Paid subscriptions plateau for OTTs after the covid-led spike in viewership

Paid subscription growth has plateaued for over- the-top streaming platforms since the covid-19 lockdown-led spike in user base, said industry executives.

While the menace of piracy is impacting returns, the shift towards bundled offering from individual OTT subscriptions by a section of users, have also hit the average revenue per user (Arpu). Besides penetration of OTTs among the urban elite has reached a saturation point and the platforms are yet to devise a strategy to woo the lower-end of the target audience in a significant way, they added.

A top executive of a broadcast network said 2023 will be challenging. “Direct subscription video on demand (SVoD) number is stuck at 25-26 million, and is not growing. While digital advertising revenue has grown, it’s not viable to sustain programming and other costs with just advertising revenues as the CPM (cost per mille) for digital is very low,” he added.

Paid subscription growth has moderated by around 20% in 2022 from the highs during the first wave of covid-19. The churn has also increased with consumers frequently activating and deactivating subscriptions. At the peak of the covid pandemic, platforms had seen over 100% rise in subscription numbers.

With most subscribers opting for annual payment plans, month-on-month growth has slowed, said Vibhu Agarwal, founder of OTT app Atrangii. “Subscriber fatigue is slowly setting in. Besides, bundling of OTT and direct-to-home, or DTH offerings have emerged in a big way providing huge value for money,” he added.

According to Keerat Grewal, partner at media consulting firm Ormax, the average number of subscriptions per user has remained flat at 2.4. “It is indicative that growth for the category will come from more paying subscribers, and subscriptions per user are unlikely to rise to 5-6. That apart, metros have a 79% penetration, with growth of only 10% this year. The next growth story will need to come from one-million-plus towns. That said, considering heightened price sensitivity, as well as the habit of consuming free content, subscription and content strategies will have to be relooked at, to make the platforms accessible and content more inclusive,” she added.

Meanwhile, at 293.7 million users, AVoD (advertising video-on-demand) segment saw strong 21% growth, driven by rural segments. Free content and affordable data are beginning to show an impact on the growth in digital video consumption, Grewal said.

“What is concerning is that there is no significant growth since the covid first phase. The incremental rise in numbers each month is barely anything,” said a senior producer working on a slate of web originals, seeking anonymity.

Most of the OTT players have been able to gain initial traction from India’s largest cities, where the per capita income is much higher than that in smaller cities or rural areas. Therefore, substantially increasing the paid user base is going to be a major challenge since people are still wary of paying for content in India. Vinita Pachisia, senior vice-president at media and marketing agency Carat India, said, “With increasing amounts of time spent online, Indian consumers are open to AVoD offerings, with many preferring to watch content that is ad-supported rather than pay for an ad-free experience. In India, AVoD generates more revenue than SVoD, it is estimated that only 31% of India’s digital video audience is paid subscribers, while the remaining 69% are AVoD audiences. Thus, a majority of video views come from AVoD services, that offer the possibility to have streaming service subscriptions at a lower price or are free of cost, something that Indian consumers prefer,” Pachisia said.

To be sure, some experts see hope ahead. “SVoD subscriptions have grown nearly five-fold since pre-covid days to about 120 million today. Given the high base and effect of price hikes undertaken by leading platforms in late 2021, incremental growth percentage will be much lower,” said Mihir Shah, vice-president at advisory, consulting and research services provider Media Partners Asia. “Sustained investments on content, estimated to be more than $2 billion in 2023, will provide OTT companies the fuel for newer additions during the year.”

Chandrashekhar Mantha, partner, Deloitte India, said the industry is at an inflection point that will support further growth in the OTT market with cheaper smartphones, moderately priced data packs, rollout of 5G, bundled cheaper pricing, increasing rural awareness and affinity and evolving consumption patterns especially with Gen Z and Millennials. “With OTTs successfully creating series and newer content library, the loyalty from existing and acquisition of newer viewers has been entrenched. Strength of serving customers across languages with regional content and live sporting events will add to the growth further,” Mantha said.