Risks faced by OTT Platforms

By Shiana Aggarwal, PGDRM July’21-22

Introduction

OTT stands for Over-the-Top, a convenient little term that explains the new delivery method of film and TV content over the internet without the need for traditional broadcast, cable, or satellite pay-TV providers. In simple terms, we’re talking about people paying an internet provider, for internet access to watch Netflix, without paying for cable TV. A few examples of OTT platforms are Netflix, Amazon Prime, Voot, Apple TV, Disney+ Hotstar, etc. There are many ways to access OTT platforms, including via your computer, phone, tablet, smart TV, or gaming console.

Why is the OTT platform disrupting?

The world is already seeing a major shift of choice from traditional cable or satellite pay-tv services, IPTV options to OTT platforms. One is not forced to watch what is being aired at the moment. Data prices are being slashed in almost a lot of regions that consume a high amount of data, now it has become a viable channel for the cord-cutting generation.

The pandemic is a major catalyst in the success of the OTT industry. It is not only for entertainment but also for other purposes like online education. There is a Censor board eg CBFC, BCCC for films and television but nothing for OTT. According to the PWC report, India is the world’s fastest-growing OTT market.

Revenue model of OTT platform

First, the platform spends money to make or buy its content, and then the content is sold by charging a charge from the audience or users.

• SVOD: Subscription Video On Demand
• AVOD: Advertising-based Video On Demand
• Hybrid
• TVOD: Transactional Video On Demand

Some TRIVIA About Revenue

• Star & Disney India had sold almost 95% of the advertising inventory of IPL 2021.
• The broadcaster had signed 12 sponsersfor its OTT platform Disney+Hotstar.
• Its sponsors include Dream11, VimalElaichi, Upstox, Livspace, UB (Kingfisher Packaged Drinking Water), Unacademy, AMFI, Phone Pe, Swiggy, Amazon, Volkswagen and Fresh2Home.
• Originally, Star was expected to cross Rs3,200 crore in advertising revenue in the year’s edition of IPL.

Regulations Across The Globe

INDIA
The centre has notified a digital media ethics code which classifies the content into five categories which are U for universal, U/A 7+, U/A 13+, U/A 16+ and A (adult).

SINGAPORE
It is one of the highly regulated markets and is regulated by InfocommMedia Development Authority (IMDA). content meant for viewers above 18 and R21: that is for those above 21 years.

EUROPEAN UNION
There are no regulations that are laid down for governing digital content.

AUSTRALIA
The content is regulated by The Broadcasting Services Act 1992 that lays down a guideline and mechanism.

INDONESIA
It’s a country with very strict anti-pornography laws that require digital platforms to cut out any manner of nudity. It blocked out Netflix since 2016 with the argument that the platform did not comply with the country’s regulations.

CHINA
Platforms such as Amazon Prime and Netflix are banned. Its mission is to promote local entertainment.

SAUDI ARABIA
Netflix was forced to pull out an episode of a comedy show Patriot Act where the host criticised the crown prince of the country.

How Did Netflix Shape the OTT Industry?

The Netflix Effect

Netflix, Inc. is an American subscription streaming service and production company. Launched on August 29, 1997, it offers a library of films and television series through distribution deals as well as its own productions, known as Netflix Originals. It allows our members to watch TV shows and movies without commercials on an internet-connected device. There are a lot of success stories that contribute to the streaming movement of visual content and one of it its Netflix-blockbuster.

BLOCKBUSTER -NETFLIX

Up until 1990, the world saw movies at home —one tape, then DVD, at a time. Blockbuster was one solid name in the industry. But something interesting happened toward the end of the nineties.in 2000, that the CEO of Netflix offered up Netflix to Blockbusterfor $50 million. No deal. It was a huge mistake for blockbuster.In 2007, everything changed when Netflix first went OTT. From then on, Blockbuster (despite trying to go OTT a few different ways) was constantly wiping its face clear of Netflix’s dust.

What did Netflix do right?

They recognized the monumental shift in how people consume content. Netflix got the first movers advantage.Blockbuster waited until the trend caught on.

Risk factors for Netflix as per its Annual Report

Risk Control Measures by Netflix

With auto-debit payment facility being deactivated from 1 April 2021, as per the RBI guidelines:

1. Banks should obtain approval of the customers before paying third parties.
2. The guidelines state that from April 1 Additional Factor Authentication would need banks to send a notification to customers five days before the scheduled payment.
3. The transaction will only take place after approval from the customer. This is needed for all transactions, however the small the amount is.
4. If the amount is above Rs. 5000 banks also need to send one time password for carrying out the payment, which generally does not happen in OTT industry payment.

Measures To Mitigate Its Competition Risk

Netflix announced on that it was reducing the price of its subscriptions in India to boost its user base.

The timing was no coincidence, as rival Amazon Prime Video had previously announced an increase in its prices effective Tuesday.

The largest price drop is for the basic full-service plan, It is now priced at just Rs199 a month, a 60% cut from Rs499.

Challenges faced by OTT platform

1. The wrong audience profiles
2. Poor technological considerations
3. Wrong content targeting
4. User experience not up to standards
5. Video piracy
6. Retention
7. Lack of Infrastructure

Get the full research study here: Case study on OTT platform by Shiana Aggarwal

Disclaimer

This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

GRMI or it’s students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.

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