Dig­i­tal Con­tent The bat­tle for eye­balls


Business Today - - FRONT PAGE - By Verma Shashid­har Ajita Il­lus­tra­tion by Raj Verma

Ama­zon Prime Video In­dia’s maiden show In­side Edge, that cap­tures the murky be­hind-the-scenes hap­pen­ings of a T20 cricket tour­na­ment, de­buted to a packed house. Within the first 30 hours, the cricket thriller, pro­duced by Ex­cel En­ter­tain­ment which is run by celebrity duo Farhan Akhtar and Ritesh Sid­hwani, got Ama­zon Prime as many paid sub­scribers as it usu­ally would in 30 days. The OTT (over-the-top) dig­i­tal plat­form, which has over one mil­lion sub­scribers, is spend­ing a whop­ping ` 1-2 crore per episode on the web se­ries. Stunned? Such as­tro­nom­i­cal pro­duc­tion costs are be­com­ing com­mon­place in the dig­i­tal en­ter­tain­ment busi­ness. The cost of a TV show, that boasts good pro­duc­tion value, is in the re­gion of ` 15 - 20 lakh per episode, whereas the cost of pro­duc­tion for a show on Ama­zon Prime Video could be ten­fold. Apart from In­side Edge, Ama­zon Prime In­dia has lined up as many as 18 orig­i­nal shows, all of which will be as grandiose as the first. Be­sides, the com­pany has signed ex­clu­sive deals with a few ac­tors to show­case their new re­leases days after they hit the theatre – this could cost up­wards of ` 80 crore – as also con­tent deals with Ma­hesh Bhatt’s Vishesh Films and Karan Jo­har’s Dharma Pro­duc­tions.

Mean­while, Net­flix, with a paid sub­scriber base

of around 2-3 lakh, has an­nounced a global bud­get of $6 bil­lion for orig­i­nal and li­censed con­tent. A sig­nif­i­cant amount of this, it is learnt, would be ded­i­cated for con­tent cre­ation in In­dia. “We will reach over 1,000 hours of orig­i­nal con­tent glob­ally this year, which is about 400 orig­i­nal TV se­ries and films, in­clud­ing orig­i­nals from In­dia. Ul­ti­mately, we want to bring a qual­ity cu­rated cat­a­logue that our mem­bers in In­dia will love,” says the Net­flix In­dia spokesper­son. Its first In­dian orig­i­nal, Sa­cred Games, pro­duced by Phan­tom Films, will star ac­tor Saif Ali Khan in the lead. The OTT plat­form has also signed a deal with ac­tor Shah Rukh Khan’s Red Chill­ies En­ter­tain­ment. Be­sides, Net­flix has also ac­quired the rights to air na­tive films such as Brah­man Na­man, Um­rika and Vis­aranai ex­clu­sively on its plat­form.

Two of the world’s big­gest OTT plat­forms splurg­ing bil­lions of dol­lars to lure In­dian au­di­ences with orig­i­nal con­tent is tes­ti­mony to the fact that it is the best time to be a con­tent maker in In­dia; to tell edgy sto­ries, un­in­hib­ited (dig­i­tal plat­forms are not bound by cen­sor­ship rules). What is also ev­i­dent is that such avant-garde con­tent en­tails hav­ing deep pock­ets and the abil­ity to in­vest heav­ily over an ex­tended pe­riod. But is that sus­tain­able?

Ron­nie Screw­vala, en­tre­pre­neur and Founder of UTV (which he sold to The Walt Dis­ney Com­pany), calls it an “ab­surd” ap­proach. “Spend­ing so much money on con­tent is a scam. I don’t know which ex­ec­u­tive has been au­tho­rised to spend so much money. The pro­duc­tion qual­ity isn’t that great ei­ther,” he says.

In­ter­est­ingly, Ama­zon Prime Video’s In­dia head, Nitesh Kri­palani, called it quits within seven months of launch. Though the com­pany cited per­sonal rea­sons for his sud­den exit, in­dus­try watch­ers claim he was asked to move on. “Heavy un­re­al­is­tic in­vest­ments in stars and page-3 pro­duc­tion houses led to enor­mous costs. The In­dian team has also been do­ing ex­pen­sive deals through mid­dle­men, which fur­ther in­creased their costs,” says the head of a con­tent pro­duc­tion com­pany fa­mil­iar with the in­ci­dent.

As per a re­cent re­port in the Los An­ge­les Times, Net­flix has ac­quired a debt of $20 bil­lion to fund its con­tent as­pi­ra­tions. This debt, as per the an­a­lyst com­mu­nity, could land the com­pany in a fi­nan­cial cri­sis. The com­pany has been on an ag­gres­sive con­tent ac­qui­si­tion spree post its fall­out with Dis­ney and Fox Star stu­dios.

Screw­vala be­lieves that Net­flix and Ama­zon are mak­ing a big mis­take by rop­ing in star di­rec­tors. “It’s not go­ing to be that easy. Net­flix and Ama­zon will learn their les­son very early. They have over­paid and the con­tent isn’t that sticky,” he warns.

Big Bets

The dig­i­tal video space has also caught the fancy of tele­vi­sion net­works such as Star In­dia (Hot­star) and Vi­a­com 18 (Voot); film stu­dios such as Eros In­ter­na­tional (Eros


Now); con­tent com­pa­nies such as Balaji Tele­films (Alt Balaji) and start-ups such as Arré and Yup­pTV. In­dia has over 25 OTT plat­forms to­day and all of them are mak­ing mind-bog­gling in­vest­ments to cap­ture the au­di­ences’ at­ten­tion. And for good rea­son. Roughly 250 mil­lion In­di­ans own smart­phones, and by 2020, this num­ber is ex­pected to reach 600 mil­lion – 85 per cent of whom will have 4G con­nec­tion on their de­vices. With most tele­com com­pa­nies of­fer­ing ir­re­sistible data plans, data con­sump­tion has in­creased to as much as 8-9 GB per month, on av­er­age, says Vivek Raicha, Ex­ec­u­tive Di­rec­tor and Head, In­vest­ment, Emer­ald Me­dia. Video con­tent has been the big­gest ben­e­fi­ciary of this rise in data con­sump­tion. From watch­ing short and snappy videos, con­sumers are now lap­ping up full-length video con­tent on their per­sonal de­vices. “No me­dia com­pany wants to miss this op­por­tu­nity to build the next gen­er­a­tion me­dia con­glom­er­ate,” says Raicha.

Star In­dia’s three-year-old dig­i­tal plat­form Hot­star (inch­ing to­wards the 100 mil­lion sub­scriber mark) has the first mover ad­van­tage in the dig­i­tal con­tent ecosys­tem. Apart from of­fer­ing thou­sands of hours of its own tele­vi­sion con­tent, the big­gest draw on its plat­form is live sports. The plat­form has ex­clu­sive dig­i­tal rights for ICC Cricket, IPL and also ten­nis and foot­ball prop­er­ties such as Wim­ble­don and Pre­mier League. The OTT player has inked con­tent deals with HBO, Fox and Dis­ney, as part of which iconic shows as Game of Thrones are on of­fer. Hot­star also has orig­i­nal shows such as Sarab­hai vs Sarab­hai and On Air with AIB.

Vi­a­com 18’s Voot and Zee En­ter­tain­ment’s Ozee, too, thrive on their TV con­tent li­braries, movies, as well as some orig­i­nal con­tent. All th­ese broad­caster-owned plat­forms, un­like Net­flix and Ama­zon Prime Video, have an ad­ver­tis­ing-led rev­enue model – ad­ver­tis­ers pay any­where be­tween 400 to 800, which is the cost per minute (CPM) for ev­ery 1,000 views.

As re­cently as a year ago, con­sumers were pay­ing huge data prices, and a sub­scrip­tion model was un­think­able. So, mon­etis­ing through ad­ver­tis­ing be­came the norm. How­ever, with CPMs as low as

400-`800, an ad­ver­tis­ing-led busi­ness is vi­able only if one has vol­umes of con­tent. Th­ese broad­cast­ers, hence, are clearly at an ad­van­tage. “Only YouTube, Hot­star and Voot have bil­lions of min­utes of watch-time, so, we can at least have a play in this ad­ver­tis­ing-led busi­ness. With half a mil­lion users a month or two mil­lion users, you may have a good loyal user base, but it’s not enough to run an ad busi­ness,” points out Gau­rav Gandhi, COO, Vi­a­com 18 Dig­i­tal.

With data prices ra­tio­nal­is­ing, Hot­star has launched its sub­scrip­tion ser­vice, Hot­star Pre­mium, which hosts live sports and English con­tent at a sub­scrip­tion fee 199 for three months. “One part of the open model is to cre­ate scale and bring In­dia on­line through ad­ver­tis­ing; the sec­ond is get­ting the more af­flu­ent and dis­cern­ing au­di­ence who are happy to pay for a dif­fer­en­ti­ated propo­si­tion on a ser­vice which has Game Of Thrones, Home­land and live cricket,” says Ajit Mo­han, CEO, Hot­star.

Voot, too, is eval­u­at­ing the sub­scrip­tion-cum-ad­ver­tis­ing model, says Gandhi of Vi­a­com 18. “Sub­scrip­tion will en­able us to do more orig­i­nal con­tent as peo­ple will pay for it,” he says.

Cost of Orig­i­nal­ity

Broad­cast­ers such as Star and Vi­a­com 18, that mostly of­fer catch-up tele­vi­sion on their dig­i­tal plat­forms as well as ag­gre­gate in­ter­na­tional con­tent (more so in the case of Star), have been re­strained in com­mis­sion­ing orig­i­nal shows. Whereas com­pa­nies such as Balaji Tele­films (Alt

Balaji), TVF Play or Arré , that do not have any legacy con­tent, have lit­tle choice but to in­vest mil­lions on con­tent in or­der to stay put in the OTT plat­form space. Eros, with its li­brary of over 5,000 films and the 10,000 films it has ag­gre­gated for Eros Now (the OTT plat­form), does have an ad­van­tage over the other non­broad­cast plat­forms. Yet, it has to in­vest in cre­at­ing con­tent in or­der to re­tain its au­di­ences.

With­out abun­dant con­tent, most of th­ese non-broad­cast play­ers are com­pelled to fol­low a sub­scrip­tion model. While it is cer­tainly more prof­itable than an ad­ver­tis­ing-led model, build­ing a large sub­scriber base takes time and huge ex­penses have to be in­curred on con­tent and dis­tri­bu­tion.

The ques­tion is whether the home­grown play­ers have the fi­nan­cial where­withal to sus­tain. Alt Balaji, for in­stance, thrives largely on orig­i­nal con­tent. The com­pany en­tered the mar­ket in April 2017 and al­ready has 12 orig­i­nal shows. It will have to cre­ate many more in or­der to get cus­tomer stick­i­ness. The con­tent on the plat­form is priced at 100 for three months. To cre­ate th­ese shows, the com­pany is spend­ing 2.5-times the money it spends on cre­at­ing a TV show. Since it needs to present a con­tent port­fo­lio, the com­pany is also out­sourc­ing from other pro­duc­tion com­pa­nies at a cost. Yes, with Re­liance pick­ing up a 29.4 per cent stake in the com­pany for 413 crore, fund­ing may not be a prob­lem. But why does Balaji, a com­pany whose forte is sto­ry­telling, want to be in the plat­form busi­ness?

Nachiket Pant­vaidya, CEO, Alt Balaji, be­lieves the ul­ti­mate value lies in own­ing the con­sumer and own­ing the IP of the con­tent. “If you are in the TV busi­ness, you can scale your pro­duc­tion to a max­i­mum of 10 shows, as those are the slots avail­able. If you are in the plat­form busi­ness, you can scale be­yond that. In the first year it­self, we are launch­ing 32 shows. The scale of ac­tiv­ity is higher if you own the plat­form.” Pant­vaidya is con­fi­dent of clos­ing the first year with two mil­lion paid sub­scribers and get­ting to the five mil­lion mark within four years.

The likes of Arré , Yup­pTV and TVF Play have huge pri­vate equity in­vest­ments back­ing them, but will they suc­ceed in get­ting the new round of fund­ing, es­pe­cially since the cost of ac­quir­ing con­sumers is pro­hib­i­tively ex­pen­sive?

“In­vestors are cau­tious,” says Neeraj Shri­mali, Vice Pres­i­dent, Aven­dus Cap­i­tal. “For fi­nan­cial in­vestors look­ing at a five to seven year hori­zon, it’s a very clut­tered mar­ket. They

will not in­vest un­less it’s unique.”

Raicha of Emer­ald Me­dia agrees. The rea­son the in­vestor has cho­sen to put monies in Yup­pTV over other plat­forms is be­cause it is in a less com­pet­i­tive mar­ket. “The big­gest hook for us was that Yup­pTV is a stream­ing player fo­cus­ing on the di­as­pora mar­ket out­side In­dia. It is the largest OTT player in the South Asian video con­tent space; is present in 60 coun­tries and reaches out to 38 mil­lion In­di­ans with live and catch-up TV li­censed from Star, Col­ors and Sun. More­over, it’s com­pletely sub­scrip­tion-based,” Raicha adds.

New Av­enues

The dig­i­tal ad­ver­tis­ing in­dus­try is worth ` 10,000 crore. A large part of its goes into search and ban­ner ad­ver­tis­ing and barely ` 2,000 crore goes into video (of which a big chunk is taken away by Face­book and YouTube). Un­der­stand­ably, brands want to spend on video ad­ver­tis­ing on plat­forms that of­fer them large vol­umes and large-scale dis­tri­bu­tion.

Play­ers such as Arré or TVF Play have found a mid­dle path – brand-funded con­tent. “My pri­mary model is B-ward, which is branded con­tent. We have con­tent with 30 brands through B-ward and with 250 brands through A-ward. Of our rev­enue, 75 per cent comes through brand as­so­ci­a­tions,” ex­plains B. Sai Ku­mar, Co-Founder, Arré . Only 10 per cent of Arré ’s rev­enue comes from ad­ver­tis­ing, while 15 per cent comes through syn­di­ca­tion to plat­forms.

So, for a show like Aye­sha My Vir­tual Girl­friend, which has fin­ished two sea­sons, Arré has signed up with Gil­lette and a host of other brands and wo­ven them into the story. “Brands do tell me that Arré doesn’t have the reach of YouTube. Of course, I don’t; but my con­tent is avail­able on plat­forms such as Ola cabs for dif­fer­ent au­di­ences. Spon­sors are happy,” says Ku­mar, He plans to come up with 12 orig­i­nal shows this year, all of which would be brand-funded.

Ku­mar be­lieves that the sub­scrip­tion busi­ness will take a while to take off, but is not averse to it. “The day sub­scrip­tion opens up, I will be the big­gest orig­i­nal con­tent player in the coun­try. That day I will pull the plug and switch to sub­scrip­tion or con­tinue my 70:30 model with the plat­forms be­cause they are tak­ing my band­width cost.”

On the other hand, al­though plat­forms such as Eros Now and Alt Balaji are play­ing the sub­scrip­tion game, they are not reach­ing the con­sumer di­rectly. Jyothi Desh­pande, MD, Eros In­ter­na­tional, is of the opinion that the pure B2C model of Net­flix and Ama­zon Prime Video will not work in In­dia. “In­dia is still a pre-paid mar­ket; no­body will pay di­rectly for a ser­vice that costs ` 100 or ` 600.” Eros has tied up with tel­cos to get ser­vices added to con­sumers’ mo­bile bills. “That’s the rea­son we are ac­quir­ing cus­tomers rapidly. The plat­form part­ner is push­ing us as we are pow­er­ing their video/ movie of­fer­ing. Had we been com­pletely B2C, get­ting peo­ple to sub­scribe would have been dif­fi­cult,” she adds.

Desh­pande is con­fi­dent of clos­ing the 2017/18 fis­cal with over five mil­lion (from the present three mil­lion) paid sub­scribers. She is con­fi­dent about the fu­ture of the sub­scrip­tion model. “Even if a bil­lion peo­ple pay ` 5 a month, it will still give us more than what ad­ver­tis­ing would, be­cause ad­ver­tis­ing as a per­cent­age of GDP is still very low in In­dia.”

While Eros Now may con­tinue to be in the race be­cause it has deep pock­ets, will the smaller play­ers sur­vive?

Raicha of Emer­ald Me­dia ex­pects the emer­gence of a pay TV like model, where there will be ag­gre­ga­tors who will com­bine con­tent of the var­i­ous smaller plat­forms. “There is the cost of run­ning a plat­form, cost of ac­quir­ing sub­scribers, cost of tech­nol­ogy and then cost of con­tent – with all th­ese costs when you have to com­pete with peo­ple who are ag­gres­sively ag­gre­gat­ing, bundling and sub­si­dis­ing con­tent,


it be­comes chal­leng­ing.”

The OTT busi­ness is a tricky game, says Shri­mali of Aven­dus. “Can you be the size of Net­flix by just do­ing ads? No. But till you be­come a large sub­scrip­tion busi­ness you have to mon­e­tise through ads. But you can’t mon­e­tise mean­ing­fully through ads un­less you are large.”

Screw­vala, who had in­vested in Arré with Ku­mar, stepped out of the busi­ness in less than six months. He felt that the rev­enue model would not get to prof­itabil­ity at least for the next five to six years. “Then you are back again into cre­at­ing value and mar­ket cap, rais­ing in­vest­ments and diluting your­self. It wasn’t a joy­ful thing to do it, and to do it in neg­a­tive fund­ing. It led me to be­lieve that there is no USP for be­ing a pi­o­neer. I didn’t feel the need to be this early in the game.”

Con­tent Trap

In a bid to garner more view­ers, OTT play­ers are ei­ther spend­ing a hu­mungous amount of money on con­tent or re­sort­ing to risqué con­tent. “The minute dig­i­tal plat­forms started emerg­ing, peo­ple had mis­con­cep­tions...that be­cause it’s dig­i­tal, you could do some­thing edgy, throw cau­tion to the winds, put in pro­fan­i­ties, show skin and sex. “Play­ers that cre­ated such of­fer­ings tanked,” points out Vikram Mal­ho­tra, CEO, Abun­dan­tia En­ter­tain­ment.

He rues that none of the In­dian con­tent cre­ators have been able to cre­ate even a sin­gle dig­i­tal show as pow­er­ful as a House Of Cards or Game of Thrones. “We need our own In­dia ver­sion of Nar­cos or Home­land to make a state­ment that we have ar­rived in the dig­i­tal space.”

Ashish Kaul, CEO of Prakash Jha Pro­duc­tions, is of the opinion that most dig­i­tal con­tent cre­ators are telling sto­ries that are al­ready be­ing told on tele­vi­sion. “In­dia has the re­sources to be the dig­i­tal con­tent cap­i­tal of the world as long as plat­form own­ers don’t look for saas-bahu in a Game of Thrones.”

There are more than 25 OTT plat­forms in In­dia to­day; more are ex­pected to join the fray in the next few months. As is ev­i­dent, only those with deep pock­ets will thrive. As many of them risk suc­cumb­ing to the ex­or­bi­tant costs of run­ning the show, a con­sol­i­da­tion is in­evitable. Five years from now, apart from the global gi­ants Ama­zon and Net­flix, in­dus­try watch­ers fore­see only a cou­ple of lo­cal OTT play­ers on the scene. Win­ter is com­ing.

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