Beginning March 31st, over-the top (OTT) video-on-demand service Disney+Hotstar will not host HBO content on its platform which comprises popular shows like Game of Thrones, Succession and The Last of Us, among others. Times Internet Ltd’s advertising-led OTT platform MX Player is in talks to sell the business to Amazon which owns a free streaming service Mini TV as well as subscription platform Prime Video. American streaming giant Netflix is expanding its film library in a big way, especially, in southern languages as it looks to penetrate down south.
The three developments may seem disparate, but they point to a shared transformation taking place in the streaming services industry. That companies in India’s cluttered video streaming market are changing tack to focus on the bottom line rather than just adding new subscribers at any cost. While Times Internet’s move to sell its free video service MX Player points to consolidation taking place in the sector, Disney+Hotstar not renewing the content deal with HBO speaks volumes of the churn and course correction in the industry that was estimated at $ 2.6 billion by the BCG-CII media and entertainment report released in November 2022.
The industry is expected to touch $ 11-13 billion by 2030 and the primary driver for growth will be paid subscriptions or what is called SVoD (subscription video-on-demand) segment slated to jump from 85-90 million to 160-165 million by 2027.
Ormax Media’s December report said OTT penetration in the metros is 79 percent, underscoring the need for chasing growth in small town India. The days of crazy 30 percent growth rate in subscriber additions are over with the pandemic, having settled at a more modest 15 percent with top eight – 10 cities reporting a growth rate of 10 percent.
Consequently, most large streaming companies are re-evaluating their strategies and re-sizing their budgets for the country. Ormax Media chief executive officer Shailesh Kapoor said Covid-19 lockdowns saw a big spurt in subscriber additions in 2020 and 2021 causing an acceleration in content acquisition at steep costs. Ormax, a specialist testing, forecasting and analytics firm for media content, now draws 50 percent of its business from web series.
Streaming market has slowed down globally as people return to routine life. “People are back to work, travelling, eating out and socialising. Unlike binge-watching shows during pandemic, they are barely watching one episode a day,” said a Disney Star executive, requesting anonymity.
Disney Star runs streaming service Disney+Hotstar in India which has ended its deal for HBO content owing to poor return on investment.
The deal cost the company Rs 80 crore a year and even if the 460,000 subscribers who watched HBO content paid peak subscription rate of Rs 1600 a year, Disney+Hotstar could not have made money, explained the Disney Star executive. “The fact is these subscribers were not paying peak subscription rates and it was a loss-making proposition,” he said.
Clearly, platforms were acquiring content at ridiculous prices during peak lockdown demand for entertainment when people were binge-watching at home. “Sanity has returned with OTT platforms now looking at their bottom line. There’s a big shift in the market where they are asking if the subscriber additions are actually worth the money they’re paying to acquire that content,” the Disney Star executive added.
Netflix said the firm is here to run a sustainable, healthy, revenue-driven, profit-oriented and high-quality service for the consumer. On a recent India visit, Netflix’s global co-CEO Ted Sarandos said the service had its best year in the country in 2022 marked by increase in revenue and engagement time. “India as a country saw the highest paid net additions last year and last year was not Covid,” said an India executive, declining to be named.
Clearly, platforms were acquiring content at ridiculous prices during peak lockdown demand for entertainment when people were binge-watching at home. “Sanity has returned with OTT platforms now looking at their bottom line. There’s a big shift in the market where they are asking if the subscriber additions are actually worth the money they’re paying to acquire that content,” the Disney Star executive added.
The company dismissed reports that it has altered its India strategy to go slow on local originals. The Indian originals slate for the year is long with six returning seasons of existing shows and a line-up of top creators coming on service including Vishal Bhardwaj, Sujoy Ghosh, Raj and DK, Hansal Mehta, Abhishek Chaubey and Zoya Akhtar, among others.
“Of course, buying films is a very conscious strategy to become the alpha player in the market,” the Netflix executive said. After Hindi films, it is going big on southern languages. “A year ago, we had not entered south in a proper way. Now we have,” the person said. In January this year, it announced 18 Tamil licensed titles that will launch on the service after their theatrical run. It also announced 16 films as part of its licensed Telugu content slate for 2023. However, right-sizing budgets, especially for films, is part of the plan, Netflix added. In 2021, platforms in India invested $ 665 million in content, Deloitte report said. The share of regional language consumption on OTT platforms is expected to cross 50 percent by 2025 from 30 percent in 2019, moving past Hindi at 45 percent, it added.
Jehil Thakkar, partner, Deloitte India said different platforms are evaluating their businesses differently but days of people chasing monthly active users are gone. “Investor sentiment has now moved to evaluating profitability. You see that in the startup world too where days of easy money are over and the focus is back on whether one can build an actual business,” he said.
In the streaming industry companies are working with AVoD (ad-led video-on-demand), SVoD (subscription-led Video-on-demand) and hybrid models. In fact, some of the changes at platforms will be driven by content consumption patterns emerging from data accumulated over the years. Deeper penetration of Smart TVs or Connected TVs will push further consumption changes.
Nielsen’s India Internet Report released earlier this month said there are more than 450 million smartphone users and an equal number of video watchers in the country. While active internet users in the 12 plus age group grew by 10 percent in urban India, rural outdid urban at 30 percent growth rate.
Such numbers augur well for streaming which is becoming a medium of choice for people as it offers flexibility in viewing and both free and paid content.
Shuchi Bansal has been a business journalist for over 30 years covering media, advertising, marketing and consumer economy.