Boom2Bust: Streaming services slip after their pandemic-highs

• Streaming services grew at 50-60% during the pandemic, now it’s fallen to around 13%.
• Ad supported models and new regional players are disrupting the market.
• Higher acquisition and production costs and churn are troubling players who are seeing effects of slowdown.
• The original content that’s streaming on OTTs is also falling into a rote, say consumers and film-makers.

The year 2020 was a watershed year for many industries, as lockdowns put enormous restrictions on people. Ramesh Bharadwaj was stuck at home waiting for the pandemic to end. To pass time and keep his mind off crazy thoughts, the 27-year-old script writer started watching web series. And he subscribed to more and more OTT platforms to keep himself occupied.

“Last year (2022), I realized that I had the big three — Prime, Netflix and Hotstar, and one more Telugu OTT. I was spending over ₹5,000 a year on these services. When I came to senses, I retained two and cancelled the rest,” he told Business Insider India.

Bharadwaj joins the list of many people who are cutting down on the number of OTT subscriptions. Apart from costs, the screen-time has drastically reduced after they started stepping out after the pandemic. Binge watching is no more in vogue — which is taking the shine off the growth rates of OTT players compared to the pandemic.

The ‘cool factor’ goes poof

The dullness that’s seeped into the OTTs is not just because of screen fatigue and too many options. The ‘alternate’ content that’s made streaming cooler than TV, is also fast waning.

Akshay Bardapurkar, CEO and Founder, Planet Marathi too says that people are moving away because there is nothing exciting to watch. “People want to devote their free time to watching OTTs but the quality of content post-Covid is not up to its mark. You don’t subscribe to OTTs for one series or a movie, you need continuity and that’s seen a downfall post-Covid,” he adds.

Bharadwaj too tells that he is watching a lot less of streaming services because there’s nothing exciting to watch. “The last time I enjoyed a series was Khakee and Panchayat Season 2,” he sighs.

Experts also say that all the web series are sounding and looking the same too. “The thriller genre is overdone on OTT and they’re falling into a rote. In order to make people watch the next episode, they’re having to invent ‘kicks’ in each episode and extend a story that can be told in 1.5 hours to 4-4.5 hours across eight episodes,” Indrani, a documentary filmmaker tells Business Insider India.

“They’re nothing more than sophisticated soaps,” she opines.

The growth curve has flattened

In 2023, the number of people using OTT platforms increased by 13.5%. While it’s still double-digit growth, it’s nowhere close to the 50-60% seen during the pandemic. OTT players call these reduced growth numbers as signs of stabilization and maturity.

“The curve has flattened over time. This had to happen. But we at Hoichoi are seeing some pockets of high growth,” Soumya Mukherjee, COO of regional language OTT player Hoichoi tells Business Insider India.

The business is moving but at a much slower pace. “Now, the (OTT) growth is more organic, influenced by factors like cheaper data, content variety and the widespread availability of digital platforms. The fervour witnessed during the pandemic-induced surge has mellowed down to a more gradual pace,” said Sameer Jain, managing director of Primus Partners.

Bharat binges but on AVOD model

All in all, 423.8 million Indians watch content on an OTT platform. An average user holds 2.8 subscriptions each. And India has over 100 million paid subscriptions in India.

Most of the new subscribers are coming from non-metroes. “Metropolitan areas and some smaller urban centers are showing signs of saturation, experiencing minimal growth. Notably, smaller towns and rural areas, where only 23% of the population is engaged compared to the national average of 34%, are driving this growth,” Jain tells Business Insider India.

This new-growth patch for OTT is coming at a new business model – AVOD or advertising-based Video on Demand. Popularized by Jio Cinema which offered Indian Cricket World Cup for free with ads, the model involves some ‘free content’ and some ‘premium’ offerings behind a paywall.

The large OTTs, which disrupted linear TV, are now being disrupted. “A clear structural disruption for the India content/telecom ecosystem may lead to early consolidation signs for India OTT, strain on global OTT giants (behind the paywall), and India OTT shifting to free offerings,” says Karan Taurani, media sector analyst at Elara Capital, says in a note.

Mushrooming and churn

During its high-growth phase, many new and regional players have mushroomed thanks to low-entry barriers. India now has over 47 OTT platforms across languages like Haryanvi etc in addition to multiple options in South languages.

“The acquisition cost of new customers is very high, and their churn is also very high,” Archana Anand, chief business officer of ZEE5 Global said at an event in November.

The average cost of customer acquisition for an OTT platform currently ranges from ₹250 to ₹650, as per Jain. “The growth rate of paid subscriptions decreased by about 20% in 2022 from its peak during the pandemic. Moreover, users are now frequently activating and deactivating subscriptions,” he sums up.

Mukherjee too says that there would be consolidation in the sector. “A lot of newer and smaller players will survive only on the aggregator model. And large players and established language players will be able to go on independently,” he believes.

Even when it’s becoming difficult to acquire customers, OTT players are having to spend heavily on new shows. In 2022, where spending on original shows alone ranged from $600-700 million, which does include the cost of acquiring movies etc.

Most OTT players are now stuck between a rock and a hard place — having to keep churning out new and interesting content for viewers who are not swelling as fast.

(This is an article in the ‘Boom to Bust’ series which will discuss post-pandemic trends.)