Over-the-top (OTT) platforms are likely to ease spending on entertainment content due to hectic merger and acquisition (M&A) activity in the media sector, impacting commissioning of fresh content amid stagnation in subscriber growth and a renewed focus on profitability after years of unbridled investment, say experts.

Experts believe that OTT entertainment content spending will continue to be driven by streaming giants Netflix and Amazon Prime Video as Indian media companies are either recalibrating their content strategy or going slow on greenlighting new shows due to M&A activities.

According to Media Partners Asia (MPA) research, online video contribution to total content investments including TV and films has nearly tripled since the pandemic with total video content investments touching $5.8 billion in 2023.

"We estimate a slight fall of 5% in 2024. Some of the key factors are the sluggishness in the SVOD (subscription video on demand) market, move towards profitability, and attempt at TV plus content cost models," said Ashish Pherwani, Media & Entertainment Leader, EY India.

According to the latest FICCI-EY report on the entertainment sector, online video content investment in 2023 stood at Rs 12,500 crore ($1.4 billion), with live sports comprising nearly 51% of the spending and the remaining 49% on originals and films.

Sony LIV content head Saugata Mukherjee said there will be a correction on the number of Hindi originals produced by OTT platforms. "There was a sudden glut of shows all across; I feel that will come down. And more of the same will no longer work," he added.

The Sony Pictures Networks India-owned streaming platform is scaling up original content offerings in non-Hindi languages such as Telugu, Tamil, Malayalam, Marathi, and Bangla. "We will also continue to expand our unscripted and premium television content pipeline," Mukherjee said.

The FICCI-EY report noted that 48% of all OTT titles produced were in Hindi, compared to 52% in other Indian languages. In 2023, streaming platforms produced a staggering 3,000 hours of original content.

“Given the flurry of M&A activities among major networks in the industry, the commissioning of new projects has taken a backseat over the last 4-6 months," noted MPA VP Mihir Shah.

The first half of 2024 will be dominated by live sports and elections, with entertainment likely to take a backseat.

"It will likely take some time for the entertainment industry to regain momentum, primarily hinging on the rebound of the advertising market and consumer sentiment in the second half of this year," Shah said, adding that streaming video is poised to match linear TV's content investments in the next five years.

Production companies anticipate a challenging year in 2024 due to a decrease in OTT content investment.

"In light of recent content experiments, it's no surprise to witness the anticipated consolidation across OTTs, a trend that transcends mergers alone. While pull content—defined by its creator, cast, and scale, garnering subscribers—remains steady, the landscape for push content—new, niche, and esoteric—is poised for significant reduction," said Friday Filmworks CEO Devendra Deshpande.

He emphasized that there is a need for precise content curation to adapt to changing audience preferences and industry demands.

Banijay Asia chief operating officer of Scripted Division Rajesh Chadha, however, believes that overall content spends might not go down even as OTT platforms rationalize costs.

"We are observing a trend of rationalization in the market where there may be more shows per platform but with lower costs per unit for creators. While there might be fewer marquee shows each year, overall spending is expected to grow, albeit marginally," he said.

With Netflix and Prime Video unveiling their biggest-ever content slates for the Indian market, Nitin Menon, NV Capital Founder, feels that content spending by the streaming giants will not plateau any time soon.

"The fact that Netflix and Prime Video continue to add subscribers globally and their valuations continue to skyrocket makes it unlikely that they will reduce their OTT spends in India."

Mumbai: Disney+ Hotstar will no longer be the default destination for HBO content in India beginning March 31 following non-renewal of the deal, potentially leading to higher subscriber churn for the OTT platform that also lost out on the digital rights to the Indian Premier League (IPL) — the richest tournament in the sport.

Disney+ Hotstar has been the home of HBO content ever since the two companies signed an exclusive pact in 2015. As of December 2022, the platform had 57.50 million paid subscribers.

In the October-December quarter, the platform had lost 3.80 million subscribers after losing IPL rights and the non-renewal of content deal with telecom giant Reliance Jio.

“Starting March 31, HBO content will be unavailable on Disney+ Hotstar. You can continue enjoying Disney+Hotstar’s vast library of content spanning over 100,000 hours of TV shows and movies in 10 languages and coverage of major global sporting events," the platform said in a message on its official social media handle.

Experts say that Disney+ Hotstar will find it tough to add new users in the coming quarters. “The absence of IPL, the termination of its partnership with Jio, constrained entertainment budgets, and the recent discontinuation of HBO content on the platform — all of these factors will significantly diminish the value proposition for subscribers, a considerable number of whom are slated for renewal in the upcoming months,” said Mihir Shah, VP, Media Partners Asia.

He added that the platform might lose a large number of subscribers by the end of 2023, notwithstanding the presence of the ICC Cricket World Cup later in the year.

“Despite some promising content lined up for the second half of the year, such as the Asia Cup and the ICC fifty-over World Cup, Disney+ Hotstar is currently facing a slippery slope, with the potential loss of close to 15 million subscribers by the end of 2023,” he said.

Elara Capital, research analyst (media, consumer discretionary & internet), Karan Taurani believes that the loss of IPL and HBO content will make it challenging for the platform to retain subscribers. “We expect the negative impact of IPL loss on the subscriber base to be in the 25-30% on a gross basis and the net impact to be 15-20% in case they added up subscribers because of other content,” Taurani said.

Mumbai: Leading over-the-top (OTT) platforms are continuing to invest heavily in original content production, buoyed by an expansion in audience base and strong growth in content consumption. According to market estimates, top OTT players have spent between $600 million and $700 million on producing original shows in 2022.

This amount excludes movie and sports content which account for a significant chunk of the OTT content expenditure. Amazon Prime Video, Netflix and Disney+ Hotstar are the top spenders on original content productions, followed by platforms like Sony LIV, ZEE5 and Voot.

In 2019 and 2020, Netflix spent $400 million on content, including on movies. In April, Amazon Prime stated that it will double down on content investments in India with plans to launch more than 40 new titles across series and movies in Hindi, Tamil and Telugu. The platform's content plans are on track.

According to industry watchers, OTT platforms are expected to increase their content spending to fuel their business growth, notwithstanding the fact that revenues are under pressure due to inflation and a global economic slowdown.

“The content creation cycle for OTTs is very long and most of the projects to be delivered in 2023 are already at different stages of production. The investment in content will continue to increase as the OTT market expands and users increase their consumption because of better connectivity and increasing sales of connected TV,” said Uday Sodhi, partner at Founder's Room Capital.

Sony LIV, which has tasted success with original shows in recent years, is upbeat about the year ahead. “We are very bullish on our original content plans and we have a lot of big launches coming up in 2023. We are also dialling up on the originals space in regional languages,” said Saugata Mukherjee, its head of content.

Mumbai: The Indian over-the-top (OTT) market has 130.2 million paying (SVOD or subscription voice on demand) audiences compared to 110.5 million in 2021, media consulting firm Ormax Media has said in its latest study titled The Ormax OTT Audience Sizing Report 2022. The total SVOD base has expanded by 18%. The direct SVOD subscriber base stood at 49 million, while the indirect SVOD subscriber base came in at 81.2 million. Over 2021, direct and indirect SVOD subscribers will have grown by 19% and 16%, respectively. The study also reveals that there are 119 million active paid OTT subscriptions in India., which translates to an average of 2.4 subscriptions per paying audience member. — ET Bureau