Netflix, Amazon Prime Video or Disney+ Hotstar, players in the video-on-demand or over-the-top (OTT) business are aggressively pushing for more subscription revenues in India. That is understandable.
Hong Kong-based Media Partners Asia (MPA) has estimated that subscription revenues will go up nearly fourfold to hit $1.85 billion in 2025, from just $0.5 billion in 2020. Advertising revenues will grow relatively slower, moving up threefold to hit $2.6 billion in 2025. And with OTT players expected to invest over $700 million annually (including sports), they would also want subscriptions rather than depend only on advertisers for revenue. On average, OTT players earn about 36 per cent of their revenue from subscriptions; the rest comes from advertising.
But Google’s YouTube, the biggest player in this space, can afford to take a contrarian call. With a 43 per cent share of the online OTT revenues in 2020, it is sitting pretty. Its nearest rival Disney+ Hotstar has a 16 per cent share, according to MPA. And with 325 million unique viewers month on month, who are above 18 years of age, according to Comscore, a US media measurement and analytics company, it is far ahead of its rivals and can continue to take a contrarian call. What’s more, it does not invest upfront on content — which is a major cost for other OTT players.
plans to leverage its advertising prowess to garner a larger share of that growing revenue.
Google declined to comment on its strategy in India. Advertisers and research agencies who interact closely with the company say that the subscription target is moderate — a 10-15 per cent share in the next 10 years from virtually zero today. And their assessment is that the advertising pie will continue to grow fast, especially in a market like India where the ability for customers to pay is limited.
Says Sandeep Goyal, managing director of Rediffusion: “YouTube
has a very lucrative advertising model. The sheer volume of traffic is very large and constantly growing. It is also the ‘television’ for teenagers and upcountry audiences”.
The challenge to retain its current dominance in advertising revenues will, however, remain. YouTube
controls over 67 per cent of the online video-on-demand ad pie. But MPA projects that its share would come down to 55 per cent by 2025, not least because competitors are also looking at a larger share of the ad pie, especially in markets where they know that subscribers are not willing to pay beyond a point.
Then there are TikTok clones, which are battling it out to fill the vacuum after the Chinese app was banned in the short video space. These, such as Facebook’s Reels, inMobi’s Glance, Josh, MX Taka Tak, are growing in popularity and subscribers. Before TikTok closed, it had over 600 million downloads challenging YouTube’s reach and had just started monetising this customer base with ad revenues going up by 50 per cent in a year.
But YouTube won’t be handing over all subscription revenues to its rivals on a platter. So it is offering YouTube Premium, a monthly subscription channel of Rs 99 that allows access to all YouTube content ad-free. And you can top it up with the YouTube music channel without ads for Rs 129 a month. Industry estimates say that it has already attracted over 3-4 million subscribers on the music channel. But competition in the online music space is cutthroat with half a dozen well-funded players in the game — Spotify, Wynk from Airtel, Jio Saavn and Gaana.
The more innovative strategy is to offer creators of content a subscription model option for their channel that will be managed by YouTube on a revenue-share basis. “There is so much content, which, unlike, say, a music video won’t get you mass viewers but only a niche audience. So while advertising share won’t generate much revenue, they can charge subscription membership which they share with YouTube,” said a creator who is using this option.
The move is catching on as YouTube already has thousands of creators in gaming, learning, news
and finance who have a subscription-like feature on their channel. The channels offer content that could range from horoscopes to stock market tips and stock market literacy, amongst others, to subscribers. For instance, chartered accountant Rachana Phadke enabled a channel last year on the stock market, with subscriptions ranging from Rs 59 to Rs 399, and has garnered revenues of over $100,000.
There are other areas that YouTube is exploring (e-commerce being one), targeting small businesses that can use the channel to showcase as well as fulfil orders and with the option to pay through Google Pay.
Of course, there is speculation that Google could get into buying content, especially in sports (it had made an aborted attempt to acquire digital rights for the Indian Premier League, or IPL). But the expected spiralling cost of buying such rights due competition amongst broadcasters and OTT players has encouraged the giant from going down this route.
However, in the ad space the growing popularity of short video has not escaped YouTube’s attention. So it is also offering this option in “Shorts”, which has been launched in beta version as part of YouTube and not as a separate app. “Other competitors have had to heavily invest in this area to build the platform as well as advertise its launch. YouTube already has a ready platform, so it did not have to make aggressive investments,” says a source in the know of Google’s strategy. In short, Google is not giving up its dominance in this space anytime soon.
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