Investment Thesis: India's Microdrama Boom
Sectoral Overview
India’s short video battle is intensifying as microdramas take center stage. “Microdramas” are dramas that have 60-120 episodes each packed with 1-3 minutes of emotional storytelling that ends with a cliffhanger. Youtube and Instagram have already built on top of this trend through reels and shorts. India is witnessing a wave of emerging players that are building OTT microdrama platforms. These platforms are competing with brands such as Youtube and Instagram.
Market Opportunity
India’s microdrama sector is estimated to reach a value of $10 billion by 2030. Globally, the market in 2024 was valued at $6.5 billion and has grown to $7.2 billion. While the domestic market opportunity’s value remains unavailable microdramas are capitalizing on India’s mobile-first users and lesser attention span.
The growth drivers of the Microdrama sector are:
Attention Span: The creator economy started with 3-hour films on OTT platforms such as Amazon Prime and Netflix. Then came the introduction of reels and shorts in Youtube and Instagram. Microdrama Startups are capitalizing on this trend of reduced attention span by creating stories that end with a cliffhanger and delivering impactful messages in record time.
Mobile-First users: India has a mobile user base of more than 900 million people over urban and rural areas. India’s mobile-first policy is driven by a rise in disposable income and the lowering cost of digital infrastructure such as 5G.
Vernacular Content: Microdrama Startups are competing with existing brands like Youtube, Instagram and TikTok (banned now) that have huge market share. On average, students watch 360-480 reels in a period of 1.5-2 hours. Short form content in India takes up 40%-60% of a Gen Z kids time. These startups are trying to compete with Youtube and Instagram by creating hyper-local content in vernacular languages such as Tamil, Bhojpuri, Hindi and Malayalam etc.
Rise of Generative AI: The rise of Generative AI has changed the way in which content is created. Gen AI has cut down costs across storytelling, production and distribution by almost 70%. Gen AI is able to automate everything and is changing the way content is created. Episodes of 1-2 minutes can be shot within a couple of days at the cost of Rs 10,000.
The market map above highlights some of the interesting startups in the microdrama sector. New startups such as Kuku FM, Reelies and Reel Saga are competing with established giants such as ShareChat, Prime and even Jio which already have existing user bases for their platform.
Business Model
There are mainly two possible sources of revenue for these startups:
Subscription/Freemium Model - These subscriptions could range from monthly, quarterly and yearly or could work on a freemium model where some episodes are free and the rest are paid.
Advertisement - These startups could build huge traffic to their apps and website via their short-form content and leverage advertising other products.
Risks and Challenges of the sector
Consumer Preferences - Consumer preferences are highly fluctuating in nature. The content/microdramas in such platforms have to be constantly iterated through rigorous data analytics and by studying what sort of content does the consumer want?. This could involve identifying different genres such as horror, comedy and family drama. Basically identifying what content sells.
Monetization - Microdrama startups are struggling to find a sustainable business model and are still in the early-stages of monetization. There are many difficulties associated with a subscription-only model. Sharechat, an established company, predicts its revenue from microdramas to be in the mid to high-teens. VCs are still willing to invest due to cost-efficiency driven by AI that shows a clear road to profitability.
Potential Copycats- There’s no barrier to entry and the way in which users can be won over is by creating unique content that has a mass touch to it. OTT giants such as Netflix, Prime and ShareChat have started OTTs dedicated to microdramas. A viable exit strategy is to just sell the company to one of these giants after attaining a commendable user base.
Prominent Deals in Microdrama Space
FlickTV raised a seed round of $2.3 million led by Stellaris Venture Partners with participation from investors like Gemba Capital and Titan Capital.
Chai Bisket has raised a seed round of $5 million from InfoEdge Ventures, General Catalyst and marquee angel investors like Alakh Pandey (Co-founder of PhysicsWallah).
Reel Saga raised a seed round of $2.1 million led by Picus Capital with participation from investors like Nazara Technologies, Warmup Ventures, 8i Ventures and Waveform Ventures.
Thesis Summary
India’s microdrama sector is capitalizing on the correct trends such as lower attention span, the rise of AI and India’s growing mobile-user base. I believe that these startups could provide potential returns within investment horizons of 5-7 years. The moat for these startups from this thesis is that they have to create unique content i.e Intellectual Property and vernacular dominance. The major point of differentiation from OTT giants is the hyper-local focus of the content.
Microdramas have the potential to change the way content is delivered. Instead of 3 hour long films short-form content of 1-2 minutes would be prevalent. The sector is not without its risks but has the power to shape the future of short-form content.
Sources: Economic Times, Inc42, CNBC TV18, Money Control, Exchange4Media, the week, Deccan Herald, Entrackr, techinasia, Times of India and digitalterminal.