Few things induce greater pathos than filmy folk selling make believe outside the theatre. Like traditional studios claiming they can continue their reign in the world of Netflix and Amazon, courtesy their decades-old movie libraries.
Take Hiren Gada, CEO of Shemaroo Entertainment. “We have created a formidable, arguably the largest, repertoire of films,” he says. “We have films from the 1950s and 1960s, and the biggest hits of today. Consumers will consume content irrespective of the medium.”
Shemaroo Entertainment, which is listed on the stock exchanges, has invested INR300 crore in acquiring content and “repurposing” it for digital viewing. More funds are coming. “We wanted to make sure no one can run a Bollywood [video] service without something from us,” Gada says.
Except a “Bollywood service” isn’t really what anyone wants to run.
Whither the post-Bollywood world?
All eyes are on Netflix, Amazon, Reliance Jio, and Hotstar as they battle for the same prize. Call it ‘digital’, ‘video streaming’, or ‘OTT’ (over the top) — everyone from telecom companies to tech firms to film studios are converging on the business of making or licensing video entertainment for the Internet.
The strategy Shemaroo’s tribe is banking on is simple. Let others make the big investment in building the platforms. All the popular content (read Bollywood fare) already released is owned by older studios who have dominated film-making in India for a long time. Ergo: They can bite off a piece of India’s growing OTT business simply by sitting on content and licensing it out to whoever wants it.
Apart from Shemaroo, studios like Yash Raj Films, Dharma Productions, and Red Chillies Entertainment have licensing deals in place with OTT biggies Netflix and Amazon Prime as well as newcomers such as Airtel TV in the wake of Reliance Jio. Many of these studios haven’t set up their own digital platforms yet, relying solely on licensing to monetise their existing content. What are the market leaders up to, meanwhile?
We wrote earlier that Netflix, the most expensive OTT subscription offered in India, is pumping big money to make entertainment set in India that can be sold to its audience around the world. It does source movies from studios too, but the big thrust is reserved for “Netflix originals”. With its high-precision data engine, Netflix is able to micro-target viewers by placing them in discrete taste clusters, such that it has something for everyone.
Amazon Prime has been on a spree to acquire the latest films released in Indian theatres. But increasingly, it has also diversified into its own content, including in local languages.
Jio is following a different course. It is directly investing in studios, including Eros Entertainment and Balaji Films, which both happen to have their own video-streaming platforms. JioCinema and JioTV are among the top five video apps in India by active monthly users.
Given this picture, how far can the licensing business model go?
Rent seeking is passé
Industry insiders say living off distribution income isn’t a viable long-term plan.
“Look at what everyone is doing. Even Zee [Studios] launched Zee5 after OZee to make original content,” says a web-series writer who has worked with a number of these studios. “The fight for consumers is not for who has Sairat or Jab We Met on their platform. It’s for original content, a complete library. If someone has rights to Sairat today, they can go just as easily to someone else tomorrow.”
The writer’s assessment is accurate. Rights to film titles need not be sold in perpetuity. Of Shemaroo’s new acquisitions, only 500 titles are owned in perpetuity, meaning they are permanently Shemaroo’s. Some of the biggest assets, such as films made by Shahrukh Khan’s production house Red Chillies Entertainment, are in five- to seven-year ownership deals.
The tenure for which a title should be acquired is in fact a tricky decision. For a studio, paying good money to buy a film’s rights permanently is a gamble. Films released today may not do well enough to garner subscriptions in future, making it a wasted investment. Or, a film that flops today can become a cult classic or sleeper hit among audiences watching at home over time (examples: 2004’s Swades or 1994’s Andaz Apna Apna).
Still, many studios feel betting on existing content backed by at least some audience data is a more cost-efficient and safer call than venturing into original content. However, some studios have realised that there is no better, long-term insurance to the vagaries of acquisition than investing in original content.
Red Chillies, for instance, has signed a deal to make web series for Netflix in India. Similarly, Zee5 is making content for Airtel TV (after a failed partnership with Jio), while Balaji Films has already made Web series for its app ALTBalaji that will be licensed to Jio.
Eros Entertainment is investing USD150 million in a joint venture with Jio to make original content. Eros Digital’s chief operating officer Ali Hussein says the company is going to focus on making originals and has set up a writer’s room to develop quality stories for their online ventures. Besides, Eros owns 11,000 titles in perpetuity, which it can license to other platforms.
“We have to do all three. We don’t know which of the three will be successful,” Hussein says when asked whether Eros will focus on original content, licensing what it already owns, or putting it up on free-to-view platforms like YouTube.
Original is king
In the more developed markets, budgets are set to create original content because that is what will eat into the studios’ business. “Platforms changed the game by getting into original content with budgets that could compete with traditional studios,” says Frank D’Souza, partner and lead, entertainment and media, at consultancy and audit firm PricewaterhouseCoopers.
Globally, the shifting dynamics have seen intense duels between studio and OTT heavyweights.
For instance, Disney, the world’s largest media company, pulled all its content from Netflix in preparation for its own OTT platform. “They (Netflix) know they can’t depend on traditional studios for long,” D’Souza says.
It’s reminiscent of what happened to music-streaming app Spotify when it began roadshows for its upcoming IPO. Spotify is yet to turn a profit and investors are concerned because it bleeds money on licensing deals with music labels. It has decided to deal with artistes directly.
The race in India too will be determined by investments in original content. So much so that YouTube, India’s most-used video platform by a wide margin, is hiring executives for YouTube Originals, a premium online video-programming service. Posts advertising openings for a development lead and a business affairs lead for the new team have been up on the Google Careers portal over the last month or so.
Eventually, traditional studios will have nothing to participate in this market. Their films will be acquired by those with the biggest muscle, and their libraries will have little to offer in a world where consumers are acquired with original content made just for them.
As D’Souza puts it, “The player with direct access to the consumer will drive India’s OTT business.”
(Graphic by Ankita Mehrotra)
Take Hiren Gada, CEO of Shemaroo Entertainment. “We have created a formidable, arguably the largest, repertoire of films,” he says. “We have films from the 1950s and 1960s, and the biggest hits of today. Consumers will consume content irrespective of the medium.”
Shemaroo Entertainment, which is listed on the stock exchanges, has invested INR300 crore in acquiring content and “repurposing” it for digital viewing. More funds are coming. “We wanted to make sure no one can run a Bollywood [video] service without something from us,” Gada says.
Except a “Bollywood service” isn’t really what anyone wants to run.
Whither the post-Bollywood world?
All eyes are on Netflix, Amazon, Reliance Jio, and Hotstar as they battle for the same prize. Call it ‘digital’, ‘video streaming’, or ‘OTT’ (over the top) — everyone from telecom companies to tech firms to film studios are converging on the business of making or licensing video entertainment for the Internet.
The strategy Shemaroo’s tribe is banking on is simple. Let others make the big investment in building the platforms. All the popular content (read Bollywood fare) already released is owned by older studios who have dominated film-making in India for a long time. Ergo: They can bite off a piece of India’s growing OTT business simply by sitting on content and licensing it out to whoever wants it.
Apart from Shemaroo, studios like Yash Raj Films, Dharma Productions, and Red Chillies Entertainment have licensing deals in place with OTT biggies Netflix and Amazon Prime as well as newcomers such as Airtel TV in the wake of Reliance Jio. Many of these studios haven’t set up their own digital platforms yet, relying solely on licensing to monetise their existing content. What are the market leaders up to, meanwhile?
We wrote earlier that Netflix, the most expensive OTT subscription offered in India, is pumping big money to make entertainment set in India that can be sold to its audience around the world. It does source movies from studios too, but the big thrust is reserved for “Netflix originals”. With its high-precision data engine, Netflix is able to micro-target viewers by placing them in discrete taste clusters, such that it has something for everyone.
Amazon Prime has been on a spree to acquire the latest films released in Indian theatres. But increasingly, it has also diversified into its own content, including in local languages.
Jio is following a different course. It is directly investing in studios, including Eros Entertainment and Balaji Films, which both happen to have their own video-streaming platforms. JioCinema and JioTV are among the top five video apps in India by active monthly users.
Given this picture, how far can the licensing business model go?
Rent seeking is passé
Industry insiders say living off distribution income isn’t a viable long-term plan.
“Look at what everyone is doing. Even Zee [Studios] launched Zee5 after OZee to make original content,” says a web-series writer who has worked with a number of these studios. “The fight for consumers is not for who has Sairat or Jab We Met on their platform. It’s for original content, a complete library. If someone has rights to Sairat today, they can go just as easily to someone else tomorrow.”
The writer’s assessment is accurate. Rights to film titles need not be sold in perpetuity. Of Shemaroo’s new acquisitions, only 500 titles are owned in perpetuity, meaning they are permanently Shemaroo’s. Some of the biggest assets, such as films made by Shahrukh Khan’s production house Red Chillies Entertainment, are in five- to seven-year ownership deals.
The tenure for which a title should be acquired is in fact a tricky decision. For a studio, paying good money to buy a film’s rights permanently is a gamble. Films released today may not do well enough to garner subscriptions in future, making it a wasted investment. Or, a film that flops today can become a cult classic or sleeper hit among audiences watching at home over time (examples: 2004’s Swades or 1994’s Andaz Apna Apna).
Still, many studios feel betting on existing content backed by at least some audience data is a more cost-efficient and safer call than venturing into original content. However, some studios have realised that there is no better, long-term insurance to the vagaries of acquisition than investing in original content.
Red Chillies, for instance, has signed a deal to make web series for Netflix in India. Similarly, Zee5 is making content for Airtel TV (after a failed partnership with Jio), while Balaji Films has already made Web series for its app ALTBalaji that will be licensed to Jio.
Eros Entertainment is investing USD150 million in a joint venture with Jio to make original content. Eros Digital’s chief operating officer Ali Hussein says the company is going to focus on making originals and has set up a writer’s room to develop quality stories for their online ventures. Besides, Eros owns 11,000 titles in perpetuity, which it can license to other platforms.
“We have to do all three. We don’t know which of the three will be successful,” Hussein says when asked whether Eros will focus on original content, licensing what it already owns, or putting it up on free-to-view platforms like YouTube.
Original is king
In the more developed markets, budgets are set to create original content because that is what will eat into the studios’ business. “Platforms changed the game by getting into original content with budgets that could compete with traditional studios,” says Frank D’Souza, partner and lead, entertainment and media, at consultancy and audit firm PricewaterhouseCoopers.
Globally, the shifting dynamics have seen intense duels between studio and OTT heavyweights.
For instance, Disney, the world’s largest media company, pulled all its content from Netflix in preparation for its own OTT platform. “They (Netflix) know they can’t depend on traditional studios for long,” D’Souza says.
It’s reminiscent of what happened to music-streaming app Spotify when it began roadshows for its upcoming IPO. Spotify is yet to turn a profit and investors are concerned because it bleeds money on licensing deals with music labels. It has decided to deal with artistes directly.
The race in India too will be determined by investments in original content. So much so that YouTube, India’s most-used video platform by a wide margin, is hiring executives for YouTube Originals, a premium online video-programming service. Posts advertising openings for a development lead and a business affairs lead for the new team have been up on the Google Careers portal over the last month or so.
Eventually, traditional studios will have nothing to participate in this market. Their films will be acquired by those with the biggest muscle, and their libraries will have little to offer in a world where consumers are acquired with original content made just for them.
As D’Souza puts it, “The player with direct access to the consumer will drive India’s OTT business.”
(Graphic by Ankita Mehrotra)
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