Streaming Platforms Tread With Caution: Tollywood Faces A Big Challenge Ahead
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Spotlight: The Telugu film industry is going through quite an interesting phase, where filmmakers, actors, technicians, and more importantly the audience are constantly challenging our notion of what is good cinema. ‘Spotlight’ is a column which sheds light on such trends, documents significant moments which are defining the industry today, and explores the past and the present, and where we are heading next. Written by Hemanth Kumar C R

Everything is changing in the film industry these days and at the core of this change is the symbiotic relationship between the industry and the myriad of streaming platforms which were licensing films. In a bullish market, there’s a potential buyer for almost every big film and the price the streaming platforms were willing to pay was mind-boggling. However, there are definitive signs of the market entering into a turbulent phase these days.

A couple of years ago when theatres were shut down and film shootings were completely halted, streaming platforms offered a lifeline to the industry. All the OTTs, including Netflix, Amazon, Hotstar, Zee5, Sony Liv, Aha, among various others national platforms, went on an acquisition spree. Almost every film which was ready for release in cinema halls was offered a lucrative deal, and the price of acquisition skyrocketed compared to what the platforms were offering until the end of 2019.

Cut to 2024, streaming platforms are treading with a lot more caution now. The money that they once offered to acquire big budget films has gone down substantially. For a majority of films, streaming platforms are now said to be offering either a pay-per-view model or a hybrid model, where they guarantee a certain amount which is paid upfront, and then, the subsequent revenue is split between the platform and the producer.

The aforementioned shift in acquisition of streaming rights is already having a big impact on both film production and release strategy in Telugu film industry. It’s no secret that when the deals are inked, the film production company and the streaming platform agree upon a release date, and the standard practice is to release the film four weeks later on an OTT. If a film’s release is postponed, the decision is mostly mutual since both theatrical release and their streaming release dates have to be in close proximity. However, instances where films have been released on OTT in 14 days after their theatrical release, especially if they didn't rake in big moolah, have become more common, of late.

This system has worked quite well for the past 4-5 years; however, there are signs of change. To understand the reasons behind the shift, one needs to understand the fundamental nature of the streaming business and how global shifts have far reaching consequences in local markets.

Streaming platforms can largely be categorized into three types - SVOD, AVOD, TVOD. SVOD (subscription video on demand) includes all major streaming platforms in our market like Netflix, Amazon, Zee5, Sony Liv, Hotstar, Aha, and ETV Win. A subscriber pays a fee to access the library of movies, series, and other content on the platform. Of late, a few platforms. have created a couple of more layers within their catalogue. While most of their content is available to subscribers, a select few films and other shows are either put in the ‘Rent’/ ‘premium’ section or ‘early access’, for which additional money needs to be paid.

In AVOD (advertisement-based video on demand), the content is free to watch; however, subscribers will have to sit through ads in the middle of the films and shows. This is what we see on Youtube. And then, there’s TVOD (transactional video on demand), where the viewer has the option to select what they want to watch and pay for only that film or show. Platforms like iTunes and BookMyShow Stream give you the option. A few months ago, Amazon Prime announced that it’s planning to introduce limited ads in their films/shows in a select few markets. At the same time, the platform gave an option to subscribers to pay additional dollars to watch ad-free content, similar to what Spotify and Youtube offer to their users.

Once you dig deeper, you see that in SVOD’s case, it’s all about how many new subscribers are being added monthly or quarterly, and how each of the new video (film or series) has performed within the first 2-3 months of them landing on the platform. If a new film/series has fetched the platform a big number of new subscribers or engaged the existing subscribers, it’s a big win for the platform, and vice-versa.

All this data has a real impact on the negotiations for subsequent films of the actor, director, production house, etc. Most platforms tend to go on a spending spree in the beginning of the financial year when their budgets are fixed, and as months go by, the late entrants to the negotiations are either told to wait for another quarter or go shop their film elsewhere. At times, the streamers would acquire a catalogue of films from a content aggregator who will license and package both old and a couple of new films.

Sometimes, the deals are signed at an idea level, where the platform sees the future potential of the idea and the team working on it; other times, they would perhaps wait until the film’s teaser/trailer releases to gauge the buzz surrounding the project. And more often than not, the platforms would either acquire films for a certain price or offer a pay-per-view deal. This is the primary concern these days. If a lucrative OTT deal isn’t secured prior to a film’s release, the subsequent result could go either way.

While the major platforms are spending big money on acquisition of feature films and commissioning original films & series in Telugu as part of their long term growth strategy in South India, it’s not all rosy if recent developments are anything to go by. The theatrical performance of a film has a direct impact on its viewership on streaming platforms, and there have been instances in the past where a few films have done exceedingly well on streaming sites more than what they did in theatres. And when a film doesn’t do well on an OTT, in terms of viewership, the price paid to acquire it becomes a tricky question.

Globally, there is some sort of consolidation happening in the OTT space. The proposed merger between Sony Liv and Zee 5, which subsequently failed to materialize, kept everyone guessing about the future plans of the two entities. In February, 2024, Mukesh Ambani led Reliance Industries and Walt Disney announced Viacom18, a subsidiary of Reliance Industries Ltd, and Star India, Disney’s Indian unit, announced the merger of their businesses. This means that a joint venture where Jio Cinema and Disney+Hotstar are poised to come under the same umbrella, and that changes the equation in terms of how they engage with filmmakers and producers. As the number of buyers who are actively trying to acquire films decreases, it’s bound to create a vacuum and more obstacles for scores of filmmakers from securing good deals.

In the past five years, Telugu film producers have gravitated towards securing a good deal with an OTT which will cover most of the production cost, and then, whatever is earned through theatrical release is treated as a bonus. Before that satellite rights from TV channels covered substantial costs; however, the rise of OTTs, and the way advertisers have shifted majorly towards digital media has had a huge impact on the revenues of satellite channels, which again affected how much they were willing to pay for the satellite rights of feature films.

For several months, there has been a fear of recession in the US, which has had far-reaching consequences. Several streaming platforms have either announced layoffs or scaled down their operations in a few territories. It’s anybody’s guess when we will see the market rebound and streaming platforms turn bullish as they once were.

Given how the OTT market has changed, it wouldn’t be surprising if more and more stakeholders within the Telugu film industry will be banking more on revenues from theatrical releases. And it’ll dictate what kind of films are made and what sort of films are able to create big buzz which will translate to ticket sales. The tug of war between the cost of production, and its recovery through theatrical, streaming, satellite, music etc is turning out to be a big challenge, more so than ever before. This explains why certain proposed projects are either put on hold or shelved altogether given the change in the OTT and satellite market.

In the meantime, the only thing one can hope for is a steady stream of hits in the theatres and rise in viewership on streaming platforms, which will revitalise the ecosystem.

- Hemanth C R

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