Case Study: How OTT Industry is Acing Payment Collection With Subscription Model

OTT or over-the-top services relate to the on-demand streaming of video and audio content over the internet, which doesn’t require users to subscribe to any cable network.

OTT platforms allow users to stream videos such as web series, documentaries, films as well as songs and podcasts.

Today, the OTT industry has become one of the fastest growing industries in the media sector.  A joint report by CII-BCG said the OTT industry is expected to grow to $13-15 billion over the next decade at a CAGR of 22-25%.

Different types of OTT platforms in India

In 2008, Reliance Entertainment launched BIGFlix, the first on-demand video streaming platform in India. With the entry of global OTT giants like Netflix and Amazon Prime, Reliance Entertainment re-launched BIGFlix in 2018 offering content in nine languages.

There are currently more than 40 OTT platforms in India vying for the largest market share.

While the majority of OTT platforms are in the online video streaming services, there are at least three different OTT models in the country.

1. Video: On demand video streaming forms the major chunk of the total OTT platforms in India. These platforms such as Netflix, Disney Hotstar, Amazon Prime Video, etc allow users to subscribe to the platform either yearly or monthly to watch as many movies and web-series they like.
2. Audio: Online platforms (mostly apps) offering on-demand music streaming are the next most popular types of OTTs after video streaming. With attractive subscription prices, these streaming platforms have almost killed the piracy industry over the years.
3. OTT marketplace: There are multiple companies that work as a dedicated marketplace of different OTT platforms. These giants include the likes of Amazon Fire Stick, Apple TV, Xbox, and Playstation.

How OTT industry leverages subscriptions to grow in India

In the initial years of their launch in India, the fourth largest OTT market in the world, almost all the OTT companies allowed users to stream video and audio content for free. Their revenue model was largely dependent on advertisement.

With the help of advertising-based video on demand (AVOD) model OTT platforms created a large user base. Once they had enough users who were hooked on to the movies and TV shows, the OTT platforms rolled out monthly and yearly subscription plans for these users.

India’s digital payment ecosystem that allows users to set automatic payment to subscribe for services and products has been the backbone of OTT companies. They realised that users will often forget to pay for their subscription every month, so they enabled users to set up auto-pay with the help of payment gateways like Paytm Payment Gateway, which has a subscription-specific product Paytm Subscriptions.

Read more: E-Mandates: How it Works, Advantages, New Guidelines, and More

Soon, the subscription-based video on demand (SVOD) model took off. The initial hypothesis and assumption that Indian users would not pay for content was proven wrong. The CII-BCG report cited above said that at the end of 2021, India had 70-80 million paid subscribers of online streaming platforms. If we compare this with a mere half a million paid subscribers in 2014-15, it’s a huge feat.

Different OTT subscription models

The way the OTT industry has leveraged subscription models in the country is truly remarkable. It is estimated that by 2030, OTT platforms will earn 60% of their revenues from subscriptions.

OTT companies didn’t just ask their users to become a paid subscriber but offered them different types of subscription plans. This was done keeping in mind the varied needs of users of different socio-economic backgrounds.

There are three different types of subscription models in play in the OTT industry.

• Paid membership: This is a straight forward model where an OTT company asks users to buy a monthly or yearly subscription to stream on-demand content.
• Mobile-only subscriptions: As a large number of the GenZ as well millennials used their smartphones to watch videos instead of their TVs, OTT companies launched a separate mobile-only subscription plan. Due to the targeted nature of this subscription model and the fact that it was cheaper than buying a regular subscription, OTT companies saw a huge demand for this.
• Freemium model: A large number of content streaming companies have both premium, which is paid content as well as free on demand content. Popularly known as the freemium model (portmanteau of free and premium), this subscription technique ensures companies get to retain a chunk of users who don’t want to become a paid subscriber yet.
• Limited screen subscriptions: Since many households have more than one large screen in their houses, OTT companies realised the potential of asking users to pay more if they wish to stream content on more than one screen.

Conclusion

While the war between OTT companies to grab the lion’s share of the market size is expected to continue, the ability to successfully process a large number of payments and manage users’ subscription cycles will define who the leader will be.

Paytm Payment Gateway’s subscription tool Paytm Subscriptions is tailor made for companies that want to leverage this model like the OTT industry has. Read our blog on how Paytm Subscriptions can help businesses gain more subscribers.

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