Tata Play, the new entrant in the OTT space: Can the company take on its well-established rivals?

‘Tata Sky-isko laga dala, toh life jinga la la.’ (Once you get Tata Sky, your life is on the right track). This popular jingle from an old Tata Sky ad was crucial in powering the direct-to-home (DTH) broadcaster to pole position in the DTH space. While it has retained the position with a market share of 33 per cent, the new rendition of that jingle is slightly different; it starts with Tata Play after the company rebranded itself in January 2022.

In the fast-paced business of entertainment, where the battle for dominance is relentless, Tata Play has taken a leap of faith with its over-the-top (OTT) content aggregation platform Tata Play Binge, launched for all customers in October 2022. “It’s both charted and uncharted [territory] for us,” Harit Nagpal, MD and CEO of the company, tells BT. (More on that later.)

But first, a little background. Analysts estimate that while the TV industry’s DTH segment will grow by just around 3-4 per cent in the near term, its average revenue per user (ARPU) will grow by 6-7 per cent. According to financial services firm Elara Capital, the DTH market will grow only slightly, while a major proportion of growth will come from households with connected TVs and free-to-air channels in the next few years. Further, Tata Play’s income from the DTH segment dropped 7 per cent, from Rs 4,567 crore in FY22 to Rs 4,240 crore in FY23, per data from Tofler. This is why diversifying into the OTT aggregation model makes eminent sense for it. “We started working on this platform about three to four years ago. We knew we had to deliver a different customer experience,” says Nagpal.

He adds that Binge’s USP lies in making content both discoverable and affordable, while also complementing the company’s DTH business—that contributes close to 96 percent to its top line. “It is charted territory for us because we have been in the business of distributing content. Now, if our subscribers have started watching on-demand content, then it’s our job to create a platform that gives them the same facility,” says Nagpal, adding that the firm is confident of bringing more eyeballs to Binge from outside its primary customer base. “We’ve spent the past two years testing this platform with our DTH customers because they would definitely be more forgiving,” he says. The company had rolled out the OTT aggregation service for its DTH subscribers in 2020.

Now, as the company embarks on its inevitable transformation, sceptics wonder if it’s a stroke of genius or a perilous folly, especially when competition from telcos like Reliance Jio and Airtel, pure play OTT aggregators like OTTplay, scope video by YuppTV, and OTT-cum-aggregator platforms like Amazon Prime Video and Apple TV+ is intensifying. Even customers’ growing preference for OTTs poses a huge risk. “The growing popularity of OTT could be a threat to DTH operators in the medium to long term. With limited product differentiation, the DTH industry is exposed to intense internal competition, and from cable TV as well as DD Free Dish,” states a CRISIL Ratings report. It adds that the drop in Tata Play’s active DTH subscriber base is due to industry-wide headwinds and growing digital entertainment options. Interestingly, the firm—that has been mulling an IPO for the past few years—posted a net loss of Rs 105 crore in FY23, compared to a net profit of Rs 69 crore in FY22.

However, Nagpal says, “It is going to be difficult for a subscriber who wants to watch content to have subscription relationships with multiple apps”. But even as customers make do with multiple OTT apps for now, it has not been any easier for the company as well. “It wasn’t easy to forge relationships with each platform because everyone wanted to go direct-to-customer and not through an aggregator. But we knew that in the end, the need of the customer would become supreme,” says Nagpal.

In an era when subscribers can choose from around 60 OTT apps, the aggregation space is fast becoming the new theatre of battle for content broadcasters. Moreover, the pricing has to be such that consumers get 20-30 apps at the price of three or four apps, which is what players like Tata Play and OTTplay are trying to achieve. “Today, everyone from leading telecom players to pay TV operators and OTT services aspire to become future content gatekeepers,” says Mihir Shah, VP at media and telecom consultancy Media Partners Asia. OTT aggregation serves various purposes for different players. While telcos aggregate OTT services to retain subscribers and drive data consumption, OTT platforms have introduced aggregation to widen their user base. Separately pay TV operators, which have traditionally served as wholesalers of linear TV, already have an established prepaid subscription relationship with customers. Despite all that, Shah says that current monetisation through ads remains limited. “With the shift in consumer viewing preferences, OTT aggregation is a natural transition for these operators to retain and expand subscriber ARPU,” he adds.

Consequently, the OTT platforms get subscribers without having to spend any money on acquiring and retaining subscribers, which is normally their biggest cost. “Now that effort will be made by us, not them,” explains Nagpal. For him, Binge’s revenue model is simple. “We are commission agents. We make commission on whatever we sell. We buy at a certain price and sell it at a slightly higher price.” Hence, the margins are also thin.

According to a Ficci-EY report on India’s media and entertainment landscape prepared by Ashish Pherwani, Media & Entertainment Leader at EY India, long-term success in streaming requires establishing a durable relationship with subscribers. “Nearly all media companies that are active in the direct-to-consumer (DTC) arena today are aiming to offer consumers a bundled offering of streaming content and other services,” the report states, adding that along with boosting sign-ups and reducing churn, bundles allow media companies to improve efficiency in marketing spends and technology investment. Pherwani says, “Going forward, media companies will fully integrate distinct streaming services into one application, creating a true ‘hard’ bundle of content.”

Another challenge that OTT aggregators could address is the subscription fatigue customers face, by allowing users to group multiple subscriptions under one account sign-on, says Shah. “Consumers can also avail better discounts by purchasing OTT app bundles through an aggregator. Moreover, some recently introduced services such as Tata Play Binge and Airtel XStream have blurred the lines between online video and pay TV, bringing consumers the best of both services,” he adds. In that backdrop, the OTT viewing experience is gradually evolving to resemble the pay TV distribution model, familiar in terms of packaging (bundling of linear TV channels combined with OTT packs), a fusion of content search and discovery, and even payment experience.

An example is OTTplay—that pivoted last year from being a recommendation and content discovery platform to aggregation. The platform says that it is solving the problem of what to watch through its recommendation engine, along with providing a solution to mitigate subscription fatigue. “People spend over 15 minutes figuring out what to watch, and if they know what they want to watch, they need to figure out which OTT is running it,” says Avinash Mudaliar, Founder of OTTplay. “That’s something we are solving. So the product-market-fit is definitely there vis-à-vis our competition.” Industry estimates suggest that the platform is closing about half a million subscribers this year.

Pherwani says the next stage of evolution will be the bundling of OTT platforms. “Like multi-system operators (MSO) bundle different broadcasters into packages for consumers, these players (OTT aggregators) are doing the same thing from an OTT perspective and offering them at a much affordable price,” he says. “Telcos have an advantage here because they have a far bigger reach. Even platforms may start bundling with other platforms. What matters is that the final value proposition must be very attractive for the customer.”

Experts believe that Jio will have an advantage as the country’s largest telecom player. Even Tata Play as the largest DTH player is well placed to make a mark in the aggregation space, they add. “DTH and OTT are two different products and target segments. OTT goes far deeper. It’s about giving me what I want, where I want,” says Pherwani. “It’s a long-term game for the players in terms of RoI, but there would be break-evens of two to five years depending on the revenue model.”

Nagpal says it took them and the content platforms some doing to get the revenue model right. “It’s kind of half settled now. And we’ll get even more perfect as the numbers grow. But it’s not very different from the kind of model we have with the broadcasters for TV content,” he says. “Every new technology is taking shorter to get adopted as it progresses. But that doesn’t mean that the old is gone or written off. And new technologies will keep coming.”

The challenge of cord-cutting is also helping the aggregation space. “We’ve seen that it has worked for us. Every person who is cutting cords can very quickly marry OTTplay with their systems,” says Mudaliar. “I also see companies making an effort to retain their customers, but people want to move away from their existing DTH connections and consume OTT content, and that’s where platforms like us make sense.”

Per the Ficci-EY report, revenues from the digital segment would be Rs 1.5 lakh crore by 2025, or around twice the TV segment. The linear TV universe will remain comparatively stable at 166 to 169 million households. And the pay TV universe will continue to shrink, albeit at a slower pace, to 116 to 119 million active households by 2025, as the impact of new, paying subscribers is expected to be lesser than the conversion of households from linear TV to connected TV. The report adds that connected TVs will exceed 40 million daily active users by 2025, thereby ending the monopoly of broadcasters on the large screen. This will lead to around 30 per cent of the content consumed on large screens to be from social, gaming, and digital channels, among others. Further, this creates a major growth opportunity for players like Tata Play and OTTplay. “Right now, there’s a blank canvas as far as OTT [aggregation] is concerned. There are about 120 million people who are not on our base,” says Nagpal.

While Binge is expected to bolster Tata Play’s slowing revenues, there’s still a long way to go before it becomes a strong cash-flow generator for the company, which is hoping that the gamble pays off. What gives Nagpal hope is the successful run in the DTH business. “We didn’t have any exclusivity [in terms of content] in TV, yet we’ve been the largest for a long time. The only differentiation was the customer experience. We failed less. We recovered fast. And we made content discovery easier. These are the principles we’re taking to the OTT industry as well,” he says. “We don’t know how to make content but we know how to aggregate it.”

Now, whether life turns out to be “jinga la la” for Tata Play, only time will tell.

@PLidhoo