Emerging Markets in the OTT industry: Opportunities and Challenges

The Over-the-Top (OTT) industry is rapidly expanding across the globe, and emerging markets in Asia, Africa, Latin America, and the Middle East present significant opportunities and challenges. To fully understand these dynamics, it’s essential to dive into specific countries within these regions, examining the unique factors that influence the OTT landscape.

Opportunities in Emerging Markets

1. Expanding User Base
   • India: With over 700 million internet users and a rapidly growing middle class, India is one of the largest emerging markets for OTT platforms. The increase in smartphone usage, affordable data plans, and government initiatives like Digital India are driving more users online, creating a massive potential audience for OTT services. Platforms like Netflix, Amazon Prime, and Disney+ Hotstar have already made significant inroads, with localized content playing a crucial role in their success.
   • Brazil: Brazil, the largest market in Latin America, has a young, tech-savvy population that is increasingly turning to OTT platforms for entertainment. With over 150 million internet users, Brazil offers a growing subscriber base for both global and local OTT services. The popularity of streaming content is fueled by widespread mobile internet access and the increasing affordability of smart devices.
   • Nigeria: As the most populous country in Africa, Nigeria presents a significant opportunity for OTT platforms. With internet penetration reaching nearly 50% of the population, and mobile phones being the primary means of internet access, there is a large and growing audience for OTT content. The Nollywood film industry, one of the largest in the world, provides a rich source of local content that can be leveraged by OTT platforms.

2. Content Localization

• India: India’s diverse linguistic and cultural landscape necessitates content localization. OTT platforms have successfully tapped into this by offering content in multiple regional languages like Hindi, Tamil, Telugu, Bengali, and Marathi. Netflix, for example, has produced original series like “Sacred Games” in Hindi and has acquired rights to various regional films, making them accessible to a wider audience.
• Mexico: In Mexico, local content is key to engaging viewers. Platforms like Blim and Claro Video have capitalized on this by offering a mix of Mexican telenovelas, movies, and series alongside international content. Netflix has also produced original Mexican series like “Club de Cuervos,” which has been well-received both locally and internationally.
• South Africa: In South Africa, content localization extends beyond language to include cultural relevance. Showmax, a local OTT platform, offers a wide range of South African TV shows, movies, and sports content, catering to the unique preferences of the South African audience. Netflix has also entered the market with localized content, including South African series like “Queen Sono.”

1. Untapped Advertising Potential
   • Indonesia: As one of the most populous countries in Southeast Asia, Indonesia offers a significant opportunity for ad-supported OTT models. The country has a growing middle class and a high rate of smartphone usage, making it an attractive market for advertisers. Local OTT platforms like Vidio and global players like YouTube are already tapping into this potential by offering free, ad-supported content.
   • Kenya: In Kenya, where mobile internet access is widespread, there is an increasing appetite for free or low-cost content supported by advertising. Platforms like Viusasa have capitalized on this by offering a mix of local and international content, supported by ads. The growing consumer base in Kenya presents a ripe opportunity for brands looking to reach new audiences through the OTT industry.
   • Argentina: Argentina’s rapidly growing OTT industry market presents opportunities for ad-supported models, especially as more consumers shift away from traditional TV. With a well-established digital advertising market and a tech-savvy population, OTT platforms like Netflix and Amazon Prime are exploring ways to integrate ads, while local platforms like Flow are already offering ad-supported content.

1. Strategic Partnerships
   • India: In India, strategic partnerships with telecom operators have been instrumental in expanding OTT industry reach. For example, Disney+ Hotstar partnered with Jio, one of the largest telecom operators in India, to offer bundled services that include free or discounted OTT subscriptions with mobile data plans. Such partnerships help overcome payment barriers and provide seamless access to OTT industry content.
   • Brazil: In Brazil, partnerships between OTT platforms and local broadcasters have proven successful. For instance, Globoplay, a leading Brazilian OTT industry service, has partnered with TV Globo, the largest broadcaster in Brazil, to offer a combination of live TV and on-demand content. This hybrid approach appeals to viewers who prefer a mix of traditional and digital media.
   • South Africa: In South Africa, OTT platforms have formed partnerships with mobile network operators to enhance accessibility. Showmax, for example, partnered with Vodacom to offer Showmax mobile, a data-light version of its streaming service, allowing users to stream content without consuming large amounts of data. This partnership has been key to reaching a broader audience, especially in areas with limited broadband access.

1. Innovative Pricing Models
   • India: The Indian market is highly price-sensitive, leading OTT platforms to adopt innovative pricing models. Netflix introduced a mobile-only plan in India at a lower price point, catering to the large segment of users who primarily consume content on their smartphones. This strategy has been successful in attracting new subscribers and increasing market penetration.
   • Egypt: In Egypt, where affordability is crucial, OTT platforms like Watch iT have introduced pay-per-view models and micro-subscriptions. These allow users to pay for specific content rather than committing to a full subscription, making OTT services more accessible to a broader audience.
   • Nigeria: In Nigeria, payment flexibility is key to attracting subscribers. Platforms like IROKOtv have introduced multiple payment options, including mobile money and pay-as-you-go plans, to cater to the varying financial capabilities of users. This approach has been effective in increasing subscriber numbers in a market where traditional banking infrastructure is less widespread.

Challenges in Emerging Markets

1. Infrastructure Limitations
   • India: Despite significant progress in internet penetration, many rural areas in India still face infrastructure challenges such as inconsistent internet speeds and limited broadband access. OTT platforms must optimize their content delivery systems to cater to lower bandwidths and offer offline viewing options to reach these underserved areas.
   • Kenya: In Kenya, the availability of high-speed internet is largely concentrated in urban areas, leaving rural regions with limited access. This digital divide poses a challenge for OTT industry seeking to expand their reach. To address this, some platforms are developing data-efficient streaming technologies and promoting offline downloads.
   • Brazil: Brazil faces similar challenges, with internet speeds varying widely between urban and rural areas. The high cost of data and limited broadband infrastructure in certain regions make it difficult for OTT industry platforms to achieve widespread adoption. Local and global platforms are focusing on adaptive streaming technologies to deliver content efficiently in low-bandwidth environments.

1. Content Piracy
   • India: Piracy remains a significant challenge in India, where many consumers opt for illegal streaming sites or download content through unauthorized means. OTT platforms need to implement robust digital rights management (DRM) systems and work with local authorities to crack down on piracy. Educating consumers about the value of legal content and offering affordable pricing models can also help mitigate this issue.
   • Nigeria: In Nigeria, piracy is rampant, particularly in the Nollywood film industry. OTT industry platforms must invest in anti-piracy technologies and collaborate with local content creators to protect intellectual property. Additionally, making content more accessible through affordable subscriptions or ad-supported models can reduce the demand for pirated content.
   • Indonesia: Indonesia faces a significant piracy problem, with many consumers accessing content through illegal streaming sites. To combat this, OTT platforms need to enhance their security measures and consider offering free or low-cost ad-supported content to compete with pirated services. Collaboration with local authorities and content creators is also crucial to addressing this challenge.

1. Regulatory and Cultural Barriers
   • China: China’s OTT market is heavily regulated, with strict censorship laws governing the content that can be streamed. Foreign OTT platforms face significant challenges in entering the market due to these regulations, and must often partner with local companies or operate under local licenses. Additionally, understanding and adhering to cultural sensitivities is crucial for success in China.
   • Saudi Arabia: In Saudi Arabia, cultural and religious considerations play a significant role in content regulation. OTT platforms must navigate these sensitivities carefully, ensuring that their content adheres to local norms and regulations. Failure to do so can result in content being banned or platforms facing penalties.
   • Russia: Russia presents a complex regulatory environment for OTT industry platforms, with laws governing data localization, content censorship, and foreign ownership. Navigating these regulations requires a deep understanding of the legal landscape and the ability to adapt content offerings to meet local requirements.

1. Monetization Challenges
   • India: Despite the large user base, monetization in India remains challenging due to the limited use of credit cards and digital payment methods. OTT platforms need to explore alternative payment solutions, such as mobile wallets, UPI (Unified Payments Interface), and carrier billing, to simplify the payment process for subscribers.
   • Brazil: In Brazil, high credit card interest rates and economic instability can impact consumer spending on OTT subscriptions. Platforms must offer flexible payment options, including monthly installments or prepaid cards, to make subscriptions more accessible. Additionally, partnering with local payment providers can help streamline the payment process.
   • Nigeria: In Nigeria, where a significant portion of the population is unbanked, monetization can be a challenge. OTT platforms need to integrate with mobile money services and offer offline payment options to reach a broader audience. Providing tiered subscription plans or pay-per-view options can also help cater to different income levels.

1. Competition from Local Platforms
   • India: The Indian OTT market is highly competitive, with local platforms like Zee5, SonyLIV, and Voot offering a wide range of content tailored to Indian audiences. Global players like Netflix and Amazon Prime must continuously innovate and invest in local content to stay ahead of the competition. Collaborating with Indian production houses and acquiring rights to popular regional films and series can help global platforms maintain their competitive edge.
   • Mexico: In Mexico, local platforms like Blim and Claro Video offer strong competition to global OTT services. These platforms benefit from established brand recognition and a deep understanding of local content preferences. To compete, global platforms need to focus on producing high-quality original content and forming strategic partnerships with local content creators.
   • South Africa: South Africa’s OTT industry market is dominated by local platforms like Showmax and DStv Now, which offer a mix of local and international content. Global OTT players must differentiate themselves by offering exclusive content, competitive pricing, and localized services to attract South African viewers. Investing in local content production and forming partnerships with local creators can also help global platforms gain a foothold in the market.

Future Trends and Considerations

• Hybrid Business Models: As emerging markets continue to evolve, hybrid business models that combine subscription-based and ad-supported content are likely to gain traction. This approach allows OTT platforms to cater to diverse consumer preferences and maximize revenue potential in price-sensitive markets.
• Localized Content Production: The success of OTT platforms in emerging markets will increasingly depend on their ability to produce and acquire localized content that resonates with local audiences. Investing in local content production and forming partnerships with regional creators will be key strategies for growth.
• Mobile-First Strategies: In many emerging markets, mobile phones are the primary means of accessing the internet. OTT platforms need to optimize their services for mobile devices, offering data-efficient streaming options and mobile-specific features to attract and retain users.
• Government Regulations: As OTT platforms expand into new markets, they will need to navigate complex regulatory environments. Understanding and complying with local laws related to content, data privacy, and taxation will be essential for long-term success.
• Technological Advancements: The adoption of new technologies, such as 5G and AI-driven content recommendation engines, will play a crucial role in enhancing the user experience and driving the growth of OTT platforms in emerging markets.

Conclusion

The OTT industry in emerging markets presents a wealth of opportunities for growth, but also comes with significant challenges. Success in these markets will require a deep understanding of local consumer behavior, innovative business models, and strategic partnerships. By focusing on content localization, flexible pricing, and mobile-first strategies, OTT platforms can unlock the vast potential of these rapidly growing markets.