OTT Slump: Programming budgets bear the brunt?

Remember the era of iconic web series like Mirzapur, Kota Factory, Panchayat, Paatal Lok and Ashram? Back in 2020 and 2021, these groundbreaking shows captured global attention, transforming India’s streaming platforms into a powerhouse of must-watch content. The sheer volume of quality programming was so vast that viewers subscribed to multiple platforms just to keep up. Two years on, the magic of such compelling originals seems to have faded, reflected in the declining number of new releases.

“Over-the-Top (OTT) platforms have scaled down their content budget by almost half, from over Rs 5,500 crore in 2021 to about Rs 2,500 crore in 2024,” several production houses and studio heads told e4m.

Commissioning an impressive 100-120 originals annually in 2021, these giants have gradually scaled back production to around 50-60 series and films per year, that too at much less production cost than earlier, producers said. The number of licensed films has also dropped.

Netflix, for instance, made 10 web series in 2024, compared to 15 in 2023. The number of licensed films has come down from 79 to 55 in this period, though it produced more original films this year (14) than the last year (10).

Amazon Prime Video released its content slate for the year in March with over 40 Original series and movies, and 29 of some of India’s “biggest and most anticipated movies”. While the platform presented it as “its biggest slate to date”, most of these programs were set to be premiered over the next two years. In 2023, Prime Video released 25 original shows, Aparna Purohit, then head of Originals, India and Southeast Asia, at Amazon Prime Video, had told a portal.

HotStar also slashed its content budget drastically, more than half, over the last two years due to a range of reasons, including loss of IPL partnership, dwindling viewership and the merger of its parent entity Disney with Viacom18 which is now on the verge of completion.

Even the number of film acquisitions have been curtailed with platforms picking just a handful of hit films that too at much lower acquisition cost, e4m had earlier reported.

The muted growth in consumer numbers, dwindling viewership and a massive churn in the sector driven by MX Player’s acquisition by Amazon Prime Video, merger of HotStar and JioCinema and closure of Voot and a few others, are being blamed for the slowdown in the OTT content industry.

The content production was at its peak in 2021 and 2022, when global streaming platforms Amazon Prime Video and Netflix spending an estimated Rs 1,500- 2,000 crore each on content production annually. Hotstar, SonyLiv, Zee5 and MX Player were spending roughly Rs 1,500 crore altogether. The budgets have been cut to almost half by most players over the last two years,” heads of production houses said. The current focus is on low budget originals without big stars. Besides, there has been a shift towards regional content whose production cost is significantly low compared to Bollywood.

e4m reached out to Prime Video, Netflix, SonyLiv, Hotstar and Zee5 to understand the reasons behind the cost cutting in programming. Their response is awaited. The story will be updated as and when they respond.

Post-pandemic truth

The pandemic served as a catalyst for this meteoric rise of OTT platforms, fuelling consumption and demand like never before. Platforms raced to outdo one another through a flurry of original web series, movies and acquired content from film and television industries.

“Not anymore. Regional players to market leaders, most platforms have tightened their purse strings to remain profitable and stay afloat. Such are the economic headwinds that the number of platforms has also dropped from 65 to 55,” industry leaders told e4m.

The platforms, who are on the verge of merger and shutdown, have slowed down on content production over the last couple of months due to administrative and operational reasons.

Studios looking for investors

The shrinking OTT landscape reflects the growing challenges of profitability and audience retention in a fiercely competitive environment. While consolidation may lead to stronger, more sustainable platforms, it also narrows opportunities for diverse content creators, actors and smaller production houses.

This contraction in the OTT industry has left studios scrambling. Big studios have no other option but to either pivot to new business models or face the harsh reality of shutting down.

Karan Johar’s Dharma Productions recently roped in Vaccine King Adar Poonawalla who has invested Rs 1,000 crore in the production firm and acquired 50 percent stake. Farhan Akhtar’s Excel Entertainment, Sidharth Roy Kapoor’s Roy Kapur Films (RKF), and Vikram Malhotra’s Abundantia Entertainment are also reportedly trying to rope in investors.

Smart Move?

Cutting down on content baskets is not always a disadvantage but a very smart move, says Pep Figueiredo, COO - PTPL India, ex-SonyLIV. He shared, “Streaming services now engage in more healthy rivalry. They leverage data analytics and tell what viewers want to watch, putting consumers in the driver's seat. This strategic shift prioritizes quality over quantity, reflecting a deliberate focus beyond waning subscriptions and market saturation.”

Echoing this sentiment, filmmaker Kushal Srivastava observes, “Audiences have become smarter and reject mediocre content. When the content is compelling, major OTT platforms are ready to invest. I feel very secure in the current scenario.”

According to Pep Figueiredo, “Only the savviest OTT companies will be able to connect with their viewers through engaging narratives by refining their ‘content is king’ strategies. This will guarantee the survival of the fittest for our OTT industry and for good.”

Nevertheless, generational shifts toward snackable formats like Reels and Shorts, where viewers opt for brief content over longer formats, could also explain this phenomenon, he noted.

Good days ahead

A recent PwC report reveals that OTT revenues have increased four-fold since 2019. However, in 2023, the market grew by 20.9%, reaching Rs 17,496 crore. It is expected to become the world’s fastest growing OTT market in the next five years, growing at a CAGR of 14.9% to reach Rs 35,062 crore in next five years. While SVoD will account for 65 percent market share, AVoD will grow faster at 26.0% CAGR.

The industry is still growing which gives a lot of hope to the entire ecosystem.

Abhishek Rege, Founder of Aarambh Entertainment, says, “We hope that the toughest time for the content industry is over. OTT platforms are likely to rationalize their costs, but increase overall spends on originals in the coming year.