The truth about streaming video

Amazon Prime Video has dropped 22 original series (Bosch, The Marvelous Mrs Maisel). An Amazon sibling offers streaming music. The mother firm offers online shopping for everything from garlic to washing machines, making the $280-billion Amazon a walled garden. The idea is to keep you within a haven of Amazon services and corner a bulk of advertising and subscription revenues.  

Not just at Amazon, the walled garden theory is driving the business strategy for the largest media and tech giants. Apple (1.5 billion users, $260 billion revenue), Google (1.7 billion users, $161 billion revenue), Facebook (2.6 billion users, $71 billion revenue) and Disney ($69.5 billion revenue) among others. But how many walled gardens can there be? And is the capital being blown up worth the return?  

That is the first observation from a month’s deep dive into the streaming video business besides the two pieces carried in this paper under “Streaming Diaries”. (September 22 and 29)  

Peter Chernin was Rupert Murdoch’s second-in-command for years. In 2010, he formed The Chernin Group to make private equity investments in media and tech firms. Here is what he had to say at a recent conference. “The idea that you can effectively create every piece of content for yourself is bad. Over the past three years, these walled gardens have spent billions of dollars on overall deals with creators. They are paying billions in guarantees and will be writing off hundreds of millions in unearned guarantees.” This will eventually erode profitability of the creative ecosystem, he reckons. 

 Now pivot to India to with its 60 streaming video brands or over-the-top services (OTTs). The largest, says Comscore’s data, is Google’s YouTube with 388 million unique visitors. It reaches over 98 per cent of the 395 million people that watch streaming video. Then comes Times Group’s MX Player (148 million) and Disney+Hotstar (83.4 million). After that the numbers fall to low double and single digits. Yet so many of them, irrespective of size, are throwing money on content. From $260 million (Rs 1,690 crore) in 2017, OTT spend on programming more than doubled to $600 million (Rs 4,320 crore) in 2019, according to estimates from Media Partners Asia. It is expected to touch $700 million (Rs 5,250 crore) by the end of 2020. That seems unsustainable for an industry that made just over  Rs 8,000 crore in revenue in 2019.  

You could argue that streaming video really took off only post-2016 when data prices fell and usage shot through the roof. This is the land grab phase, when it is normal for companies to splurge. Maybe. But while India is a large market for entertainment (836 million TV viewers, 662 broadband users) it is also improvished. The per unit monetisation and the margins on anything from TV shows to films are among the lowest in the world, making it at $24 billion the smallest media and entertainment market among comparable ones like, say, Brazil ($40 billion). The stifling regulation in TV, on the one hand, and the appalling neglect of film on the other, have seriously limited scale in these employment-intensive, high tax-paying industries.  

This brings me to the second observation that the deep dive brought. The broadcast and film industry, which are the source of all programming for streaming, don’t have freedom on creative and pricing. In many ways, then, streaming has liberated other parts of the entertainment industry from its shackles. The freedom storytellers have on OTT and the wide market it offers (over 200 countries) are helping showcase Indian storytelling to the rest of the world faster than the occasional international hit like My Name is Khan. In 2019, four Indian originals and this year three, have been nominated for the international Emmys. This simply re-emphasises the abilities and soft power of India’s creative industries — one that its news channels are currently busy destroying. Their screeching and finger-pointing could actually end up inviting poor-quality regulation into an area where India is just finding its feet.  

If the first two observations seem pessimistic, here is the zinger. While overall viewership stagnated and advertising fell during the pandemic, subscription numbers for OTTs grew from 10 million to over 31 million by June. The two subscription-only brands, Netflix and Prime Video, saw the sharpest growth in subscriber numbers in the last six months. Others that offer a mix of ad and pay supported (Zee5, Hoichoi) programming too reported gains. This is great news.  

In an overcrowded market or one with skewed regulation, ad-supported programming can quickly degenerate into poor quality, polarising or downright fake. Because it is free, platforms will do anything to get eyeballs. But subscription-supported programming (usually) is well researched, written and produced — whether in entertainment or news.  

If the balance of power between ad and subscription tilts even slightly in favour of pay, it signifies a shift from trading viewers for advertising to using good stories to get their attention.  


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