50% price drop, 1-year deals, and zero safety net - Bollywood’s digital dream turns nightmare as OTT platforms tighten screws and leave producers bleeding

The OTT market went on a high with the advent of the Covid-induced lockdown in 2020. The major streaming giants took advantage of the fact that cinemas were shut and tempted filmmakers to skip theatrical releases for their unreleased movies. In return, they were paid fancy prices. As expected, several filmmakers took the bait. It was a win-win situation for the producers – they were given an amount which was much higher than their total cost of production. Hence, they made a profit without the stress of distribution, fighting for screens, etc. The golden time continued until the first quarter of 2022.

Two developments happened in 2022 - the theatrical business gradually came back on its feet, and secondly, the OTT platforms realized that paying premium prices for acquiring films was not paying them dividends, like it did in 2020. Hence, they decided to ask filmmakers to release their films in cinemas first, thereby putting the onus on filmmakers for promotion. It helped the OTT giants to buy the films at a lower price. They also decided to have very limited direct-to-OTT films on their platforms and insisted on being a part of it from the very start.

Since then, there have been a few more developments that have pinched the producers hard. A top industry source told Bollywood Hungama, “In these 3 years, the streaming platforms now ask for box office collections. And no, makers can’t submit the collections they brag about on social media. They need to submit collections audited by a reputed firm and based on the lifetime, the price of the digital price of the film is decided upon. For instance, if a biggie collects less than Rs. 100 crores, it would be paid a lesser amount. But if it collects more than Rs. 100 crores or Rs. 150 crores, the digital price would be higher.”

The industry source further said, “Several small films which bombed at the box office are yet to find a digital partner. Secondly, the prices have further come down compared to last year. In fact, producers are shocked to see prices fall by nearly 50%. Unka poora economics ab hil gaya as they used to rely big time on making a profit through digital sales.”

Girish Johar, producer and film business analyst, confirmed these developments, “Prices have come down. The entire revenue pie has shrunk. Box office has shrunk, music revenue has shrunk, and even satellite revenue has shrunk. OTT players, which were the latest entrants, were paying prices to the producers during the pandemic period. They soon realized that the higher revenue and new subscribers that they were expecting were not matching their expectations. Hence, they have decided not to pay the high prices that they used to pay earlier. That has occurred across the board.”

He added, “The OTT players use a simple logic. If a film is not working at the box office, how can a producer ask for a higher price?”

Suniel Wadhwa, co-founder and director at film production and distribution firm Karmic Films, had a slightly different take: “I don’t believe so because good deals are given to producers who are giving them regular content like Excel Entertainment, Dharma Productions, Yash Raj Films, Maddock Films etc. But definitely, the prices offered have reduced for films that are not performing well.”

Girish Johar further stated, “This is from producer to producer. If a particular producer has a multiple-line-up of films, then he still gets a good deal. But a producer with a single price is getting 30-40% of last year’s price.”

The practice of annual contracts

What has further depressed the filmmakers is that OTT platforms are buying streaming rights for just one year, as opposed to buying rights for 3 to 5 years. This further reduces the revenue for the producers, as obviously, the platforms will pay a small amount since the time period has further shortened.

Girish Johar explained, “The OTTs are now shelling out less money for a lesser number of years as well. They take a call on whether a long-term acquisition of a particular product can help them in the fourth, fifth, or sixth year in the future. If they feel it would benefit them, they have deep pockets to pay for renewal. But if they feel a film’s presence on their platform won’t help them down the line, they decide to just have the cream of the milk and pay accordingly for a period of one year or two years.”

Suniel Wadhwa explained, “Earlier, the rights were being sold for 5 years or 7 years, depending on the producers’ capability and the bandwidth. If a producer runs a cash-rich company, he’s definitely going to command the price he wants. It basically boils down to who has the power to negotiate for a better deal between the two.”

Girish Johar agreed, “Anyone who has more experience or more might can dictate. If it’s a distress sale, the other party can dictate.”

OTTs say no to political drama

Realizing that times are volatile, the OTT players have another strict requirement in place – in case the film gets into a controversy or gets into some political tension, the producer will bear the risk. An industry insider commented, “The streaming giants include a clause stating that the filmmakers would be held responsible in case things go wrong after the digital premiere. Usually, if the film gets into trouble, it happens when it’s been released in cinemas. But then there are instances like the 2023 Tamil film Annapoorani, starring Nayanthara, which caused an uproar over allegations that it hurt religious sentiments only after its Netflix premiere. Hence, the clause was added.”

Another indemnity clause is added in the contracts of the writers by the producers at the insistence of the OTT platforms. The insider revealed, “As per this clause, if it comes to light later that the writer plagiarized the script of the film, he or she would be to blame for it and pay for the legal and other costs incurred.”

OTT killed the satellite medium

Earlier, the makers also had the safety net of the sale of TV rights. Sadly, even this option has been diluted. A prominent filmmaker told us, “The satellite market has been killed thanks to the priority given to the OTT platforms. The idea was that a film should arrive digitally within 8 weeks of its theatrical release and that there should be exclusivity for a few months. This delayed the satellite premiere, and the makers were okay getting a pittance from the TV channels. After all, they were earning big bucks from the OTTs. Now, streaming platforms are not paying them like before, while the sale of satellite rights continues to fetch a low price. Meanwhile, the cost of filmmaking is increasing. No wonder that the profit margin has shrunk and the makers are hoping for a huge box office performance to stay afloat.”

The filmmaker further said, “One way of looking at it is that OTT prices have fallen. But it’s a price correction that is happening. What’s unfortunate is that few of us saw it coming. But no one paid heed as most of the industry was busy making hay while the sun shone. There was no long-term planning. What would they do if the golden goose were killed? Finally, the filmmakers are grappling with this question.”

He also ended on an optimistic note, “I can safely assure you that we’ll find a way. Our industry has battled extensively in the past. We fought piracy, introduction of video cassettes, multiplex diktats, and who can forget, the Covid pandemic? Remember the sceptics predicting the end of cinema-going culture in 2020? But the theatrical business is back on its feet. Similarly, a solution will be achieved for the OTT crisis, too. It’s just a matter of time.”

Also Read: Shashi Tharoor calls Aryan Khan’s The Ba***ds Of Bollywood “absolute OTT GOLD”; tells Shah Rukh Khan “you must be so proud”

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