Box office is delivering duds and OTT is saturated. But for investors, content is still king

This September, veteran stock market investor Ramesh Damani, Madhusudan Kela-owned Singularity AMC, and market veteran Utpal Sheth together acquired a 3.3% stake in visual effects firm Prime Focus for ₹146.2 crore. In May, ReelSaga, a mobile entertainment startup founded in 2024 by serial entrepreneurs Shubh Bansal, Shanu Vivek, and Ritesh Pandey, raised $2.1 million in a seed round led by Picus Capital.

Audio entertainment firms Pocket FM and Kuku FM have raised $103 million and $85 million, respectively, this year. Enam Securities co-founder Vallabh Bhansali, Motilal Oswal Financial Services Ltd co-founder Motilal Oswal, and Zerodha co-founder Nikhil Kamath, along with Abhijeet Pai, his partner at investment firm Gruhas, invested in film producer Mahaveer Jain’s firm last year.

While these are financial bets with limited control, unless backed by board rights or veto protections, Adar Poonawalla acquired co-ownership in Dharma Productions last year by picking 50% for ₹1,000 crore.

These investors are looking beyond box office volatility, OTT saturation, and subscription fatigue to bet on the ability to acquire scale and evolving monetization models after the post-Covid boom. Mobile-first formats, AI-driven production, and data-driven audience insights are reshaping how content is created and consumed. The rise of regional and vernacular storytelling is also unlocking fresh demand.

According to a Ficci EY report, the Indian media and entertainment industry is expected to expand from ₹2.5 trillion in 2024 to ₹3.07 trillion by 2027, growing at an annualized rate of 7%.

“The recent interest from savvy investors in the media and entertainment space, despite the well-known challenges, is not about betting on a single blockbuster. It’s a strategic play on the broader ‘digital India’ consumption story,” said Varun Singh, founding partner – Foresight Law Offices. “These investors are looking for companies that own the ‘picks and shovels’ of the industry, the talent, the technology, and the distribution networks rather than just the gold itself.”

The focus is on finding scalable, institutional-grade businesses within an otherwise unorganized creative sector, according to Singh. The real value is in the infrastructure and the intellectual property that can generate multiple, diversified revenue streams over time, he said.

According to Rajesh Sethi, partner and leader-media, entertainment and sports at PwC India, investments in the sector have evolved from broad bets on legacy studios to strategic backing of technology-enabled and creator-led platforms. The rise of AI-driven production, regional content, and short-form video has reshaped investor priorities, favouring scalable intellectual property (IP) and mobile-first formats, he said.

The variety of formats has prompted a shift in how investors perceive value in content.

“A decade ago, investments revolved around film studios and theatrical releases. The pandemic triggered an OTT boom and exuberant deal flow. That phase has cooled; platforms are cutting spends, and investors demand discipline,” said Rishabh Gandhi, founder, Rishabh Gandhi and Advocates. “Now capital is flowing into creator networks, IP libraries, and short-form ecosystems.”

In an earlier interview, Apoorva Mehta, chief executive officer at Dharma Productions, had explained that the Poonawala partnership provided them with financial stability to plan for the long term. “It also allows the company to focus on creating more content, expanding infrastructure and eventually making its own movies,” he had said. “The idea for us now is to eventually shift to becoming a content and IP-driven company as opposed to operating just like a studio, which is what we were doing earlier.”

Most such investments are non-strategic, token positions, typically 5-10% of equity, large enough to secure board visibility and influence key decisions, yet small enough to avoid day-to-day operational drag and non-controlling with little to no say in strategic matters.

Such mid-sized stakes allow investors to ride the upside of high-margin IP without shouldering full production risk, according to Isheta T Batra, founder, TrailBlazer Advocates. But these bets come with risks. “Commercially, content revenues are lumpy and irregular: a single flop or an OTT licensing pause can compress cash flows. Legally, evolving censorship norms, talent contracts and AI-generated content raise fresh liability and IP questions,” said Batra.

However, “seasoned investors structure their investments with strong exit rights, reserved matters, liquidation preferences and robust moral-rights indemnities, thereby capping any downside risks while preserving the right to amplify exposure if a bet performs well”, Batra said.

Nikhil Sachdeva, partner, corporate practice at law firm Trilegal, said post-covid content consumption has shifted from big screens to mobile devices, supported by the rapid penetration of smartphones and affordable data.

OTT platforms in India have moved from freemium to premium models, providing multiple monetization channels including subscriptions, satellite rights, theatres, licensing, and brand integrations, improving cash flows, Sachdeva said. Consolidation moves, such as Amazon’s acquisition of MX Player, have also provided visibility on potential exit opportunities, making the sector more attractive for investors, he said.

Ashish Pherwani, M&E sector leader at EY India, sees content IP as an “extremely profitable” investment option. “From international deals being done to acquire video libraries by both private equity and media businesses to the large investment being made by labels to acquire artist-owned music rights, the trend will continue,” Pherwani said. “The longevity of high-quality content IP is increasing, as digital mediums make it more amenable to monetization and distribution.”