While the COVID-19 situation still poses a threat, taking a toll in the form of business closures, job furloughs, and rising growth in social problems, recent reports from media and business research agencies mentioned that they predict a significant (around 60%) rise in the level of OTT consumption and gross revenue across all markets in India. 

But does that translate to a higher advertising spend as well? Since most top brands are saving up their advertising money for when the travel and lock down opens up, do we see a drop in advertising spend on these OTTs or does that harmonize with increased consumption?

Considering that the user behavior is changing rapidly due to current scenarios, and the majority of professionals are working from home and are forced to shift to digital ways, content consumption patterns see a major shift.  

If Maxwell Martz’s research on 21/90 habit building rule holds true, it might have opened up an opportunity for major OTTs to provide a seamless streaming experience and get consumers for a lifetime, considering we are officially at the 85+th day of the lock down.

Looking at revenue models, currently there are primarily 3 ways an OTT earns its revenue-

1. Advertising Video On Demand (AVOD): In this model, OTT service gives a free video streaming coupled with ads placed at the beginning, middle and end. This is primarily how YouTube builds revenue. Other major service providers include SonyLIV, Zee5, Voot, MX player
2. Subscription Video On Demand (SVOD): One of the consumer favorites, where users get a library of video content by simply signing up for a subscription service (monthly/quarterly/annually). With Netflix being the leader of the pack, Hotstar and Amazon Prime Video are among the top OTT services providing this option.
3. Transactional Video On Demand (TVOD): As the name suggests, you pay for the specific video content you want to view on a Pay-per-View basis.

OTT can provide either of three or a combination of the two with select packs.

Considering the subscription base for most OTT services is 1% of the entire viewership, most of them are considering increasing their subscriber base as it gives them more revenue than advertisements. 

The membership plans have recently been revised to a more “mobile-friend cheaper” ₹250 alternative by the giant Netflix with a monthly membership of ₹499, while still expensive when compared to its rivals — Amazon Prime Video costs ₹129 per month across screens while Disney+ Hotstar Premium, which has global studio content, is available for subscribers at ₹199 per month.

To gain an incremental percentage of paid subscribers and differentiate from rivals, players are further focusing on “originals” content.

As per the current study, the number of users opting for free-trials for SVOD services is expected to increase short-term as users browse for online content. Increase number of subscriptions per users and average revenue for a select OTTs

However, what does it mean for AVOD based Video Streaming sites/apps? Higher viewership and video consumption may lead to increased cost but at the same time brands pulling out  money from advertisement, monetization from this increased consumption might be a challenge as per recent research study by KPMG.

A recent article in ET Brand equity talks about rising share of ad insertions in Top OTT partners like Eros Now, Zee5, Disney+Hotstar, MX Player, Sony Liv, YuppTV, VOOT, and Viu, but an interesting number of categories/brands advertising on OTT platforms has decreased as most sectors have pulled back from advertising due to lock down and economic slowdown.

However, they did see an increase in new categories/brands willing to put in ad insertions as well. Major spikes were observed from the Food and Beverage category followed by entertainment, education & services.

Looking at recent data for AVOD from SimilarWeb/Apptopia for Advertisers for most OTTs, there is a significant increase in advertising spend on most of the OTTs like MX player and Disney+ Hotstar while players like SonyLiv, Zee5 and Voot show a slight decline due to Live Sports being not available.

Major advertisers during this time spending money on OTT Advertisements are Youtube, Amazon, Netflix, Facebook, Horlicks, Airtel, Suzuki, Flipkart, Apple, Linkedin, and many more

Prior to 2020, we saw that OTT was experiencing exponential growth in its user base as the digital footprint is increasing. With the outbreak of COVID-19 affecting how we consume online content and our everyday lives, OTT stands at an advantage with all the extra time available to us. Current offering of free-trials and reduced costs, could result in a new normalization towards subscription based video streaming, and we might see a shift in consumption from mobile-screen to connected TV.