Streaming Firm Hotstar Sees Blended Revenues as Winning Strategy

Indian video streaming service Hotstar sees its blended revenue model that relies on both subscription fees and ad sales as a winning formula in India's fast-growing market, home to tens of millions of price-sensitive new Internet users.

Advertising currently drives the bulk of Hotstar's revenue, its Chief Executive Ajit Mohan told Reuters in an interview on Thursday, but he added that while the platform is keen to boost its ad sales, it will look to gradually boost its revenue share from those willing to pay a fee for its Hotstar Premium service.

"There is no animal like Hotstar in many markets. Streaming platforms that are at scale are usually behind a paywall. We are an anomaly, where as a marketer, the fact that you can advertise against such high-quality premium content is fairly unique," said Mohan.

The streaming platform, owned by Twenty-First Century Fox's Star India arm, launched in India in 2015 about a year ahead of streaming giant Netflix, and nearly two years ahead of Amazon.com's Prime Video debut in the country - and it remains well ahead of both in terms of its popularity with domestic users.

It has achieved this by offering exclusive premium content like HBO hit show Game of Thrones and live-streaming India's massively popular T20 cricket league and English Premier League action for an annual subscription of just Rs. 999 ($14.20). The cheapest Netflix plan in India costs Rs. 6,000 annually.

"We do not want to build a niche subscription product. We're not solving for just the top-end of the country," said Mohan. "We want to create a product that is valued and embraced by tens of millions of users."

For those unwilling to pay, Hotstar offers a vast library of ad-driven Hollywood and Bollywood movies, and TV shows for free.

Mohan said this has helped Hotstar draw 150 million monthly active users, but he declined to give exact subscriber numbers.

"A large number of people come on the back of the free proposition, and over time, with the stickiness to the platform, and by offering differentiated propositions, a substantial part of them will convert to paid subscriptions," says Mohan.

While its subscription model looks to target the offerings of rivals like Netflix, Mohan sees its free ad-driven offering challenging two other global giants.

"We believe that we have an opportunity to build a marketing proposition for advertisers in the digital world, that can be an alternative to the Google-Facebook duopoly," said Mohan.

Google, which owns YouTube, has also begun in some countries to adopt a blended business model with the launch of its YouTube Premium offering, while Facebook recently won the rights to stream Premier League soccer matches in Cambodia, Laos, Thailand, and Vietnam.

"There is a myth that most digital advertising money will finally get concentrated with Google and Facebook. I don't believe that," said Mohan. "With the kind of scale Hotstar has and the kind of value we can give advertisers, we're providing an alternative to the world."