Test for streaming platforms as outlook no longer over-the-top
The overcrowded over-the-top (OTT) business in India is facing vulnerabilities as subscriber numbers decline and platforms slash budgets and self-censorship rises.
The aborted merger between Zee Entertainment Enterprises Ltd (ZEEL) and Sony earlier this month has exposed the vulnerabilities of India’s overcrowded over-the-top (OTT) business that is pegged at ₹15,000 crore.
The stratospheric spike in subscriber numbers during the pandemic has tapered off sharply, leaving many of the 40-odd streaming services struggling. The unease caused by customer churn is made worse by platforms slashing budgets and rising self-censorship.
“Sport was once driving the subscription revenue for streaming but JioCinema’s move to give Indian Premier League (IPL) free to digital consumers last season led to a fall in SVoD (subscription-based video-on demand) revenues. So, while the number of customers on the platform may have gone up, IPL’s paying customers for the last five years have vanished,” said the head of a popular production company who declined to be named. “Likewise, cricket World Cup’s premium customers also disappeared when Disney+Hotstar offered the matches free to mobile users.”
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Disney+Hotstar, which is in advanced merger talk with Jio, has lost 37% of its paid subscriber base over the last year after the platform lost digital IPL rights and offered the World Cup free. In a note he circulated in November, Elara Capital’s Karan Taurani said the platform’s subscriber loss may have bottomed out, and that it could see a single digit growth over the next few quarters on account of new movies and web series being showcased.
But industry-watchers in Mumbai point to the big slash in acquisition and production budgets that is impacting the quality of new programming on these streaming services. “The party is over for now. Content companies are sitting on unsold inventory and the cost of capital is biting. This mood will continue for another six months till things stabilise,” said the head of the production company quoted in the first instance.
Disney+Hotstar content head, Gaurav Banerjee calls it post-pandemic price correction. “When you build a new category, investments need to be deep and the revenue that you get back is uncertain. We saw that in phase one when we started on the erstwhile Hotstar journey in 2015,” he said. But the medium caught the imagination of people and led to a glut of competition with 40 plus streamers, including three big global ones. “It created a bit of a content arms race,” Banerjee admitted. And the demand for content during the pandemic distorted pricing as production lines went dry and the cost of content that was ready went through the roof. “That created an imbalance which needs to get corrected,” he said.
“Looking at the trends of the last two to three years, we get a sense that the post-pandemic impact is over and growth will be harder to come by each year. When a category grows, especially if it has grown so rapidly, the saturation too is bound to come in early,” says Shailesh Kapoor, CEO of Ormax Media that tracks numbers and trend in the entertainment industry. A report, compiled last November by Ormax, revealed the growth in subscription numbers slowed from 20% in 2021-2022 to 13.5% in 2023. While the 2023-2024 numbers are awaited, Kapoor points to the decline in smartphone sales and slower internet penetration also as plausible reasons for sluggish growth in digital consumption. “I wouldn’t be surprised if next year, OTT audience base expands only in single digits.” The subscriber base in India’s top 20 cities, he says, is “fairly saturated.” So, any further growth will have to come from the smaller towns and rural areas, he adds.
The game-changer
From chasing the top of the pyramid, most companies have reset their targets. “Netflix launched lower-priced plans in India to tap deeper into the paying SVoD market while Prime Video launched its AVoD service, Amazon MiniTV,” said Rishi Negi, CEO, Endemol Shine India. (AVoD plans offer free content to consumers but with ad breaks). Endemol has made several shows across platforms such as Bigg Boss, Trial By Fire, Masterchef. “JioCinema changed the game when it made IPL and entertainment content free and expanded the viewership beyond the top cities. We understand there’s humongous traffic for Bigg Boss OTT and Temptation Island,” Negi added.
Jio’s free premium content offers, however, have made it difficult for others to drive up subscription revenue, argue experts. Viacom18, which operates JioCinema, declined comment for this story.
Sajith Sivanandan, head of Disney+ Hotstar, India, who remains bullish about the OTT business said that while he would not comment on other platforms’ strategies, they too were experimenting to maximize subscribers and profits. Disney+Hotstar made the ICC Men’s Cricket World Cup free for mobile users but to watch it on connected TV, one had to be a paid subscriber.
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“Building a large, successful streaming business is hard, but we are not in a race to the bottom,” said Netflix India’s vice president, content, Monika Shergill. Netflix, she adds, believes in three primary metrics for streaming — engagement which drives retention, revenue which ensures continuous investment in the creative industry, and lastly, profit. “These three are all critical to running a healthy, long-term streaming service — and focusing on growth at all costs is not sustainable, as other companies are rapidly discovering.”
Netflix’s competitor Prime Video has cut jobs and dropped programmes in some of the Asia-Pacific markets it is in. Gaurav Gandhi, vice president, Prime Video, APAC, told his colleagues in an internal memo that there would be no change in the company’s investments focus in Japan and India. Sushant Sreeram, country director, Prime Video India, told HT that the company has over 100 original projects in various stages of development and production across multiple languages — the second largest slate after the US. “We continue to invest heavily in licensing content to provide access to the best of local and global entertainment. We are invested in India, in the long run,” he said.
Netflix, too, said it will continue to invest significantly in the country. In 2024, it will showcase shows by Kapil Sharma, Sanjay Leela Bhansali, Imtiaz Ali, Neeraj Pandey and YRF studios.
A profit problem
But at the same time, these streaming platforms are exploring cheaper and longer-running shows on the lines of television shows. “They are exploring non-fiction as well as putting out longer running shows of 30-40 episodes as audience stickiness is critical. The shows that drop daily do not have pricey budgets,” said Endemol’s Negi. The TVization of streaming platforms is also borne out by the Ormax report that says some of India’s most-watched OTT shows are in homes where audiences don’t mind the ad breaks. Though streamers and content companies said even on AVoD plans, the quality of shows is superior to television programming.
But while the free content may garner bigger viewership, making money on AVoD platforms is not easy. Advertising spends on digital media may have surpassed total spends on linear television, the fight for each advertising rupee on digital platforms is fierce. Last year, a mammoth ₹46,000 crore in digital advertising was cornered by just two companies, Google and Meta. E-commerce platforms Amazon and Flipkart are also gaining share in digital advertising. Ads on Google’s YouTube are very economical and offer a stiff challenge to OTT advertising.
Media agency Initiative India’s Rohit Ahuja said the challenge for streaming platforms will lie in scaling the AVoD audience base. “Generating revenue through AVoD plans is feasible if OTT platforms can build sufficient attraction to marquee properties and achieve scale,” he said. OTT platforms often price their tent-pole properties at a higher CPM (cost per thousand impressions) due to high content acquisition costs, he added.
Censorship bites creators
Even as profits are hard to come by and subscription growth is slowing, for creators of OTT content, the rising tide of social media hounding, and issues with censorship are big worries. Streaming platforms have begun self-censoring to ensure there are no messy legal battles as happened with Amazon Prime’s show Tandav in 2021 or disruption of their business.
Recently, Netflix withdrew the Tamil film Annapoorani from its platform after complaints on social media that the film hurt religious feelings. “In the recent example of Annapoorani, I want to be clear that we removed the film at the request of the licensor. We are here to entertain, and our members come to Netflix to discover stories that represent world class variety and quality,” Shergill said. “We have an incredibly broad range of Indian films and TV shows, all of which speak of our long-standing support for creative expression,” she added. However, Netflix has also canned Dibakar Banerjee’s film they commissioned for its political overtones.
If the I&B ministry’s draft Broadcasting Services (Regulation) Bill becomes law, TV and OTT content will need to be pre-certified by a Content Evaluation Committee which has been deemed a retrograde step by media experts. This, and the focus on profitability, may drive platforms to pick popular, massy films and shows and give experimental content a miss leading to a greater mirroring of television programming.
Web content’s evolution doesn’t necessarily imply a shift towards becoming more mass market, said Rohit Ahuja, formerly with Zee 5. The key lies in striking a balance between mass appeal and edginess to cater to the diverse preferences of the OTT audience. “As the industry matures, achieving this balance becomes imperative for sustaining and growing the audience base,” he said.
