The Inflection Point For OTT Revenues In India
If there is one media segment which has dominated during the pandemic, it is the OTT industry. Globally, the music streaming market is expected to expand at a compound annual growth rate (CAGR) of 17.8% in the time period from 2020 to 2027. In China, there was a whopping spike in online music subscriptions of 70.0% in the first quarter of 2020. In the US it accounted for 80.0% of the revenue generated by the recorded music industry in 2019.
Closer home, the success of audio OTT in India has been no less remarkable. According to a 2019 Deloitte-IMI (Indian Music Industry) report, it accounted for more than 70% of the revenues generated by the domestic music industry in 2018. While we don’t have the latest data, it is safe to assume that this number must have gone up exponentially, as witnessed in other parts of the world where the pandemic and its resultant restrictions created a spike in demand for OTT services.
Coming To The Rescue
The recorded music industry has seen some turbulent times in the last few years. Once a major component of the entertainment sector, the music industry saw a crippling downturn with piracy and lack of demand in the last decade. Even today, it is placed globally at the 15th position in terms of industry size. This is surprising given its cultural and historical importance. Even in terms of usage, the average Indian internet user trumps the global listener, spending 21.5 hours listening to music every week compared to the global average of 17.8 hours.
Audio OTT has emerged as an important player, changing the entire landscape of the Indian recorded music industry. It has created a more democratic space, increasing the reach of the industry. Given its quick and impressive dominance in the market, it is clear that it has also created immense value for the consumer, providing them with easy, quick, and curated access to music. Like the rest of the world, Indian OTT has also been critical in driving growth during the pandemic. With more Indians confined to their home than ever before, OTT services emerged as the preferred medium to listen to audio content that also includes podcasts, audiobooks, storytelling, and talk shows.
Drivers Of OTT Growth
There are multiple factors which have spurred this remarkable growth in a very short time span. The chief among them is India’s smartphone-using population. With 700 million internet users as of 2020 and an estimated smartphone penetration rate of 42%, India has among the largest pool of potential users. If we consider that the average user spends more than 21 hours listening to music in a week, we have one of the largest music-listening pools in the world.
On the other end of the spectrum is the vibrant Indian music industry, populated by film music as well as independent artists. The well-established industry is known for its popular names, a rich and long history, and multiple genres. More significant is its impact on our cultural ethos where Indian music is recognised globally for its vibrancy. In other words, we have a talented pool and high demand, creating an ideal marketplace which requires a platform to connect the two. This is where OTT platforms have made their impact. Consequently, we have seen that digital platforms have also strengthened their position in India due to exponential rise in their user base.
Revenue Models
Despite their popularity, one of the challenges facing the industry is monetisation through different revenue models. In more developed markets like North America, OTT platforms have moved towards a subscription model with healthy profitability. In India, subscription is slower to take off as most people are inclined towards free streaming services. The other two alternatives to emerge are ad-based and bundled models. The ad-based model offers free streaming services in exchange for displaying or playing advertisements. The revenue comes from advertisers who pay a fee for their spot. For the ad revenues in India to scale to the next level, advertisers need to shift their radio-ad dollars to the more targeted and measurable version of audio ads on audio-streaming apps.
Under the bundled model, OTT companies tie up with third party platforms. Users get free access only when they purchase the third party’s service or product. The revenue is shared between the OTT and the third party platform. The subscription model remains the most premium because the user pays a fee for the service. In return they get access to ad-free streaming, customised services, multi-device access, and a wider library to choose from along with convenience to download songs. With listeners becoming more discerning and OTT platforms improving and widening their offerings, we will see a move towards the subscription model as witnessed globally and increased profitability.
As the OTT industry enters its next phase with more tech-based innovations and a wider reach, we are at an inflection point. With a steadily growing popularity, there is little doubt that audio OTT platforms will continue to rule the music industry in the next decade. Led by CX-led innovations, AI-backed upgrades, and audio compression tech, we will see technology creating a hyper-personalised experience that will anticipate our taste and lead the change.
The author is Gautam Sinha, CEO, Times Internet and Gaana
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