Sun NXT to abandon the advertising strategy?


Sun NXT is by far the largest source of digital content in South India

The management of Chennai-based Sun TV Network appears to have abandoned the previous “hybrid strategy” for its digital platform and come to the conclusion that an advertising-driven model is unlikely to work in the world of TV. long-term video on demand. .

The company‘s Sun NXT app has been by far the most aggressive player when it comes to serving ads on its content.

Some movies on Sun NXT had commercial breaks every few minutes.

MD R Mahesh Kumar has repeatedly advocated a hybrid model for content applications in India, claiming that there would be room in India for premium subscription applications as well as hybrid applications that depend on both subscription and advertising.

The approach was reflected in the prevalence of advertisements on Sun NXT.

In fact, at least some customers preferred to watch Sun NXT content on third-party apps like Vodafone Play and JioCinema instead of Sun’s own platform to avoid ads.

Almost no other content app, including Amazon Prime, Vodafone Play, JioCinema, and Airtel XStream, serve ads between programs. The only exception is Disney + Hotstar, which shows ads between certain live content, such as cricket matches. But even Hotstar doesn’t interrupt movies and other recorded content to serve advertisements.

Interacting with investors after releasing Sun TV Network’s latest quarterly results, Mahesh Kumar said his company also realizes that ads and apps don’t mix.

“I have a feeling that OTT will be a pure-play subscription model because no one wants to pay money and also watch ads,” he said, after reporting on Sun’s quarterly performance. TV for the period July-September. “My instinct tells me [it won’t be an ad-based market]. “

Sun NXT content is currently consumed by around 18 million users each month, but the vast majority do so through third-party applications like JioCinema and Airtel XStream.

Mahesh Kumar has indicated that his company will focus on subscription revenue for its digital products in the future, although it does not stop running ads for the time being.

“Today it is not possible [to completely eliminate ads] in India because you can’t get Netflix type prices in India. So there is inevitably some reliance on adding ad revenue to subscription revenue. But in the long run, we think we’ll have more and more pure subscription revenue and very little advertising. “

CHANGING CHANNELS

As in the case of competitor Zee Entertainment, Sun TV also appears to be preparing to negotiate with third-party applications that are currently the primary channel for the digital sale of Sun NXT content.

Rival Zee Entertainment has abandoned some major content-sharing partnerships in recent weeks – including those with telecom companies – and has chosen to push their own apps instead.

Like Zee5, Sun has also started with fixed-cost content-sharing agreements with Reliance Jio and Vodafone Idea.

As part of these agreements, these companies may make Sun NXT content available to their subscribers free of charge in exchange for payment of a fixed amount to Sun. In comparison, a direct subscription to Sun NXT costs Rs 50 per month.

However, Mahesh Kumar said, the era of such easy deals is drawing to a close.

He indicated that there are a lot of people in the market who are hungry for content for their apps. Sun Group, which has about three dozen channels in non-Hindi languages, is the largest source of content in South Indian languages.

As such, he said, the group will begin to upgrade its existing contracts to a model per subscriber.

In fact, a per-subscriber model will generate significantly more revenue for the business than existing flat-rate contracts – but it remains to be seen whether platforms like Jio and Airtel can make the economy work.

“More and more, we’ll start charging them per subscriber. We were working on package deals, ”Mahesh Kumar said, although package deals were being negotiated as Sun NXT content was delivered to more and more users through third party platforms.

“But we’re going to switch that model to a per-subscriber basis,” he said.

IMPORTANT FOR THE FUTURE

At least part of the reason for the move seems to be a burgeoning awareness of the importance of digital platforms as a key distribution channel for the future.

The Indian media landscape has undergone rapid transformation over the past three years due to the increasing penetration of high-speed wireless data, resulting in explosive growth in video-on-demand consumption.

In line with the growing importance of digital platforms, Mahesh Kumar said Sun TV will invest around Rs 200cr over the next fiscal year (April 2021 to March 22) to create original programming for Sun NXT.

For now, most of Sun NXT’s content comes either from the group’s broadcast archives or from its film library. But, he noted, the tastes and profiles of those who consume content on apps and stream TV are different. Younger and more modern viewers who prefer video on demand have different expectations and tastes which may not match those of a middle class family watching linear TV in rural India.

Additionally, he said, digital content sales are starting to generate enough revenue to justify such investments, unlike in the past where they were nascent and perhaps riskier.

“We have stabilized our turnover rate with multiple sources of sales. We sell our content to telecom operators, to other OTT players. We also have regular subscribers who have come to the app or website and give us Rs 50 / month, and many more in other markets such as Singapore, Malaysia and USA. We are now at a stage where our sources of income are sufficient to spend this kind of money, to spend money on the originals and not to declare an exorbitant sum as losses… ”, he explained.


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