The once-touted ad-free medium for consuming content has experienced a huge shift, as the OTT (Over-The-Top) space has been drawn into a competitive battleground, leading to an inevitable AVOD (advertising-based video on demand) future.
According to the Global Entertainment & Media Outlook 2023–2027, report by PWC, the global AVOD industry is expected to witness significant growth in the coming years. The study projects a CAGR of 13.8 percent, indicating a surge in AVOD revenue from USD 28.7 billion in 2022 to a whopping USD 54.8 billion by 2027.
Total global advertising-supported video on demand revenue will increase at a CAGR of 13.8 percent from USD 28.7 billion in 2022 to USD 54.8 billion in 2027. In India as well, AVOD will grow at a higher rate than subscription service revenue. By 2027, AVOD, largely from local and regional broadcasters, will account for 22.3% of OTT revenue, while SVOD will have a 73.8% share. In 2022, SVOD accounted for 78.1% of the market revenue in India, while AVOD constituted 15% of the market revenue.
The report also highlights the fact the AVOD landscape in India is set to experience an even more substantial expansion, surpassing the growth rate of subscription service revenue. By 2027, AVOD is anticipated to constitute a substantial 22.3 percent share of the overall OTT revenue in the country. This significant rise will largely stem from local and regional broadcasters entering the AVOD space.
In contrast, subscription video on demand (SVOD) services will still hold a prominent position in the Indian market, capturing a sizable 73.8 percent of the OTT revenue share.
These projections are a result of the change in consumption pattern among the audience and the increasing competition in the digital streaming landscape, with services like free streaming becoming popular among platform and AVOD gaining traction.
“5G rollout presents a huge OTT opportunity in India’s mobile-first market OTT streaming is growing most rapidly in emerging pockets, where the combination of large historically underserved rural population and strong demand for local and sports content present major opportunities,” said the report.
The growth opportunity in India is high with the country’s biggest telecommunication operators forecasting that the nationwide rollout of 5G capability will be complete by the end of 2024.
Smartphone ownership in India is set to grow by 125 million across the forecast period to 888 million, which is 62.52% of India’s population. As per PWC estimations, only China can boast a bigger market.
However, the report also highlights that the main challenge for the market is the country’s low broadband penetration, at just 10.8 percent in 2022 and predicted to expand to only 14 percent in 2027.
Investment in improved broadband infrastructure will unlock a vast market for OTT players. Regional language content can secure wins for OTT players.
“In an overcrowded and competitive market, OTT operators who focus on fresh and original programming are most likely to win customers. Hindi language original content played a major part for the largest OTT player in India. Regional content that caters to the country’s linguistic diversity will stand out,” the report said.