"A few months back, we were not convinced that there is a business case that exists. But now, we have a very clear indication to the market that we will be investing more and more into Sun NXT and content, which will first get premiered on Sun NXT, may or may not get broadcast on the TV channel," Sun TV Group CFO S L Narayanan told analysts.
The company is in advanced stages of discussion with certain telecom majors to integrate the app on their platforms. It expects a substantial potential for revenue from this segment in the next couple of years. There is clarity on how overall trends are emerging in the OTT space and the company is looking at various options, including investing in original content. It will also have better synergy with its other media businesses, including the television channels and movie production arm.
At present, most of the material from its channels available on YouTube is from its partners -- the independent producers who work on the slot model. However, the programmes produced in the commissioned model are not broadcast much on this channel. The company's Tamil channels are shifting from an outsourced model to the commission model for content creation. This will increase its control over the intellectual property rights of the content, both in fiction and non-fiction programmes, which could strengthen the content of Sun NXT, it expects.
While most of the broadcasters have been operating on the commission model, almost 100 per cent of the content on Sun TV historically was outsourced on a private producer (PP) model, offering a fixed part of the advertisement inventory to the producers to recover their cost. However, it has been shifting towards the commission model.
It has completely converted to the commission model in Malayalam, Telugu and Kannada. In Tamil, it would take some time to convert to the model since the outsourced programmes are already running and successful and it would not be possible to pull out half-way through, said the management.
Sun TV Networks' interest on OTT comes at a time when various Indian companies, including the Zee Group, have already strengthened their OTT business with local presence, apart from international players such as Netflix and Amazon Prime Video.
According to a BCG report last month, the OTT market in India is expected to reach $5 billion by 2023, mainly due to the increasing affluence among consumer, the higher penetration of internet in rural markets and affordable data packages, along with adoption of the platform across various demographic segments, including the older generation and women.
The report, 'Entertainment goes online', says that by 2023, India would have around 40-50 million paying subscribers and around 600 million users would be using advertising-based video on demand. Advertising-based video on demand is expected to account for around 43 per cent of the OTT market, while around 32 per cent would be subscription-based and transactional video on demand would account for the rest of the 25 per cent.