OTT play ….is content the only differentiator?

Entertainment has changed with many parts specially distribution rapidly becoming digital in recent times. The current lockdown across the world markets will further hasten the process across all facets of the business. With physical access curtailed, the large venue based entertainment be it filmed entertainment or live events has stalled and the recovery to their pre lockdown business is looking sometime away with restrictions and fear being the big reasons. OTT and surprisingly Television have been the gainers though advertisement the major source of revenue for TV still down in the negative territory.  Filmed entertainment it seems will revive its theatre led viewing in sometime but is slowly starting to consider the digital alternative. The business of entertainment is clearly at the crossroads of change though the demand for good content remains firm.

Content therefore and superlative video content is the new flavour with OTT platforms willing to allot large budgets for the same. Netflix started the trend of differentiated content through a subscription based service which led it to become the numerouno in the valuation sweepstakes though maybe not so on the profitability front. The success of Netflix in attracting subscribers has encouraged a number of other entertainment companies who now have launched their own OTT platforms. Worldwide we have Disney+, Viacom-CBS, HBO and Comcast with Discovery as the latest entrant for the sweepstakes. In addition you have Amazon, Apple and now also Microsoft getting into the act but not only as producers, as aggregators of content too. Domestically also there are number of platforms with strong domestic distribution like Hotstar (now a Disney venture), Sony LIV,  Voot, Zee5 and Eros Now. Each of these players are looking to produce content as everybody has the mantra that original content sells. Content therefore is set to explode with substantial money chasing it. 

While this is good news for the Content producers, I wonder if it is good news for the OTT platforms. OTT  which started of as a mixture of new content and catch up shows to lure subscribers are now increasingly relying on new content as their prime attraction for new subscribers. The number for investment is huge in billions of dollars. The question which now becoming pertinent is that with that kind of investment when and how do the platforms make money? How much of new content is enough to sustain an OTT ? Since most of the OTT rely on subscription and that too monthly or yearly how do you correlate the success of their content to the revenue? Is it a matrix of simple net growth of paying subscribers year on year? What is the role of the content libraries one holds and how does one monetise those? All key questions but not with clear answers, specially when most of the platforms along with a leader like Netflix are still in an investment mode. What is a profitable business model here then ?

New content,many argue,is a must have it but how much? What is equally necessary are the digital systems which allow the customer a choice as well as access. If one dumps reams of content on the subscriber, how is he supposed to make a choice? Video content choice is basically through short trailers where Netflix still has the best technology. We will fast reach that time of content overload and if we still do not have a clear model of profitable existence then the whole industry is in trouble. Volume of content versus watch ability will be the choice. Many believe that future will change ie the number of players will consolidate or there could be different set of offerings for ad led content or subscription led model. Netflix is already beginning to cut the number of titles to reduce overload according to sources. There is also a growing view that companies like Disney plus or Comcast have better chance of success than pure play OTT which have other businesses like Content or Parks in this instance.

While content clearly will the central theme, the successful digital model is still a mystery. Therefore welcome to the world of uncertainty in the digital world!


Published by eyeonmediablog

Professional Chartered Accountant and presently the founder and chairman of Sapphire Professional Services Pvt Ltd - a boutique advisory firm in M&A,Strategy and Structuring ( ). Previously a senior partner with PwC and leader of the Entertainment & Media industry in India for 7 years.

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