By Pranav Subramanyan
Globally, media and entertainment companies are facing an existential crisis. Despite being late starters, Indian companies in this space are also experiencing these death throes, especially following the announcement of two likely mega mergers that could be formed in 2024. We are referring to the Zee-Sony merger and Reliance Jio’s talks with Walt Disney.
While Zee-Sony (now Culver Max Entertainment) began back in 2021, Reliance started discussions with Walt Disney for their India assets only in 2023. In case both these deals go through, India could witness a duopoly with 175-plus channels and four streaming services, including the popular Disney Hotstar, Zee5 and SonyLiv and the emerging JioCinema.
Will the big fish eat up the small ones?
Before going into the deals, let’s take a look at some of the questions that emerge on the future of the media and entertainment business in India. What does it mean for the smaller players as well as content creators on public platforms? Would these players be able to cope with the massive budgets that these merged entities have at their disposal?
The market concentration that would definitely occur if and when both the deals go through could definitely impact the smaller players as well as the content creators, who would face a much higher entry barrier. For the creators, artists and other entities who create content on a much smaller scale, the challenge of showcasing their wares becomes more difficult.
Even the big fish have nowhere to go now
Without doubt, these mega deals are necessitated by the need to enhance their reach and maximize market share at a time when advertising dollars are getting choked due to the economic uncertainty still plaguing the markets. The other story worth noting is that India today stands second behind China when it comes to digital media consumption and the headroom that is available for growth will elude the players who start off late.
That Reliance and the Sony-Zee combine are seeking to target the two big global entities – Netflix and Amazon Prime – is also a no-brainer. That these two are the only ones actually making money amongst a surfeit of pureplay streaming services is also not lost on the Indian entities attempting to create a broader audience for their content.
At the same time, legacy broadcasters were forced to launch streaming services to keep pace with the fast-paced growth of digital natives in India, given the ultra low costs of data in mobile telephony and the availability of free services such as YouTube and DailyMotion. However, these players who went digital are already struggling due to the high operation costs, which makes them easy prey for bigger networks with larger wallets to acquire them.
The growing challenges for the Big Fish
One cannot blame them though as a recent Ormax survey revealed the existence of 481 million subscribers and 102 million active subscribers for OTT platforms in India. While a majority of these are in large cities, the audience from the smaller towns and cities continue to restrict themselves to the free to use digital channels. Which is where YouTube scores as they rely heavily on ads to fund their operations.
The challenge comes when the OTT content creation costs escalates and the growth rate of subscriptions decline. During the Covid lockdown phase and a year later, subscriptions grew by 20% annually but the rate slipped to 13% in the succeeding 12 months. Which means both broadcasters and channels need to up the production costs to retain the eyeballs.
The future may not be as bad as it looks
So, if one were to look at it carefully, the years ahead could witness a war of attrition between these post-merger monoliths and the smaller players where the former continue to focus on the big cities with big shows and movies and the latter rely heavily on the smaller towns and villages with snackable content such as the ones YouTubers are creating and making money with.
Of course, one could also expect an interplay between the two worlds when the likes of Vir Das pick up an international Emmy and get snapped up by a large OTT platform. At the same time, we see large production houses such as Yash Raj Films hitting pay dirt with their maiden OTT release while smaller media companies end up getting early views on regional platforms.
The case of the Great Indian Kitchen, a Malayalam movie without stars and made on a shoestring budget during the lockdown was premiered on a local channel before Amazon Prime stepped in and bought the rights for a larger release. The movie went on to become a major hit on the OTT circuit thanks to its content quality that also led to a slew of remakes.
However, OTT platforms are only one side of the story. There’s more happening on the music streaming side, which we will keep for another blog at another time. So, keep watch!