Streaming platforms reduce spending on content as revenue pressure surges amid muted subscriber growth

Global video streaming platforms are heavily cutting their content spends in India, in some cases by one-third, as revenue pressure is building while subscriber growth has remained muted. 

Platforms like Netflix, Amazon Prime Video and Disney+ Hotstar have either cut their per series budgets or are negotiating with the producers to reduce the cost heavily. 

“Netflix has already reduced their budget by a third, while Prime Video is re-negotiating with some of the producers, asking them to create the same show at half the agreed price. Disney+ Hotstar is asking producers to increase the number of episodes to 50 in some cases. It’s a nightmare for the production industry,” said a senior producer, who declined to be named.

Initially, in 2018, these players started spending heavily on content as it was a land grab for the OTT services. Later, the spending was spurred by the Covid-19 lockdown. However, many producers now feel that the gravy train has stopped and across services, costs may be brought down by up to 50%.

Netflix and Disney+ Hotstar are no longer green-lighting large-scale shows in a hurry, spreading them out with mid-budget titles. Meanwhile homegrown platforms are looking at keeping production standards reasonable. 

Incidentally, neither can afford to bring down volume of content drastically as it may lead to subscriber churn, and the additions are not compensating for the loss in the paid subscriber base, experts say. 

Moreover, along with issues of piracy, the pure play subscription model isn’t paying off in India and ARPUs (average revenue per user) continue to remain low. The market is hugely competitive and advertising spends have slowed down thanks to global inflation and crypto and tech brands struggling with funds.

Netflix and Disney+ Hotstar did not respond to Mint’s queries, while Amazon Prime Video declined to comment. 

“What may seem like a recalibration or adjustment post covid is actually a normal consequence of accelerated demand during the pandemic,” said Ajit Andhare, chief operating officer, Viacom18 Studios. “There was a certain frenzy for putting content out then and everyone wanted to make most of the opportunity,” Andhare added. 

Siddharth Anand Kumar, vice-president, films and television, Saregama India, which owns boutique studio Yoodlee Films, said while the number of marquee shows is reducing, it is getting easier to have anything with a budget below ₹15 crore greenlit by a platform. “The insane subscription growth that was anticipated hasn’t happened, hence they are being conservative. Plus, the industry is no longer in its infancy so it is only inevitable that prices will rationalise,” Kumar said. 

As the consequence of an impending global recession, there is a sense that platforms would rather not be over-ambitious and curate a smart assortment of slice-of-life stories that may not require as much spending as marquee shows that will now be launched less frequently. 

“The first wave (of spending) was primarily driven by a race to gain market share, scream for attention and attract the best talent and therefore consumers. The risk appetite has gone down considerably since,” said Vaibhav Modi, founder-director at Victor Tango Entertainment, a production house known for ZEE5 original Mukhbir. 

Modi said the second season of a music reality show the company has brought out in 2020 hadn’t received a go ahead, since it didn’t make sense monetarily. 

Sahil Shah, president, digital experience, DENTSU CREATIVE India, agreed there seems to be a slowdown in spending. “The focus will be on better cost structures and the best scripts. The idea is to get smarter about investments as the pool is getting more and more limited,” Shah said. Along with the global slowdown that is impacting cash inflows to buy content, with the impact of covid waning, people are starting to venture, out a lot more than in 2020-21, resulting in lesser OTT consumption.

Most platforms have realised the huge dent that piracy makes to monetisation of content and that nearly 70-80% of OTT viewers aren’t willing to pay for programming behind paywall. 

“Unless there is huge interest in a particular show, there is no reason to pay for theatrical quality of production. However, while the volume of content cannot be brought down drastically, prices will have to be controlled,” Vibhu Agarwal, founder of OTT app Atrangii said. 

The pressure on advertising spends has aggravated matters for platforms, said Karan Taurani, senior vice-president at Elara Capital. “India is hardly a mature market when it comes to ARPUs. While a lot of projects are being put on wait and watch mode, there is likely to be less experimentation in the near future, and only genres that have done well traditionally will be attempted,” Taurani said.