2024 set to be a tough year for OTT business: Ormax’s Keerat Grewal

The partner in the media consulting firm predicts muted to stable growth next year. 

From 20% in 2022 to 13.5% in 2023, the growth in total audience for OTT platforms has slowed down post the Covid19 boost. With the growth being saturated in metro cities, the coming year is expected to be a tough year for the business. 

In an interview with afaqs!, Keerat Grewal, partner, Ormax Media, says that considering the saturation observed in the top 15 cities, the next year may witness either muted or stable growth. “We saw the growth rate for OTT drop from 20% in 2022, to 13.5% in 2023. This growth rate is unlikely to change in the coming year.”

In 2024, Grewal predicts a slowdown across multiple platforms, accompanied by a concerted effort to expand content beyond existing markets. “Platforms are experimenting with content, shifting from big-ticket to less ambitious projects. But as they have hit the glass ceiling in the bigger markets, they are exploring new audiences. This is anticipated to be a key focus in 2024,” she adds.

The growth for the OTT category observed this year primarily stems from tier-two cities and rural areas. In rural areas the penetration is  around 23%, contrasting with 81% in metros. “We are going to see a slowdown in SVoD because the price sensitivity of these smaller markets will make them more challenging to penetrate,” she says.

Grewal predicts this will lead to an increased focus on regional language platforms. Several local OTT players that focus on regional languages are emerging. 

“However, monetisation remains a challenge for them due to lower numbers compared to OTT players at national levels. Marathi, Bengali, Tamil, and Telugu are some of the languages which have a notable presence of local language OTT players, with even national players investing in content in these languages. Also, these are low entry barrier markets because of the cost of production being lower,” she says. 

In metros and in cities with a population between 10 to 75 lakh the growth rate has already dropped to single-digit numbers. But encompassing about 89% of India's population, the <10 lakh urban and rural markets present a growth opportunity for OTT. With increasing digital penetration there's substantial exposure. “However, monetisation in AVoD may pose challenges, given the significant content investments.”

Speaking about the reduced growth rate, Grewal says there's a noticeable slowdown in the investment by some of the bigger OTT platforms. SVOD growth now requires a strategic overhaul to tap into the vast Indian digital audience which is available  on platforms like YouTube, social media, and other AVoD platforms. 

“The challenge lies in monetising this audience and optimising metrics for more ad-friendly content. The focus on achieving this transition is crucial for OTT’s growth in the coming years.”

SVoD vs AVoD: what’s the way forward?

At 18%, SVoD has failed to show growth since last year. This includes three segments of viewers: One, who directly pays for SVOD (B2C), two, who indirectly pays through telecom bundles (B2B), and three, who consumes SVOD content but someone else is paying for it. While the first two combined comprise around 75.9 million audiences, the third, non-paying SVOD audience base alone comprises77.2 million audiences.

Grewal predicts 2024 to be one of the toughest years for SVoD. With low-hanging fruits already saturated, breaking into markets where content consumption is high but willingness to pay is low poses challenges. 

“Platforms will focus on experimenting with subscription models, pricing, and distribution. They are experimenting with reduced rates models and free content,” she adds.

Grewal predicts a significant role for aggregators. “The space has been waiting to grow. However, the landscape remains somewhat unclear. Telecom bundling hasn't proven successful for OTT platforms, as minimum guarantee payouts were unfeasible for smaller platforms. Current deals are not advantageous for OTT platforms, posing challenges in this domain.

Meanwhile, the AVoD+ universe, which is defined as those who watch videos only on free streaming platforms, including at least one platform besides YouTube, but do not have access to paid content, has witnessed a 7% rise and it now comprises 198.1 million viewers. Notably, YouTube and social media within the overall AVoD universe have grown by 19%, comprising 129.9 million viewers.

“Cricket is the only tent pole property right now. With Cricket going free, the increase in AvoD+ audiences is evident, particularly among males and in tier 2 cities,” she says.

The major game-changer this year is the shift to free sports content on OTT platforms. What started with IPL by JioCinema, was extended to the ICC Men’s Cricket World Cup by Disney+ Hotstar. Grewal doubts the sustainability of this free model due to the high cost of acquisition. 

“Monetisation without subscription revenue is challenging. The current approach is likely tactical, aiming to increase penetration first, with the eventual plan of transitioning to a paywall model over time,” she says.

The biggest challenge for advertisers with AVoD remains measurement. Unlike the transparency TV provides, OTT platforms lack established metrics. “OTT platforms remain protective of their data, necessitating the use of viewership estimates. Understanding what works and what doesn't is essential for advertisers, prompting the role of services like Ormax in providing valuable insights,” she says.

Content Strategy

As future growth is expected from tier-two cities and rural areas, the content strategy also needs to evolve and the platforms need to understand India beyond the metros.

“Contrary to the general belief that rural audiences in small cities require stories set in small towns or rural areas, they are in fact looking for relatable entertainment, irrespective of the setting. However, niche interests that work for some metro audiences are not going to work with the rest of India, more so the smaller cities or rural areas,” she says.

Today’s OTT scenario is similar to the television scenario in the late 90s. Back then, television focussed on the metros and the big cities. So its content could deal with evolved and modern subjects. However, as television expanded to smaller cities, it had to massify its content.

“Unfortunately over time it also degenerated the quality, but that's exactly the stage OTT is in today. So if we're looking to massify our content, then we will have to speak to the lowest common denominator,” she explains.

There is also a dearth of content for older audiences, aged 35 and above, an age at which an Indian is typically a parent. The current offerings often include dark themes with abusive content, which doesn't resonate with this audience.

“There's a need for a significant shift to provide content aligned with their cultural values with relatable character conflicts. To achieve mass appeal, similar to TV's approach of inclusivity, OTT needs content that caters to a ‘family audience’, whether they gather around a television or watch on mobile devices,” she highlights.