According to some of the recent reports from McKinsey, there are about 2.5 billion digital customers across the globe who are less than 25 years old. This group is the most active group online and displays a different kind of consumer behavior compared to the traditional customers. These “millennials” spend around 315 minutes online daily compared to the over-25 customers who spent just 126 minutes per day. Indian consumers are also climbing on to the bandwagon in growing numbers. As per reports from Media Partner Asia, the number of active OTT video subscribers in India is set to grow by 105 million as we approach 2020. Low-cost smartphones offerings combined with low tariff plans will continue to drive greater demand for online content across India. The OTT services consumption habits of this audience are evolving, and are among the primary drivers for the changes in the market for OTT solutions today. In October last year, the Economic Times reported that Indian consumers watching sports prefer high definition and uninterrupted live streaming online with the trend shifting from binge watching to live OTT content.
The growing demand for sports content in India has led to a huge chunk of the population moving to OTT platforms through connected devices. Approximately, 60% of this digital audience falls into the 13-35 age group. A curtain raiser to how successful this can be is the IPL T20 league – in 3 years, viewership is expected to cross 130 Million viewers on the Hot Star platform. However, there are also some strategic challenges that lie ahead for OTT, along with these opportunities that have opened up. Let’s look at both just that bit closely in this article.
Opportunities that exist for OTT players in the future
1. Emergence of new markets
By 2025, digital growth will add over a billion middle tier consumers in the upcoming markers for telcos. This will open up new markets for many OTT players. The OTT services will comprise voice, messaging, content consumption, and video calling services. Many of these areas were previously dominated by the “voice” services provided by conventional telco players. Apps like Face time by Apple, Google Hangouts, and What’s App are already offering user-friendly, innovative and more attractive voice and video messaging services. These products have established their presence with their high-quality offerings and their widespread acceptance poses a threat to the traditional markets of telcos unless they find ways to profit from the OTT opportunities this opens up. A switch of focus from voice to data may not be long in coming.
2. Service offerings would be cheaper
The world of OTT is starting to merge with the world of core telco services including voice, message, and media and this trend will grow in the future. Beyond the basic, opportunities have also opened for premium or niche OTT services. Low- cost access to high quality, unique video content with a good subscriber base is at the vanguard of that trend. Specialist service providers who offer premium content with the right blend of engagement and technology may be able to attract a larger number of subscribers and greater profit.
3. Live streaming channels will grow in demand
OTT operators will start offering more live streaming channels in the future and will start operating even more like cable TV companies. Besides, OTT content will see a transformation with breaking news reaching Periscope, Facebook Live, and even YouTube. Broadcasters in the U.S may be able to collaborate with MVPD’s (Multi-Channel Video Programming Distributors) who may be able to offer a ready version of live and linear feeds which may be packaged as OTT offerings by such service providers.
Unique challenges affecting OTT players
1. Content discovery
Nowadays, viewers do not prefer to browse through numerous channels to get what they what. With the plethora of options out there they are likely to get distracted easily. They need a more personalized experience and this is where a growing challenge lies for OTT providers. The focus must be more on boosting content discovery functionalities with improved ways to map the viewer’s habits and choices. Viewers prefer service providers who can give them suggestions on what to watch and who can help them find content that interests them.
2. Reaching a global target audience
Many OTT providers are focused on delivering content which may be restricted to a specific geographical location while providing their services. Niches are served with specific language content or catering to specific interest groups. As a result, niche players may not be able to the economies of scale that accrue by targeting a wider audience worldwide. The trade off is between the greater content discovery and management effort of providing niche content, and the increased difficulty of differentiating, and the greater competition the wider, international audience draws. The focus needs to be on a middle ground that targets international customers worldwide with a consistently high level of customer service and experience.
3. Multi device viewing
With multiple devices available today, a majority of the viewers have access to smartphones, tablets, and smart TV’s and hence the challenge for OTT providers lies in providing content in a format, which can delivered seamlessly across all these different devices. OTT providers may need to look for technology partners who can enable them to provide similar quality of content across all platforms with a consistent cross-device user experience.
4. Viewer retention
The biggest challenge that lies ahead for OTT players is the question of how to retain their subscriber base. This is a key challenge and could involve treading a fine line between user experience and monetization. Superior free content and advertising that is unobtrusive are both the need of the hour.
5. Issue of monetization
Of all the challenges, monetization is affecting the Indian OTT providers more than any others. The Financial Express reported in April this year that online videos were able to secure ads amounting to 1200 crore in 2014-15. The advertising market in India is set to grow even though online advertising comprises only about a fifth of TV advertising as of now. At that rate, online advertising revenues could increase rapidly. But there seem to be divergent trends to consider here – Overall the current OTT players in India have recently revealed a reduction in ad revenue from 90% to 40%. The task for OTT players is to maintain that balance between uninterrupted quality content, and meaningful ads that the consumers could respond to. Differentiation, personalization, a robust technology platform, and a quality viewing experience for the consumer will all prove key in this quest.
It’s quite obvious that the OTT space is becoming more competitive and if providers want to survive and thrive, they must deliver content, and an experience that attracts, and retains the right subscribers. The focus is not just on delivering great content but providing an impressive performance overall to engage the viewers constructively and meet the growing challenges effectively. Will you be ready?
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