ET Intelligence Group: Rising content costs, increasing focus on balance sheet and re-opening of theatres have impacted the share of revenue from digital rights in the total revenues generated by India's media and entertainment companies.

According to the latest FICCI-EY media and entertainment report, revenue generated by selling content to the OTT (over the top) platforms accounted for 17.7% of the total revenue for a sample of media companies in 2023 compared with 48.6% in 2020.

According to Ashish Pherwani, Leader, media and entertainment sector at EY, the journey of OTT platforms can be broken down into three phases. The first phase was pre-Covid when these companies focussed more on developing their own content while selectively buying studio productions. The second phase was during the pandemic where they ran short of their own content which increased their exposure to external content. Since theatres were shut during the lockdown period, they tried to compensate the producers for the loss on theatrical revenue. In the third phase after the pandemic, things are fast changing.

“The streaming platforms are following a strategy of buying either tentpole (money spinning franchise of studios) or extremely low-cost content with large purchases linked to the theatrical success," said Pherwani.

In the pre-Covid phase, the share of studio revenue from digital rights was close to 10%. It expanded five fold during the Covid period as streamers had to buy more content to retain the fast growing subscriber base.

According to Ameya Naik, head, Fantasy Films, an event management company, streamers are focusing on their balance sheet and are keen on generating at least a small profit. “Today, streamers have become cautious about their investments in films as subscriptions are not yielding effective results. Then, there is high content cost,” said Naik, adding that streamers gauge how films fare in theatres first and then buy them.

The streaming platforms may either showcase movies after a theatrical release or may release them directly on platforms. According to the FICCI-EY report, the number of films directly released on streaming platforms fell to 57 in 2023 from 105 in 2022.

"One must bear in mind that streamers are brands who look at films as brands. When they buy a film, they want to make their own brands stronger,” said Naik citing that streamers are willing to pay high prices for big-budget and star-studded films which performed well at the box office whereas mid-budget films may not make the cut as they may not generate high audience interest on OTT platforms.