Hotstar, Star India’s 10-week-old mobile video service, is off to a flying start, securing around 15 million downloads since making its debut in February.

The launch comes ahead of planned forays into the same space by telecoms major Airtel and commercial behemoth Reliance, marking 2015 out as a landmark year for online video in India, a space traditionally dominated by YouTube alongside aspiring startups.

Key building blocks needed to foster OTT monetization models, from infrastructure to awareness and affordability, are still being put in place however, creating scope for lots more experimentation and competition in the years ahead.

“It’s been a continual learning process since launch,” Star India COO Sanjay Gupta tells Media Business Asia. “The market is very different to tests in the laboratory.”

As India's biggest broadcaster, Star was able to leverage two core strengths to support Hotstar's debut: 1) access to some enticing content, including live cricket rights for two major tournaments, the World Cup and the IPL, in addition to an attractive library, mostly exclusive to Hotstar; and 2) years of experience promoting entertainment shows and brands.

Both content and marketing prowess will be key weapons in the fight for viewing, as India's OTT marketplace gathers pace.

At the same time, Hotstar takes the broadcaster into less familiar territory, dealing directly with consumers while grappling with the requirements of a new and evolving distribution platform.

“TV content is very powerful – that’s been validated by Hotstar,” Gupta says. “But it’s hard engaging with consumers on a daily basis.”

Hotstar, an early prototype for content delivery and monetization in a mobile-first world, has been designed for mobile viewing over poor bandwidth.

Launch, however, has highlighted three priorities: encouraging more people to try the service, especially those without access to WiFi; persuading those who have tried it to watch more; and making money from all these new eyeballs, initially from advertising.

Addressing these challenges will lay a good foundation for future growth. The interface is in English, even though much of the content isn’t, but further localization of the UI will have to wait.

“We don’t have the bandwidth to do it,” Gupta says. “We have a number of problems to deal with, and we don’t even know the answers.”

Medium-term breakeven

Star is targeting breakeven for Hotstar within three to five years as an ad-supported business – another area where Star has useful exprience but more to learn.

The ad market for OTT overlaps with broadcast but has its own dynamics, incorporating more location specific and direct response advertising, incurring closer competition with Google.

The challenges are conceptually the same as TV, which is also opening to more targeted ad opportunities via digital and addressable systems, but the answers will be very different, Gupta notes.

Over that time, Star will also have to keep up with changes in technology as well as rival services from competitors.

Nonetheless, the broadcaster is prepared for the long haul, having set aside a marketing warchest to sustain its profile and appeal, with digital rights already secured for the medium term.

Possible subscription revenues are further down the road, as there are few payment mechanisms in place today, while credit card penetration remains low.

Current mobile data costs effectively position Hotstar as a premium paid service today, especially compared to relatively affordable bills for cable TV. Downloading the app on a mobile data plan costs 30 rupees, Gupta points out.

Nonetheless, economics should become manageable over the next few years, as data costs come down, new payment options develop and WiFi becomes more prevalent across the country.

Consumer barriers around cost and access also make Hotstar a complementary service, rather than competition to traditional TV for the near term.

As those barriers come down however, and cable and satellite platforms develop their own multiscreen offerings, Star will have to decide what role its direct-to-consumer service will play.

That’s a decision for later, in what should be a much larger and more diverse media landscape.

“To be honest, I don’t know how the market will respond,” Gupta says. “The reality is people are shifting screens, and media companies will have to adapt.”