How will OTT monetization transform the Media and Entertainment industry?
The OTT industry was on the rise when the coronavirus pandemic hit the world. While everyone was struggling with the issue at hand, the OTT players saw an opportunity. People were stuck at home, seeking entertainment, and OTT was where they turned to.
Since theatres were shut and people were hooked on to web series and movies on Netflix, Amazon Prime, Hotstar, and other platforms, the filmmakers did not want to lose out on the buzz they had created for their productions. They opted for an OTT release, uncertain of when cinemas would open up again.
An article by Indiatimes states that the Indian OTT market is projected to grow at 21.8% CAGR between 2018 and 2023. Naturally, the industry players will focus on monetizing their growing market. How then will the media and entertainment industry transform as a result of this monetization?
How Does The Media And Entertainment Industry Make Money From OTT Vs From Theatres
When a movie is received well by the audiences, it ends up making a bomb at the box office. But a flop film struggles to recover the money that was spent on its production. In other words, a theatrical release is riskier, with higher profits if successful.
If a producer opts for an OTT release, as opposed to a theatrical once, there is a fixed amount that he or she receives from the OTT platform, thus minimizing the risk. So whether or not the content does well, it has been paid for in advance.
OTT releases make about 70-80 per cent of their revenue as the fee from OTT platforms, while the remaining money from satellite rights. Since content is always available on the OTT platform, their satellite rights fetch them lesser money as compared to if they would have released in the theatre.
While smaller movies benefit from an OTT release, the bigger movies incur a loss as the fixed price that OTT players can pay does not compare to what this kind of content can earn on the big screen. Also, they need to recover a significant chunk of their investment from satellite rights, which would be much lower in case of an OTT release.
Shift From Broadcasting To OTT
Remember the time when you would wait eagerly in front of the television set, waiting for that much-awaited new series to air? And when you would have to wait a whole week for the next episode, when the previous one was left on a cliffhanger?
Today, you can just log onto your OTT platform and watch episode after episode of your favourite series. You don’t have to wait in anticipation. That’s the reason people are willing to pay for OTT memberships- access to much more content, whenever they require. And whom does this monetization benefit? The media and entertainment industry, who choose to air their content where the crowd prefers it.
How Do OTT Platforms Make Money
OTT platforms have to spend money to acquire content. And since the content is what their entire business is based upon, they can’t make any compromises there. How then do they earn money?
OTT platforms earn money by charging their subscribers and advertisers. Monetization is a large part of their business model, and providing premium content by charging a subscription fee is how these platforms make most of their money. In addition, advertisers want to display their product ads wherever they find an audience, which is now increasingly on the OTT platforms. Which is why they are willing to pay these OTT players huge sums of money for displaying their advertisements.
The Revolution Of OTT For Media And Entertainment Industry
How did OTT find its way into the market? Was it always as widely adopted as it is today? The answer is no. Initially, it was only the tech-savvy population that turned to OTT to fulfil their entertainment needs. Since most of the content available was in English in the earlier days, it’s self-explanatory why the vernacular population had still not caught the OTT bug.
As adoption increased, platforms like Netflix, Amazon prime, and Hotstar started coming up with original content in regional languages to reach the common man. But that was not the only reason for the rise of the popularity of OTT content. Smartphone adoption increased and data plans became cheaper by the day.
It’s not just the adults that are adopting the “Netflix and chill” approach. With kids’ entertainment programs available, even children log onto their favourite OTT platform and binge-watch cartoons and educational shows. Isn’t it surprising that kids have a favourite OTT platform? Could you have ever imagined the same during your time?
OTT has revolutionized the media and entertainment industry not online for the consumer, but also for artists. More new talent is cropping up every day than ever before. Aspiring actors and filmmakers who spent years struggling for a chance at the silver screen are now doing prominent roles on OTT content. And they’re also getting noticed. Naturally, the demand, as well as the supply for OTT, are in abundance.
OTT monetization will create a positive impact on the media and entertainment industry, especially for smaller producers and actors. The revenues from the users will be passed on to the content makers. Hence the more the number of subscribers, the better it is for the entertainment industry. And the more they will strive to make better content. It’s a win-win situation for everyone.
Then there’s the question of bigger players who don’t want to release on OTT. They prefer to stick to traditional platforms like theatre and television. They will always have an option to do so as these are not going to be obsolete anytime soon. If anything, the different media will complement each other and exist in harmony.