WHY SHOWBIZ IS NO BIZ FOR MNCS IN INDIA
There’s no business like show business for global media and entertainment (M&E) companies, except perhaps in India, judging by how they always have one eye on the exit door. Close to three decades after launching the iconic youth and music channel MTV in India, M&E conglomerate Paramount Global quit the country last month, after selling its entire stake in Viacom18 to MukeshAmbani’sRelianceIndustries(RIL). In a regulatory filing with the stock exchanges, RIL said it would acquire the 13.01% stake in Viacom18 Media Private Limited held by Paramount for about $517 million (₹4,286 crore).
People familiar with the developments said the company was looking to exit after Reliance began betting aggressively on sports, as Viacom18 isn’t keen on the category globally. “They were anyway being ousted by Reliance and, globally, have no interest in the sports segment. Things reached a dead end post the merger with Disney,” said a senior analyst, declining to be named. In February, Reliance said that a new joint venture will combine the Viacom18 and Disney Star India businesses.
Paramount is not the first foreign entity to have given up on India’s entertainment industry, despite its young content-viewing population and rising disposable income. In 2009, NBCUniversal exited its partnership with the NDTV Group, which had led to the formation of NDTV Imagine.
In2016,WaltDisneypulledtheplugonits Hindi film production, closing UTV Motion Pictures. However, Disney acquired 21st Century Fox Inc. in a $71-billion cash and stock deal in June 2018. This brought Star India, Fox Star Studios, and Hotstar into the Walt Disney fold. While movie production did continue through Fox Star Studios for a while, the company’s last theatrical release was superhero film Brahmastra in 2022. The American giant’s focus has now shifted tobackingmoviesforitsstreamingplatform, Disney+ Hotstar.
Further, in 2020, Universal Pictures shut its India office, with all its Hollywood titles now distributed in the country by Warner Bros. Reasons for the disenchantment with India vary—from an unpredictable theatrical box office to uneasy intellectual property (IP) sharing terms with local producers, as well as broadcast regulations that make operations challenging. The emerging streaming industry, meanwhile, has already seen paid subscriptions hit the ceiling as advertising struggles to take off.
Moreover, India’s heterogeneous market has always been difficult to cater to, with its language and geographical variations. Global executives, who insist on micromanaging things and refuse to relinquish control to local teams in the country, have often struggled to fathom the market.
BOX OFFICE UNCERTAINTY
India’stheatricalecosystemcontinuestobe riddledwithfartoomanyuncertaintiesfor cautious and conservative foreign players to attemptbigbets.Thesevereunder-penetration of theatres means there is far too much dependence on metros and urban multiplexes,whenlargechunksofaudienceshave stopped going to cinemas in the first place, findingcomfortintheconvenienceofhome viewing and large television screens. While the Indian movie industry raked in record boxofficerevenuesof₹12,226crorein2023, this was due to higher ticket pricing—footfallshaveactuallyfallenby10-20%acrosssinglescreensandmultiplexescomparedtothe pre-covid period.
Global corporations have continually refrained from active investment in India; theirmovieproductionoperationsaremore orlessdefunct.WhiletheWaltDisneyCo.has beenfocusingonproducinglocalcontentfor itsstreamingplatformDisney+Hotstarover theyears,others,suchasSonyPicturesInternational Productions, remain cautious with few, modestly budgetedtitlesspreadoutover months. Warner Bros has no local production arm even thoughitdistributesAmerican films in the country, while MGM(Metro-GoldwynMayer) hasn’tevenattemptedanentry.
Several analysts question this disenchantment with Bollywood given that Indians are known to love their movies. But there are dynamics at play behind this state of affairs. One, internationalstudioshaverecognized the need to partner with local co-producers over the years, as the latter haveabetterrelationshipwithtalentand a deeper understanding of the market. But in return, the studios consistently refuse to part with intellectual property rights.
Two,leadingIndianmaleactorsoften insist on pocketing 60-70% of the productionbudgetastheirsalary.Third,the Bollywood theatrical film business model, which was already under stress beforethepandemic,nolongerfetches big returns in small towns. It is hence, hardlysurprisingthatthisisthesecond timeDisneyhascloseddownanIndian filmunit(afterUTVMovies).Itisamove thatepitomizesthedisillusionmentof HollywoodstudioswiththeBollywood business model, say industry experts. The American conglomerate had acquiredacontrollinginterestinUTV Software Communications in 2012 afterwhichallforthcomingtitlesmade by the company were rebranded as Disney movies. However, the firm announced it was halting all local film productionin2016afteraspateofdisasters, including Mohenjo Daro and Jagga Jasoos.
“Compared to say, television, where global players have at least invested actively over the decades, and there is an established source of revenue from advertising, Indian film production has never seen a large strategic studio player make any kind of dedicated investment on a sustained basis,” said an independent producer and former studio executive, declining to be named. Coupled with lack of organized funding from banks or private equity, this has meant there is inadequate capital for movie production in India.
Infact,severalstudiosbelieveit simply makes more sense to distribute Hollywood films—they bring in better returns and require negligible marketing, though the money-spinning superhero franchises have also been under stress for the past few months. Recent films of the MarvelCinematicUniverse,for example, including Guardians of The Galaxy Vol 3; Ant-Man and the Wasp: Quantumania; Black Panther: Wakanda Forever; and Eternals, have struggled to surpass the
₹100 crore mark in India, and, in certain instances, even the ₹50 crore mark.
BROADCAST NORMS
Things aren’t much rosier on the broadcast television front. The pay television market is heavily regulated, an unfair disadvantage compared to the completely unregulated, free, user-generated content ecosystem prevalent on the Internet. From regulators such as the
TelecomRegulatoryAuthority ofIndia(Trai)fixingpricesofTV channels to a national broadcasting policy that attempts to bring over-the-top (OTT) mediaunderthesameumbrella asTVandgaming,thechallenges are many for foreign players. The Broadcasting Services (Regulation) Bill proposed by the I&B ministry last November, for instance, has sparked significant distress within the television and streaming industries. The draft bill seeks to regulate broadcasting services, including OTT content and digital news, stifling innovation with a regressive approach,saymediaexperts.Oneworry, among many, is the establishment of a content evaluation committee (CEC), whichwouldrequirebroadcasterstocertify their programmes through this body, potentially impacting creative freedom andimposinganadditionalfinancialburden. “How can unequals be treated as equals?Indiaisamarketwithsignificant promise, but we never deliver on our promises,” said a senior broadcaster, on condition of anonymity.
MICROMANAGING TEAMS
That said, several media and entertainmentindustryexpertspointout that global parent companies have not giventheirlocalexecutivesafreehandto runteamsinIndia.Incaseswherethere has been no micro-management, such as with Sony’s television business, the businesshasprospered.Inthewordsof thebroadcastermentionedabove,“You can’t run the country on a tourist visa.” “If you’re trying to run the business sitting in another country, you will have no idea on either the regulations or the complexities and biases prevalent in this unique, heterogeneous market. We are an extremely complicated market because of our diversity, and it can be difficult for any international player to navigate and do well given that the market operates with its own quirks, and things are done their own way here,” the person added. Further, there has been little effortonthepartofcorporationsto cater to India’s diverse, mass-market, TV viewing population in the firstplace.“Thereisacertainbelief that TV is a thing of the past and that digital will overrule all other media. That cannot be true when around 140 million people in the country haven’t even bought their first TV sets, and most TV homes do not have access to WiFi,” said Harit Nagpal, MD and CEO of Tata Play. Thatmindsethasresultedin very little innovation on TV, with over-dependence on a young population flocking to digital programming. The fact that digital subscriptions have remained flat is testament to the fact that the free content-viewing population hasbeensaturated,andthat in a market like India, there is room for both TV and digital to grow together, Nagpalreasoned.Indiaisa complex market with multifaceted nuances that impact critical business decisions in the media and entertainmentsector,saidChandrasekhar Mantha, partner, media, and entertainment leader, Deloitte India. The content preferences, media consumption habits, and regional
An unpredictable box office, unease over sharing IP with local producers, strict broadcast norms and a stagnating streaming sector have made MNCs wary of operating in India.
Executives at global firms, who insist on micromanaging things from abroad and refuse to relinquish control to locals, have struggled to fathom the intricacies of the Indian market.
demographic trends are ever evolving in India,withitsyoungerpopulation,henoted.
“In contrast to other international markets,Indiapresentsamoredemandingenvironment,whereadeepercomprehensionof themarketcanleadtoachievingsuccessand long-term sustainability, and this has to be done within the ambit of profitability economics.Withtheworld’slargestpopulation, India offers great opportunities in the M&E sector,” said Mantha. “The competition to grab viewers will keep intensifying and that maybringhighgrowth,contractionorcannibalizationamongmediaparticipants.Knowingyouraudiencewell,theabilitytoexecute within reasonable costs, and a focused contentproductionanddistributionstrategyare afewthingstofocusoninthiscomplexmarket for success.”
STREAMING BOOM NO MORE
ADespite its young contentviewing population, foreign M&E firms have struggled to crack India’s entertainment market, with its language and geographical variations.
s is evident by now, India’s streaming boom has slowed down. The audience for OTT platforms rose by 13.5%, reaching 481.1 million in 2023, up from 423.8 million in 2022, according to a recent report by media consulting firm Ormax. While this growth rate is significant, it falls short of the 20% surge seen in 2022.
The growth rate isn’t low, Ormax had said, especially since penetration in rural areas and small towns, which make up a sizeable part of the population, stands only at 23% compared to the pan-India figure of 34%. But OTT platforms are yet to address the challenge of whether consumption can grow beyond the top 20 cities. Amid this, global giants such as Netflix, Prime Video and Disney are facing profitability pressure, which has tempered their bullishness and reined in their spends in the country.
Plus, the industry consolidation in India has stretched far too long, be it the Zee-Sony merger or the sale of Disney’s assets to Reliance Industries, which in turn, led to a slowdown in content commissioning and greenlighting decisions, leaving many producers in the lurch with ready projects or ideas they wanted to pitch and take to the floors.
Meanwhile, new advertising-driven models are emerging with little clarity on revenue possibilities, since a major chunk of digital advertising is going to YouTube and Facebook, even with paid subscriptions having barely taken off.
“First of all, the OTT market doesn’t have space for so many players. Plus, nobody is making money. India does not seem an attractive proposition at the moment,” said Partho Dasgupta, managing partner, Thoth Advisors and ex-CEO, BARC India.