The Business of OTT
Ultimately its all about the business, whether you are selling toothpaste or pakodas(fritters). At least those businesses are clear cut because the product is stable and recurring in production. Their battle is mainly in marketing and distribution. But what is the business of OTT or streaming as you may like?
Is an OTT selling content or is he selling experience or is he is selling a promise? The stock in trade is content but the retention and acquisition are based on promise and experience. The product is new every day and the audience is very fickle. So what are the constraints or assets that run the OTT business?
Broadly speaking the four pillars are Content, Management, Distribution, and Promotions. The guy running the business must keep these four balls in the air as he juggles with one arm. One arm because he is handicapped by limited resources.
What are the options that one can exercise in this wizardry? How will the investments and subsequent revenues be allocated to each head? How would you allocate the resources if you were the head honcho of an OTT?
Let’s examine the four pillars in order of their appearance in the story. After that, you can decide the percentage division between the four pillars.
Management: The team is the first to be recruited. Needless to say, it has to be a good team. But the cost of the team is a recurring cost with little room for negotiation after it is in play. This team is going to directly affect the cost of the content by its abilities. This is the most crucial part of the machinery as this is the sieve which will filter the diamond from the sand. Their winner spotting skills will directly affect the fortunes of the company. The team can acquire content at a huge cost or they can discover hidden gems and Spielbergs of tomorrow. It is definitely more valuable to have a team that has a vision for new trends and out of box subjects which will excite the audience. These content need not have stars and big production sets and that will keep the overall cost of content down.
Content: “There is no price for creating good content”. This statement is ambidextrous. It can mean that “content can be without cost limits” or it can mean that “good content has no relation to the volume of cost”. There is no formula to apply in the business of content creation. Certain content does need a little more resource than others. The function of content, besides being obvious, is also creating news, envy, excitement, and acquisition. There are big-ticket shows which may not break even but they create the hype and hoopla for the service which results in acquisition and ‘feel good’ for subscribers. Audiences do acquire bragging rights for the kind of content they have viewed before others. But the bigger function of a content repertoire is that after the viewer has seen the big show, what can he watch next? You cannot have big shows back to back and thats why you need a good line up which will prevent the viewer from being promiscuous. A good OTT needs to have great mid and low budget programs with a variety of subjects to keep the interest alive of the subscriber. Something like a good stock investment portfolio must have mid-cap and low cap stocks also. These shows do not cost a lot but are heavily dependent on the ability of the team in spotting and nurturing the rough diamonds. In the long run, this will win them the game more than a few big shows.
Distribution: In any other market this is the king. But in digital space the battle is slightly different. An OTT is an app and most of their subscribers have downloaded the same. New acquisition come through certain aggregator apps which allow people to sample the content before parting with money. A lot of the effort of the distribution team is related to the delivery of service. They need to work with the tech guys and make the streaming experience smooth both on the app and third-party aggregators. Curiously this head requires more resources at the start of the venture and then might plateau as success showers start drenching all, now the momentum of success leverages their efforts.
Promotion: This is a moving target, in terms of resource allotment. The primary function of this head is to divert eyeballs to the shows. These eyeballs are present subscribers and new acquisitions. The effort of promotions convert the fence-sitters very efficiently. A good show with lesser-known stars will definitely require bigger promotion vis-a-vis a star-studded show. So when a star-studded show needs less promotion, so its good for the OTT? The pitfall is that what you would spend on promotion is being charged by the star and dependence on the star and not content is a bad policy. If the content fails it hits the OTT harder as the audience perception is that the OTT could not use the star properly. While when a relatively obscure content hits the bullseye it delights the audience. One, they tom-tom about discovering good content and two, its instills confidence in viewing more obscure content on the OTT.
Pricing and freemium aare other subjects that we have not touched, they too play a big role in distribution strategy.
Now can you try to play the game of running an OTT? What percentages will you allocate to each pillar? Will that be constant or will it change with milestones? Should it remain dynamic and geet tweaked as we play along?
Your thoughts and inputs are welcome.
