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May 4, 2020updated 05 May 2020 10:11am

Eros – STX merger might not be a box office smash

By GlobalData Technology

The OTT-focused merger of Eros and STX intends to capitalize on the combined library of Indian and Hollywood content. But it could fall short in the fight with dominant market players such as Netflix and Walt Disney. Its strategy to target China with foreign content could be a cash-burning move, especially as powerful local players have a domestic advantage. It is better off focusing on growth within India – a fast-growing market that Eros is already familiar with.

Eros gains content and STX gets platform

Eros will stream STX’s original Hollywood content on its Eros Now platform, which had 26 million paid monthly subscribers in December 2019. STX will gain access to an OTT platform that is an alternative distribution channel for its content.

Eros STX Global will not be a global success story

In the long-term, it is likely that they will be not be able to stand up to major players. Walt Disney, Netflix and Amazon Prime Video currently dominate the US and Indian markets. The Eros STX Global Corporation hopes to expand into China, where neither company has so far succeeded. STX previously failed to bridge the gap between Hollywood and China: without the backing of powerful studios, it is tough to make any Hollywood or Indian content work in China. It must also compete with Tencent, iQiyi, and Youku for a slice of their market.

Eros’s financial performance has been poor over the last five years, with investment and credit ratings firm shorting its stock or downsizing its rating. STX likewise had its own share of financial worries. It pulled a planned an IPO (initial public offering) in Hong Kong. This was due to an underperforming box office, and the trade war between the US and China.

Focusing on the Indian market may be a better strategy

The unusual East-West pairing argues that there are marketing reasons to combine forces. The company planned to release 40 feature films casting A-grade actors from the US and India this year. But Covid-19 makes that unlikely.

Ultimately, the combined entity will be just another minnow in a pond full of whales, unable to position their premium content and attract customers. For a media company to become an industry leader in production and streaming, continuous scaling and investment in technological innovations is more pressing than collaboration alone.

A solid catalogue of content; an intuitive and easy to use user interface; and the need to market well and gain user recognition are essential factors to gain pace in streaming market. For a small player like Eros, gaining dominance in its main market, India, through constant innovations and content creation may be a better idea than running before it can crawl.