not an OTT as such. If an SVoD service wants customers to subscribe to a long term pack, it has to give them visibility (of the content it has to offer),” he explained.

Malhotra is less optimistic and doesn’t believe a hike in ARPUs is going to happen anytime soon. “As far as linear video is concerned, we’re under a regulatory regime where our NCF (network capacity fee) has been capped, margins from broadcasters are capped, so you can’t increase ARPU unless you start exponentially adding subscribers,” he said. And to gain subscribers, the platform must dish out freebies when it comes to subscriptions and set-top boxes, which again has no positive impact on ARPUs.

There have been no major breakthroughs on the broadband side either, where bundled offers with OTTs like Netflix, Disney+ Hotstar offered the scope of raising prices. But most consumers still go to big telecom operators for broadband connections, who throw in free subscriptions to streaming services with their prepaid and postpaid plans.

“You need to create niche content first and then market it in such a way that consumers come to the platform and pay either on a b2c or b2b model. Service providers like us will probably do soft bundling with broadband plans. When something starts going free as a bundled offer, the ARPU drivers go out of market,” stated Malhotra.

Sankaranarayana agreed, adding that it is highly necessary to boost ARPUs to survive in the market. While tie-ups with content providers are required, the deals should be “win-win” with margins that don’t undercut but rather, benefit the SVoD service and distributors too. 

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