IPO-bound Ullu is bringing content in cinemas near you, bets on ads to woo users

Video streaming platform Ullu is looking exploring ways to attract subscribers to its service in a fiercely competitive market, founder Vibhu Agarwal told Moneycontrol in an interview.

The streaming platform, which offers shows and movies targeted at an adult audience, has more than 20 lakh active subscribers, has registered over a 50 percent rise in subscribers in the last two years, according to a Draft Red Herring Prospectus (DRHP) it has filed with the Securities and Exchange Board of India (Sebi) to go public to raise around Rs 150 crore.

The plan is to make content for the big screen and then bring it to the smaller screen. "We are also coming up with a theatrical release section. We will make films with a budget of Rs 2-5 crore which will first release in theatres and we will then stream it on the digital platform” he said.

Agarwal said they are targeting the single screen cinemas for theatrical release, instead of multiplexes, because they follow the minimum guarantee model. “We see a gap when it comes to content for single screen cinemas. While the demand is there, there is not enough content for single screens," he said.

The picture has been bleak for single screen cinemas as there is no steady flow of content. Occasional hits like Shah Rukh Khan's Pathaan, Jawan, Sunny Deol's Gadar 2 or Ranbir Kapoor's Animal brought fireworks to these theatres but limited film releases that connect with the mass audience are putting pressure on single screens.

New titles, more investments

Ullu plans to spend Rs 30 crore on the production of new content using the proceeds from the IPO.

The company purchased content worth Rs 31 crore in FY23, up from Rs 26.5 crore in FY22. Its cost of production went up to Rs 9.5 crore in the last financial year from Rs 3.7 crore in FY22, as per the DRHP.

"Currently, we have 2,500 hours of content and we have ready content for the next eight months which is yet to be released. I am in the steel business so I love to stock. While I have a lot of content ready, I am not stopping at it and exploring different genres. We are also buying international content including Korean, Russian and Turkish titles. We are buying both short and long form content. To enhance the quality of content we will use the funds from the proceeds," the founder said.

In FY22, the company undertook a total of 66 projects from production houses and delivered on the app, up from 21 projects in FY21. It expanded into new genres like mythology which contributed to the increase in the project count.

Taking the ad route

With the platform’s content library expanding, the company has also hiked its prices to its subscribers in recent years. Annual subscription plan has increased from Rs 198 in 2020 to currently Rs 459.

Agarwal said that they have made content available for all pocket sizes since India is a price conscious market and not everyone wants to pay for content.

Similar to many of its peers, Ullu also plans to introduce advertising on the platform, where it plans to offer older library content to viewers for free. In recent years, many streaming platforms have taken the AVOD (advertising video on-demand) route as this market is 10 times bigger than the subscription video on-demand market (SVOD), said experts.

Streaming giants such as Netflix, Amazon Prime Video, and Disney+ have also started introducing advertising on their respective platforms in several markets across the world.

Cost of content

Along with content and pricing strategy, Agarwal's focus remains a tight control on the content cost. "I closely look into the cost of the content and the focus is always to not go overboard in terms of budget. What we keep in mind is that after we make a piece of content, we have enough capital to make more. It shouldn't be that all the money is spent on one thing, " he said.

This approach has helped them be profitable in recent years, a rare feat in India’s tech and startup ecosystem. The company posted a profit of Rs 15 crore in FY23, up from Rs 3.9 crore in FY22 and Rs 1.2 crore in FY21.

“The maths we follow at Ullu is that after recovering 50 percent of the money invested, will I be able to recover the remaining 50 percent in the near future and whether I will be able to earn profit from it," he said.

In today’s age, it is all about quality of content and doesn't matter if a show or a movie is headlined by a big star or not, Agarwal said. He also mentioned that it doesn't matter how much a content is valued at, but the focus should be on whether the content produced justifies the investment. “There are streaming shows which have been valued at Rs 25 crore but have not been able to justify those investments," he said.

A look at Ullu’s DRHP shows that the company is spending in the range of Rs 2.8 crore to Rs 4.8 crore for an entire show.

On the other hand, the first season of popular web series Sacred Games on Netflix is estimated to have been made on a budget of Rs 20-25 crore, while the popular Amazon Prime Video series The Family Man had a budget of Rs 50 crore.