Streaming services wary of poor free-to-paid-user conversion
AVoD is estimated to grow from $1.1 bn in 2021 to $2.4 bn in 2026; SVoD is likely to grow to $2.1 bn
Video streaming services are struggling to expand their paid subscriber base due to low free trial conversion rates, according to a report by media consulting firm Ormax.
Out of the estimated 99.7 million Indian users on advertising-led video-on-demand (AVoD) platforms only 18% are ready to turn to subscription-led video-on-demand (SVoD) services, it added.
Experts said very few small town users are ready to pay for entertainment because free-video platforms, such as YouTube and MX Player offer variety, choice and convenience. Short-form video services are also a catalyst for the growth of AVoD platforms, they added.
A section of experts said the recent change in online payment rules by Reserve Bank of India (RBI) mandating users to authorize even recurring payments every month has added to their woes as the process is very cumbersome.
A Deloitte report said AVoD is expected to generate more revenue than SVoD in India. While AVoD is estimated to grow from $1.1 billion in 2021 to $2.4 billion in 2026, SVoD is likely to grow from $0.8 billion to $2.1 billion, it added.
SVoD subscription growth may also taper with declining covid-19 cases, following the rapid adoption of such services during the two years of the pandemic, the report said.
“In India audiences are used to getting video entertainment for free, or at very low price points. A family of four can still watch about 100 TV channels at ₹400, which comes to about ₹3 per person per day. Paying for content is not something everyone in India has warmed up to,” said Shailesh Kapoor, founder and chief executive, Ormax Media.
Kapoor expects the overall digital video user base to grow at 15% every year for the next few years, and SVoD at 10-12%.
“Video streaming platforms are also not expecting a major change in consumer behaviour, especially in tier-2 and 3 towns, as all genres of content are available for free on AVoD, such as YouTube, which has a paid offering, but still relies on ad-supported programming as mainstay,” Sourjya Mohanty, chief operating officer of EPIC ON and Stream-Sense, owned by IN10 Media Network, said.
“Getting users to upgrade from a monthly to annual subscription plan is even more tough, but many services have now started pushing annual plans,” Mohanty added.
Users are more drawn to particular shows or movies over platforms and, hence, prefer to take up quick subscriptions to watch those individual titles. Such behaviour leads to lower ARPUs or average revenue per user on a paid service. For instance, Disney+, the international video streaming service owned by Walt Disney, generates ARPU of $6.32 in the US and Canada and $6.35 in other international markets. However, its service -- Disney+ Hotstar -- that operates in India and other Asian countries, clocked an ARPU of $0.76, according to its latest earnings.
India has a massive appetite for short-form video content, driving growth for the AVoD ecosystem, said Subhasish Gupta, managing director, sales, India and SAARC Region, Brightcove, a global provider of cloud solutions for video. “Engaging with viewers by capitalising on the short spans of audience attention is a significant factor in boosting viewership for AVoD models. AVoD services provide a low barrier to entry for most consumers, requiring minimal information to start watching. This ease of access to high-quality content, the broad availability of the internet, and dependency on smartphones are fueling growth for AVoD services. Many streaming services are moving back into the AVoD model since it is easier to reach and engage with audiences and achieve ROI,” Gupta added.
While viewers in tier-one and tier-two towns are taking up subscriptions if they have paying capacities, many in smaller towns are still accessing pirated content, Vibhu Agarwal, chief executive officer and founder of video streaming app Ullu pointed out. “These are people who are mentally prepared for ads, unlike those in metros who don’t have time for them. The other challenge is the recent RBI mandate that has made online payments difficult,” Agarwal added.
Sidharth Singh, co-founder of marketing agency CupShup said India’s OTT market is still nascent. The audience would like to watch the scene unfold and market to consolidate before handing out their hard-earned money to the leader, he said. Further, during the lockdown, audiences may have subscribed to platforms given the time on hand but with life returning to normal, many customers aren’t renewing subscriptions and it may take time for them to revisit their decision and come back to the platforms, Singh added.
With movie theatres now open and several live entertainment experiences available, there is bound to be some slowdown in subscriptions compared to the past two years, said Mihir Shah, vice-president at advisory, consulting and research services provider Media Partners Asia (MPA). “As the GDP grows, there will be higher consumer propensity to pay. The idea behind platforms investing over a billion dollars annually in content is that a bulk of it will be behind paywall,” Shah explained.
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First Published:15 Jul 2022, 12:01 AM IST
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