Despite incurring losses, deep-pocketed OTT platforms are continuing operations due to regular fund injections from their parent companies, while smaller rivals are at risk of going out of business due to high capital requirements for content, marketing, and user acquisition, they said.
The small OTT platforms are hence facing two options: get acquired by larger platforms or shut shop due to growing losses as expenses continue to outpace revenues.
Zee Entertainment chief Punit Goenka said consolidation in the OTT industry has to happen since the market can accommodate only a certain number of players. As per Media Partners Asia, India’s OTT video market, which generated $3 billion in 2022, is projected to more than double to nearly $7 billion by 2027. “An average subscriber is subscribing to 2.5 OTTs, so from that perspective, consolidation has to happen. It will be either consolidation or some platforms will have to shut shop,” Goenka told ET in a recent interview.
Streaming in India continues to be a cash-guzzling business due to high content costs coupled with monetisation challenges. India is a price-sensitive market featuring the lowest average revenue per user (ARPU) of $7.2, according to RBSA Advisors, making monetisation through subscriptions a challenging task.
Though OTT platforms have made progress in monetising through advertising, YouTube continues to be the dominant player in the ₹13,000-crore digital video ad market.The merger of Star India and Viacom18 will make the proposed merged entity a powerful force to be reckoned with in the OTT industry, with two strong platforms in Disney+ Hotstar and JioCinema with 333 million and 95 million monthly active users, respectively, for Q4 2023, according to Sensor Tower.People privy to the developments said South Indian streaming platform AHA is scouting for funds as it needs investments to grow the business. The company has held talks with multiple parties but hasn’t been able to any headway so far. Despite recording strong growth, Bengali OTT platform Hoichoi has seen its networth erode due to accumulated losses of up to ₹28 crore, as of March 2023. Balaji Telefilms-owned ALTT and Eros International-owned Eros Now have scaled down their operations due to intense competition.
ZEE5 had recorded cumulative losses of over ₹800 crore in 9M FY24. Novi Digital Entertainment, which owns Disney+ Hotstar, incurred a ₹748-crore loss in FY23.
Media industry expert Rajesh Sethi believes that consolidation will create a smarter content ecosystem and provide hyperscale revenue opportunities, leading to sustainable profitability. “Most OTT platforms are unprofitable, despite their widespread adoption and borderless consumption. The streaming industry will be shaped by consolidation to achieve competitive scale and efficiency. OTT platforms desirous of a national play will need to provide content in 8 to 10 languages, and each language will further require multiple pieces of fresh content across films and series, which can be achieved by consolidation,” said Sethi.
According to Studio Mojo founder Radhakrishnan Ramachandran, the Indian OTT market will witness consolidation since smaller players will find it difficult to match up to the financial might of Disney+ Hotstar-JioCinema, Netflix and Prime Video in the new competitive scenario.
