Market size and revenue distribution in the content industry

From: nikhil.kamath

The content industry in India is a dynamic and evolving landscape, marked by significant shifts in consumption patterns and revenue streams. Key players from the multiplex, streaming, and talent management sectors provide insights into the market’s current state and future trajectories [00:01:13].

Overall Market Size

The video media business in India, which encompasses television, streaming, and movie studios, was estimated to be between $12billionand$14 billion in 2022 [00:33:37] [00:34:29]. This represents a combination of various revenue sources, including advertising and distribution [00:33:53].

Over-The-Top (OTT) Streaming Market

The streaming subscription business in India is approximately $2 billion annually, encompassing all players [00:32:34].

• Key Players: Major platforms include Hotstar (the largest), followed by Netflix, Amazon Prime, and SonyLIV [00:32:43] [00:32:57]. Jio is also growing in the mix [00:33:04].
• Number of Players: There are around 48 to 50 streaming platforms in India [00:33:12] [00:33:14].
• Subscriber Base: The number of people who have paid for a subscription at least once is between 80 million and 90 million [00:35:32].
• Growth: The OTT market is growing at approximately 20-30% year-on-year [00:43:47].
• Content Consumption:
  • Mobile and computer consumption accounts for 70-75% of users [00:36:47].
  • Platforms like Disney+ Hotstar have both paid subscribers and users who consume free content [00:36:56].
• Growth Opportunities:
  • Greater emphasis on vernacular and regional content is crucial for market expansion [00:40:36].
  • Exploring short-form content (30 seconds to 2 minutes) is important, as its consumers are overwhelmingly male (75%), under 25, and from Tier 2 cities and below (65-70%) [00:40:59] [00:41:20] [00:41:30].
  • Addressing the disparity in smartphone access for women, especially in non-Tier 1 cities, is vital for democratizing content consumption [00:41:53] [00:42:02].
• Sports Content: Sports content, particularly cricket, serves as a critical top-of-the-funnel strategy, drawing hundreds of millions of users to platforms, even if many later leave [01:03:22] [01:03:30] [01:03:59]. Historically, cricket has been a significant share of the subscription market due to paywalls, but this is shifting to ad revenue as content becomes free [01:02:58] [01:03:24].

Television (TV) Market

TV revenues from ads and distribution are a substantial part of the market [00:33:53].

• Reach: Around 600 million TV sets are in India, with TV reaching about 800 million people, including free Dish [00:34:56] [00:35:07].
• Pricing: Cable TV subscriptions allow users to pick and choose channels, costing around 600 rupees per month on average [00:38:43] [00:38:56].
• Growth: TV is growing at a lower rate than OTT and is not declining as sharply as in the U.S. [00:43:50] [00:38:27].
• Cultural Aspect: Paying for cable TV is deeply ingrained in Indian culture, often seen as a community viewing experience [00:39:22] [00:39:32].

Theatrical (Movie) Market

The theatrical business, including box office and F&B revenue, contributes a couple of billions to the overall content market, making it similar in scale to OTT [00:52:43] [00:52:45]. The reported box office revenue alone is approximately 10,000 crores [00:52:28].

• Screens: India has about 9,000 screens in total, with around 3,500 being multiplexes [00:44:22] [00:45:27].
  • Approximately 500 screens close annually, often due to mom-and-pop owners converting cinemas to commercial real estate, which offers better value [00:45:14] [00:45:06].
  • Multiplexes open about 300 new screens each year [00:45:22].
• Revenue Distribution: Multiplexes account for 70% of revenues due to higher average ticket prices [00:00:03] [00:46:11].
• Ticket Price: The average ticket price across all screens is 239 rupees [00:46:28]. Multiplexes average around 200 rupees, while single screens are about 80-90 rupees [00:46:31].
• Challenges: Compliance and regulation (e.g., fire escapes) add to capital costs, making it difficult to build theaters in smaller cities and villages [00:47:06].
• Regional Differences:
  • The South (Tamil, Telugu, Malayalam, Kannada) consumes the highest number of films annually, with a movie-going index of 12 times a year [00:47:49] [00:48:03].
  • 62% of single-screen theaters are in the South, compared to 16% in the North [00:48:22].
  • In North, East, and Central India, only Hindi and dubbed English movies (like Fast & Furious or Marvel/DC) are commonly consumed [00:48:09].
• COVID-19 Impact: Pre-COVID, TV shows and movies complemented each other [00:54:04]. The pandemic blurred lines as producers sold content directly to streaming platforms due to cinema closures, leading to a collapse of theatrical windows [00:54:27] [00:56:01].
  • The theatrical window for movies, which used to be years, shortened significantly, even to simultaneous releases in some experimental cases, but this faced industry backlash [00:55:10] [00:55:36].
  • The success of movies like “Avatar” (despite challenges in Russia and China) highlighted the importance of theatrical releases for recouping large budgets [00:57:30] [00:57:50].
• Consumer Preferences: Audiences still prefer to watch big event films in theaters, but content must connect with them [00:59:02] [00:59:31].
• Demographics: The age group for movie-going audiences is 12-34 [00:49:05]. Women often influence the choice of cinema based on factors like hygiene and aesthetics (e.g., colorful interiors) [00:49:13] [00:49:40].
• Sports in Theaters: While cinemas are primarily for movies, there’s potential for communal viewing of short-form sports like football matches or exceptional cricket games (e.g., India-Pakistan) [01:06:40] [01:07:03].

Revenue Distribution and Role of Content Creators

The average budget for a reasonable Bollywood film is around 50 crores [01:45:52].

• Actor Fees: Actor fees can account for 20-50% of a film’s budget [00:00:10] [01:45:40]. This allocation is a subject of debate, with concerns about its impact on profitability [01:09:11].
• Transparency: There’s a perceived lack of transparency in film budgets and revenue waterfalls, especially concerning IP rights and royalties for creators like music composers [01:13:51] [01:14:50].
• Industry Structure: The Indian content industry, particularly film production, has historically been less corporatized and more fragmented compared to the West [02:07:02] [01:11:52]. The concept of agents is relatively new [00:01:18].
  • Studios typically back 50% of a film’s cost, with the remaining 50% staying with the producer [01:13:08].
• Comparison with Western Models: In the West, actors started participating in gross profit points, which significantly impacted the business [02:22:24]. The IP system in India is seen as not adequately benefiting creators, often reducing their compensation to a salary rather than long-term royalties or a share of global revenue [01:22:47] [01:23:13] [01:23:40].

Future Trends and Opportunities

Shift in Consumption

• Disaggregated Consumption: Traditional family viewing of TV is declining; consumption is now highly disaggregated across various platforms and devices [01:52:05].
• Video Dominance: Content is rapidly moving from text to video, with Indians watching 1.3 trillion hours of video annually on smartphones (compared to China’s 3 trillion) [01:53:03] [01:53:12] [01:56:11]. The average Indian spends over an hour daily watching video on a smartphone [01:53:31].
• Short-Form Content: Short-form content has a higher likelihood of success, catering to modern consumption habits [00:29:01] [01:56:37].

Rise of Creators

• Influencers vs. Stars: Social media influencers are growing the content pie rather than simply eating into existing shares, especially in the digital marketing budget [01:47:52] [01:50:07]. They represent a new avenue for advertising spend, shifting from traditional media [01:50:49].
• Creator as Distribution: The creator now functions as the product and the distribution channel [00:37:37] [01:51:26]. This has led to a move away from centralized corporate content to individual creators, particularly among younger generations who trust individuals more than traditional news agencies [01:53:50] [01:55:24].
• New Stardom: Stardom is diversifying beyond traditional film and cricket, with digital stars (e.g., Mr. Beast, CarryMinati), musicians (e.g., Divine), and social media personalities (e.g., Kylie Jenner) emerging [01:19:38] [01:21:12].

Challenges and Barriers to Entry

• Writer Compensation: The lack of fair compensation and IP rights for writers disincentivizes new talent from entering the Bollywood writing industry [01:16:59] [01:30:04]. There’s a need for a new model where writers benefit from their creations throughout the content’s lifecycle [01:22:02] [01:39:39].
• Story is King: Despite the prominence of stars, a great story is paramount; a weak story cannot be saved by a famous actor, but a strong story can elevate unknown talent [01:27:52] [01:28:18].
• Getting Discovered: Breaking into the content industry, especially for aspiring actors, is challenging and often requires personal connections [02:04:08]. There’s a need for platforms or “talent hunts” specifically for writers to discover and develop new stories [01:32:10] [01:35:57].

Gaming as a Competitor

Gaming is a significant competitor for audience time, due to its interactive nature. However, like other forms of content, a great story remains critical for a game’s success [01:57:51] [01:58:01] [01:58:30].

Role of Technology (AI/CG)

While AI and CG can offer efficient ways to create content and generate actors’ expressions, the industry is grappling with concerns about not having guardrails on their use, especially for writers and actors [02:00:06]. The emotional connection audiences have with human actors might be difficult to replicate, but hybrid models (like in anime) are already emerging [02:00:20] [02:01:08].

Greenlighting Content

For platforms like Hotstar, greenlighting original content involves looking for:

1. A great story [02:01:51].
2. The “arc” or overall narrative structure [02:01:53].
3. The right talent (actors) and director to execute it [02:01:58].
4. Genre (e.g., mystery, murder, drama tend to travel well) [02:02:13].
5. Pilot and script are crucial for platform content [02:02:55].

Investment Opportunities and Outlook

For investors, the Indian content market is seen as having exponential scale due to its vast consumption base [01:46:27] [01:46:42].

• Publicly Traded Companies: Companies like PVR are cited as examples of resilient businesses in the sector, especially noting the CEO’s ability to navigate challenges like the pandemic [02:07:06].
• CEO Traits: For a CEO in the entertainment industry, objectivity and the ability to avoid being “enamored by the surroundings” are crucial [02:07:59].
• Challenges in Monetization: The lack of transparent and standardized valuation models for content rights (e.g., digital acquisition rights) is a significant challenge [01:46:50]. This opacity makes it difficult to assess value and build robust financial models [01:45:46].
• A Call for Collaboration: Stakeholders (platforms, aggregators, producers) must collaborate to develop sustainable models, potentially by exploring new revenue distribution systems that benefit all parties, especially creators [01:12:50] [01:59:01] [01:33:59]. The ecosystem’s overall health requires all segments (movies, TV, streaming) to thrive together [01:00:09].
• Networking: Building a network and connections remains a high barrier to entry for those aspiring to enter the content business [01:36:20] [01:37:15].