OTT Vs Theatres: The War Has Begun

'The satisfaction of making content only comes when it reaches theatres as you are directly connecting to the masses.'

Direct to over-the-top (OTT) film releases, which saw a major boost during the pandemic, have lost prominence as streaming platforms shift strategy on content and focus on profitability, while producers and filmmakers have realised the lack of monetisation opportunities under this model.

Direct-to-OTT films saw a surge in 2021 as several theatrical releases had shifted to OTT due to pandemic-related theatre closures.

These films contributed 53 per cent of the total number of streaming originals in India in 2021, while fiction series contributed 40 per cent, according to a report released by Ormax Media in January.

The report highlighted that since 2022, fiction series continues to be the dominant format, with around 70 per cent of the total number of streaming originals in India.

By 2024, the share of direct-to-OTT films came down to 18 per cent of the total number of streaming originals in the country.

This was due to limited opportunities to monetise intellectual property through other ways later on in the direct-to-OTT model, media executives noted.

"The dynamics are starkly different (in revenue model, direct-to-OTT and theatrical-first, followed by platform syndication). When we go theatrical-first, we unlock multiple value chains like box office, music, satellite, and eventually digital, each step creating a layered monetisation pathway," said Pradeep Dwivedi, group CEO, Eros Media World.

"More importantly, theatrical success enhances the perceived value of the film across other windows."

In contrast, Dwivedi added that direct-to-OTT typically involves a fixed buyout, often pre-release, which caps the upside.

While this model was attractive during the OTT boom of 2020-2022, it doesn't allow for long-tail monetisation that theatrical releases still command. This is especially true in the Indian context where the big-screen experience continues to hold cultural and commercial value, he said.

Vimal Doshi, chief operating officer, motion pictures, Balaji Telefilms, agreed with Dwivedi and said that there is better marketing and promotional buzz for a movie released in theatres.

This same type of marketing and viewership was not visible for films directly released on streaming platforms.

Meanwhile, Suniel Wadhwa, co-founder and director, Karmic Films, a film production and distribution company, said that for mid and small-budget films with niche genres, debut projects, or content without A-list stars, OTT offers a viable and often safer revenue model.

Direct-to-OTT eliminates the high marketing, print and advertising costs that theatrical releases demand while ensuring instant pan-Indian or even global reach.

"Most of these (OTT) platforms don't reach 90 per cent of (people in) India yet. Theatre is the only medium where you can have maximum reach. Also, the satisfaction of making content only comes when it reaches theatres as you are directly connecting to the masses," said Doshi.

This decline in direct-to-OTT film releases is not just prevalent in India but also in the global market, Producer Shariq Patel noted. This follows streaming platforms focusing on profitability, and the major part of cost-cutting was on original content, especially movies.

Currently, huge budgets (Rs 100 crore/Rs 1 billion or above) for direct-to-OTT films won't be allocated, which was the case two years ago, Patel added. The movie budget in this segment is not more than Rs 50 crore (Rs 500 million).

'We look at every piece of content, whether it is a film, series, short-format title, documentary, or sport, through a clear lens of scale, storytelling strength and cultural relevance. Format is never the starting point; the focus is always on what will capture attention, create impact, and build sustained engagement across our diverse viewer base,' JioHotstar stated in an e-mail response to Business Standard.

'There is no fixed allocation between direct-to-digital and post-theatrical films. Every acquisition (on content) is weighed for its individual potential -- its genre, scale, timing, and ability to resonate.

'As viewing behaviour evolves, we remain committed to curating a slate that is relevant, high-impact and representative of the breadth of content our audiences seek across stories, formats and screens.'

While direct-to-OTT films account for only 10 per cent of the most-watched streaming originals, their supply share is nearly double at 19 per cent, according to a report released by Ormax Media.

"Whatever we are seeing right now (movies being released on OTT platforms) were all commissioned two years ago when the slowdown had just started," said Patel.

Media executives collectively noted that the streaming platforms have become cautious in film acquisitions, and the price of acquiring films for streaming platforms has gone down.

Wadhwa added that during 2020-2022, OTT had become a lifeline for producers, with streamers paying high premiums to build libraries and retain users.

But post-2022, platforms have tightened acquisitions, as the focus is now on quality, cast value, and franchise potential, not just content volume.

"We're seeing a marked pivot towards long-format storytelling, original series and mini-franchises that drive sustained engagement over time. For films, unless there's a marquee name, a theatrical performance, or festival pedigree attached, the willingness to licence has declined," Dwivedi explained.

"For us," he added. "it reinforces the need to back stories that are cinematic in appeal and commercially scalable. OTT now complements success, it doesn't define it."

Doshi agreed with Dwivedi and said that producers and studios are now being pushed back to theatres, partly due to a post-Covid correction in OTT acquisition prices.

With acquisition prices no longer justifying production costs, quality films need to be made for theatrical release.

At present, Eros Media World is focusing on developing projects that are built for the big screen.

Dwivedi added that theatrical-first storytelling allows us to create event-driven cultural moments and from there, syndicate the content across multiple platforms globally.