What is the 'freemium' model? Why OTT players are swaying towards it?

Monetisation is a big challenge for OTTs, especially as content costs are rising. Netflix—which accounts for about 30 per cent of the revenue share in the SVOD (subscription video on demand) market—is considering an ad-supported model. Likewise, aha is also rolling out an AVOD version. “We are introducing freemium because there are a lot of people who are not paying, and we want them to continue on the platform,” says aha CEO Ajit Thakur.

India’s digital video audience count stands at 353.2 million, but there are only 40.7 million paying subscribers, according to Ormax data. Meanwhile, AVOD player MX Player has launched an SVOD version, MX Gold, to cater to viewers who prefer ad-free viewing. It indicates an increasing shift towards a middle ground called ‘freemium’, where a part of the content is available for free with ads, while premium subscribers can view content ad-free. From a one-size-fits-all model, the pendulum is swinging back to multiple free and paid models similar to the western concepts of completely free TV, cable, premium cable, and pay per view, among others, explains Karan Bedi, CEO of MX Player.

Thus far, OTT streaming has largely been an urban phenomenon. As the players look to expand to the smaller cities and towns, especially with their regional content, bundling with telecom operators will become inevitable, concede the players. It is harder to penetrate deeper through regular marketing methods, they say.

Voot—a cousin of telecom operator Reliance Jio that has 405 million users—and MX Player with its 280 million AVOD monthly average users (MAU) have an edge over the others in distributing their content. “The distribution models are evolving. There will be a move towards aggregation, and there will be an opportunity to use the Jio platform in a strategic way,” says Gourav Rakshit, COO of Viacom18 Digital Ventures, adding that the rate of that change is not clear at this point.

For others, telecom bundling leads to cannibalisation of the user base, and reduces the already low OTT average revenues per users (ARPU), experts say. Co-founder Vishnu Mohta says hoichoi, which is bundled on JioFiber’s postpaid plan, has not seen its user base cannibalised. “That’s why we focussed on going deeper into that. Telecom has a massive subscriber base. It’s the only way to reach the audience at a very deep Tier II and Tier III level, at least for the next 1-2 years.”

But Ormax Media Founder and CEO Shailesh Kapoor points out that the subscribers gained may not convert into increased revenues. “The revenue would be pretty low, less than 20 per cent,” he says. But hoichoi’s Mohta says that on a net basis, it’s a fair arrangement. “You might have to do a lot of marketing and other activities to acquire that customer otherwise.” His rationale is the same for getting on Prime Video Channels—Amazon’s venture into aggregation. The idea is to enable subscribers to access 12 OTT services, while the aggregated apps can get a much better reach for a fee.