Checks and Balances: Shifting audience taste, rise of OTT bring film & entertainment business at crossroads
The vast Indian film industry is among the oldest in the world and is a leading producer of films, churning out the largest number of movies annually. Renowned for its grandeur and widespread appeal, Indian cinema reflects societal themes. The Hindi film sector, popularly known as Bollywood, enjoys international acclaim.
As per the FICCI-EY 2024 report, the Indian M&E sector grew over 8% in 2023, earning revenues over Rs 2.3 trillion. The film segment grew 14%, earning revenues of Rs. 197 billion. Major revenues of around Rs. 120 billion were generated by domestic theatricals, followed by a Rs 35 billion revenues from digital/OTT.
In 2024 the sector is projected to grow 10.2% to reach Rs 2.55 trillion revenues and grow at a CAGR of 10% to reach Rs 3.08 trillion by 2026. By then, the digital segment is expected to grow to Rs.955 billion at CAGR of 13.5%.
The number of films being produced is growing. Annually India produces more than 1,700 hundred films and more than 3,000 hours of OTT content, reaching more than 160 countries and topping streaming charts.
With the rise of the digital, OTT and streaming platforms, the film and entertainment industry is experiencing a shift in its business and revenue models. As it gradually embraces AI in production, the industry is undergoing significant transformation.
The film industry relies heavily on perception and is inherently volatile, making it a high-risk business. Except for a few notable successes in recent times most big films despite the presence of big stars and A-list actors have failed to resonate with audiences, leading to significant financial losses.
Having said that many medium and small-budget films with relatable stories rooted in culture that connect with people from all walks of life have been liked by the audiences.
This raises important questions: Why are formulaic films with big stars losing their appeal? Is there a definitive formula for success in filmmaking?
Geetanjali Minhas spoke to film business experts on issues ranging star power, failing films, content, impact of OTT, financial stress on exhibitors, high production costs, etc.
You can watch the video report here: https://youtu.be/NTPoRDcp1s8?si=divnpClA6ox1S638
Here are the edited excerpts of what experts said:
Komal Nahta, Editor, Film Information and film trade analyst
Failing Films
The film industry is grappling with failures largely due to the absence of a guaranteed success formula. Entertainment remains the key, but understanding what appeals to diverse audiences is complex, especially as tastes continually evolve. Small-budget films featuring lesser-known actors often outperform big-budget productions with A-list stars, highlighting that strong content and compelling scripts drive success.
Recent successes, like ‘Stree 2’, demonstrate that a great script can triumph without star power, outpacing major blockbusters. While stars can draw initial audiences and mitigate financial risks, reliance on them and formulaic content limits creativity, making producers hesitant to explore innovative narratives.
OTT Impact
OTT platforms present both challenges and opportunities. Although they have led to a slight decline in cinema attendance, they also account for a significant portion of producers' revenue. Audiences may prefer watching films at home, but OTT deals help cover production costs, making these platforms crucial for the industry.
However, the dominance of a few large production houses, which capture around 80% of the market, stifles opportunities for smaller companies and new talent. Established producers have an advantage, making it difficult for newcomers with strong scripts to gain visibility.
Industry Dynamics
The film industry is perception-based, often repeating safe but uninspired stories, which limits opportunities for talented individuals who lack established connections. Additionally, multiplexes are facing closures due to dwindling audiences and financial pressures, exacerbated by the absence of major star releases in recent times.
Exhibitors are exploring alternative revenue streams, such as converting cinema spaces for corporate events, but these solutions are not sustainable long-term. The high capital investment required to build cinemas makes it challenging for exhibitors to recover their costs, especially when reliant on external productions.
Addressing Production Costs and Regulations
Inflated production costs, often used to secure subsidies, pose another significant issue. Producers may exaggerate expenses to obtain larger financial assistance, leading to unethical practices, including under-the-table dealings with vendors. Such leakages can inflate costs significantly without benefiting the film's actual production.
Regulations in the creative space are contentious; while some advocate for oversight, the industry thrives on creative freedom and intuition. Ultimately, success in filmmaking often hinges on the unique vision and talent of individuals rather than strict rules.
The film industry stands at a crossroads, facing significant challenges from shifting audience preferences, the rise of OTT platforms, and entrenched production practices. Embracing creativity while navigating these hurdles is essential for revitalizing the industry and fostering new talent.
Shibasish Sarkar, Group CEO, Reliance Entertainment Studios, and President, Producers Guild of India
Evolving landscape of Film and OTT
The film industry has faced numerous shifts, from the rise of satellite broadcasting in the 1990s to the current dominance of OTT platforms. Over the past six to seven years, OTT has drastically changed audience behaviour, especially post-COVID. In India, cinema footfalls remain 10-15% below pre-pandemic levels, while Hollywood is down about 25-30%. Despite crossing 2019 revenue figures, the industry is still on an unpredictable path.
With a population of 1.4 billion, we're just starting to tap into our audience potential. While our biggest films attract around 4 to 5 crore viewers, many are looking for a captivating weekend show. With limited time for entertainment, they’re unlikely to invest hours and money unless the experience truly captivates them.
While OTT may seem to cannibalize theatrical releases, it has also opened avenues for new talent and narratives, enriching the industry. The success of films featuring emerging actors demonstrates a shift from traditional star-driven models toward a more democratic storytelling landscape.
The pandemic reshaped content consumption, breaking down language barriers as viewers embrace diverse global offerings. Audiences now prioritize quality over familiarity, raising expectations for filmmakers, writers and producers. Star power no longer guarantees box office success; films like ‘Munjya’ and ‘Stree 2’ can outperform big-budget, star-studded projects if the story resonates. In last 1.5 - 2 years with films like ‘Pathan’, ‘Jawan’, ‘Stree’ and ‘Animal’ doing 400- 500- 600 crore is unheard of in the history of Indian cinema.
Nepotism, transparency, exhibitor woes
Ultimately, the consumer is king. No matter the limitations, group dynamics, or exclusive opportunities, it’s the audience that ultimately determines success. In both India and the West, the film industry often revolves around a small group of stars—typically about ten—while hundreds of producers invest in them. This lopsided-ness has persisted for decades, highlighting a similar trend across various industries. While nepotism and privilege are often discussed in the film industry, these dynamics are prevalent in many sectors.
Globally box office accurate figures are typically available within 24 hours through various platforms. India faces a significant gap in this process. Producers and exhibitors have long advocated for a reliable body to gather and publish accurate box office figures from cinemas for public consumption. I am optimistic that this barrier will eventually fall. Cost of production figures are proprietary numbers of the producer or studio and they would not like to open their account books for that. The same applies to other industries also.
Exhibitors are turning to re-releasing old titles due to the lack of new film options and available inventory. With audiences showing less interest in new releases, many films like ‘Rockstar’, ‘Jab We Met’ and ‘Laila Majnu’ are giving revenues. It reflects a gap in the current film supply, with exhibitors seizing opportunities to draw audiences back, but ultimately highlights the need for a more consistent flow of new content.
Linear TV, AI
Linear TV faces challenges as advertising revenues shift to digital platforms. With most broadcasters launching their own OTT services, the landscape is changing rapidly. The future will likely see further integration of technology, including AI, which may streamline production but also threaten certain jobs. Adaptability and a focus on quality content will be essential for survival in this dynamic environment.
While challenges persist, the ongoing transformation within the film industry presents opportunities for innovation and a broader representation of talent and storytelling.
Girish Johar, Producer and film business expert
Today, moviegoers demand compelling content to justify their theater visits, especially as they have grown accustomed to global streaming options like Netflix and Apple TV. The success of films such as ‘Barbie’, ‘Oppenheimer’ and ‘Joker’ illustrate this trend, as they have thrived in India, showcasing a willingness to engage with diverse narratives.
Previously, star power could guarantee box office success, but post pandemic that’s no longer the case. Audiences are discerning, often determining their interest based on trailers and marketing buzz. Meanwhile, the rise of OTT platforms has changed the economics of film production, leading to a re-evaluation of budgets and star salaries. Producers are now looking to link acquisition costs to box office performance, prompting a shift in focus toward content that can draw audiences back to theatres.
As OTT platforms expand into Tier 2 and Tier 3 cities, the market potential is vast. However, the industry must streamline costs across production and exhibition to remain viable. High production costs, often inflated by star salaries, need to be addressed, and there’s a growing trend for actors to take a percentage of profits instead of fixed fees, promoting shared success.
Exhibitors face their own challenges with fixed overhead costs, necessitating a reconsideration of ticket pricing strategies. Promotional campaigns like National Cinema Day, Buy1 Get 1, 99 Rupees etc, aim to entice viewers but they rely on quality content to succeed.
The industry is in a transition phase, with upcoming OTT mergers and shifts in viewer behaviour signaling a need for adaptation. The focus must be on compelling storytelling and realistic budgeting to rebuild audience habits and ensure profitability. Success in this high-risk business ultimately hinges on hard work, strategic planning, and a keen understanding of audience desires.