Netflixanother OTT platform is transitioning to an ad-based video-on-demand (AVOD) model.
- Regional OTT platform Aha announced that it would have ads on its platform and an ad-free subscription option.
- AVOD models are money grabs for OTT players. According to the TMT Forecasts 2022 report by Deloitte, AVOD is expected to generate more revenue than subscription-based video-on-demand (SVOD).
India is home to about 60 over-the-top platforms, but most of them have been unable to turn a profit as the subscription revenues don’t bring them the revenue they so desperately need. Netflix eventually relented, announcing that it was now watching ads on its platform.
Regional player Aha, who delivers Telugu and Tamil content, is the latest to move to a hybrid model. This is a mix of ad-based video-on-demand (AVOD) and subscription-based video-on-demand (SVOD).
“All OTT platforms are currently consuming a lot of money in terms of both content creation and subscriber acquisition. In all of India, there is only a certain number of paid subscribers that you can bring on the platform. So at some point everyone has to walk to profitability. The natural answer here is AVOD, which is where the consumer base is 10x or more than the subscription base you have,” Vaasudev Koppineni, VP – Content and Strategy, Aha told https://londonbusinessblog.com/ India.
Aha will have three options for consumers in October. There will be free content with ads, gold subscription and premium with high definition content. Aha is also optimistic it would be on the road to profitability after moving to a hybrid model.
“With our team expanding non-subscription revenues into branded solutions, AVOD and other new initiatives, I believe we are on track for profitability,” said Koppineni.
AVOD models are money grabs for OTT players. According to the TMT
Forecasts 2022 report by Deloitte, the Indian AVOD market will double from $1.1 billion in 2021 to $2.4 billion in 2026.
Rural consumers prefer affordable OTT plans
After a strong presence in the cities of Telangana and Andhra Pradesh, Aha is looking to expand and go deeper into the country and that was one of the reasons behind the change in business models.
“We wanted to reach the nationwide audience of AP, Telangana, where we could lower the entry-level package. That’s when we decided it’s time to launch inventory on our platform, lower the back price for our first-time consumers so they can afford to watch premium content with ads,” Nitin Burman, head of non-subscription at Aha, told https://londonbusinessblog.com/ India.
He said rural India was a price sensitive market.
Currently, Aha’s annual premium subscription costs 699. There is a basic annual package of 399 and the quarterly package costs ₹199. Prices will be adjusted during the holiday season.
To make the most of its budget and pass the benefits on to consumers, Aha also focuses on creating original content, which Koppineni says is more viable for a streaming platform from a business point of view.
“Creating content or having its own IP makes more sense than acquiring content because nowadays, with the growth of competition, everyone is fighting for the same piece of content, even leading to high costs. What was previously capped at 40% recovery of a piece of content from digital has now grown to 60%-70%. So acquisition has become more expensive,” said Koppineni.
Growth of regional
Born just before the start of the pandemic in March 2020, Aha currently has 10 million monthly active users (MAUs) and the app is installed by 30 million people. It has conquered more than 2 million paid subscribers and each of them shares their password with 2-3 people – so on average about 8 million users have access to Aha content.
According to a FICCI-EY
reportthe share of regional language consumption on OTT platforms will exceed 50% by 2025 from the 30% share in 2019. FICCI-EY believes regional consumption will surpass Hindi but settle for 45% of the pie .
“According to various reports, the next step for any national player is to get consumers on board with the regional audience. And we have already conquered the urban markets and are in phase two to move into the Tier II and III markets,” said Burman.
Aha also aims to become something of a super app for its regional audience by adding gaming to its platforms.