MUMBAI, Dec. 26 -- Going into 2026, India's media and entertainment (M&E) industry will make greater use of Artificial Intelligence in production of films and shows, will be more careful with programming budgets, and will create content that straddles multiple formats. The downward slide of traditional TV will continue, connected TV (internet-enabled) households will increase, streaming subscription growth rates will be slow with most OTT platforms pushing advertising-led tiers. Latest numbers from research, advisory and consulting company Media Partners Asia (MPA) estimate that India's $30 billion media and entertainment industry grew 5.4% in 2025, with the screen economy - comprising television, streaming, and theatricals -- contributing nearly 45% of value ($13 billion). "The video industry is undergoing a structural transition, driven by rapid connectivity upgrades, rising connected TV adoption, and a decisive shift in monetization from linear TV to online video," said Mihir Shah, vice president, MPA. The biggest worry and expectation of M&E industry for 2026 is moderation in content costs to keep the industry healthy. "Celebrity production houses quote very steep rates for films and shows. This comes on the back of high cost of talent - especially Bollywood stars seeking massive upfront fees, making projects unviable. Entertainment industry talent will have to temper their expectations and new talent will be promoted in 2026," said an executive of a large media company, declining to be named. Mihir Shah agreed: "India's content investment landscape is expected to grow modestly, driven by disciplined capital allocation after years of elevated spending." Streaming investment will rise from $2.6 billion in 2025 to $2.9 billion in 2026, he said. Production costs of films and shows will also benefit from enhanced use of AI in the business that allows for speed and scale without burning cash. JioStar's first AI-generated epic series 'Mahabharat' was well received. Abundantia Entertainment has announced two AI-powered mythological feature films. Swastik Stories is dabbling in AI-generated tales for digital channels. 2026 will also see a glut of micro dramas with both the mainstream OTT services and smaller apps investing in this segment. Amogh Dusad, head of content at Amazon MX Player, said they have dropped 200 micro drama series on MX Fatafat in the last two months and will scale up their offering given its phenomenal reception on the service. "You may binge-watch a traditional web series, but micro drama consumption happens throughout the day," Dusad said. Shah likens the nascent micro drama segment to the short-video boom of the early Covid years when platforms scaled rapidly on funding momentum despite unproven monetization models. "Over the past year, a new wave of local micro drama apps has entered the market, triggering another round of fundraising. However, the format remains in an exploratory phase," he said. On challenges facing OTTs, Dusad said that Amazon MX Player, the free, ad-supported service, has seen its user base increase and brand partnerships expand. "Streaming really established itself post-Covid and is fairly young. It has churned out some amazing content for consumers and is learning to monetize through subscription video-on-demand (SVoD) and advertising video-on-demand (AVoD) models," he said. At the end of 2025, India will have 272 million paid video subscriptions, MPA said. Meanwhile, though traditional TV is declining, it's still prized by advertisers for reach, appointment, and community viewing. But since digital advertising is geo-targeted and measurable, it is growing faster. Channel revenues will decline 14% year-on-year in 2025, marking the third consecutive year of contraction in television advertising, MPA said. "Despite channel price hikes, affiliate revenues continue to decline, limiting the TV industry's ability to reinvest in content," Shah said. "However, television still remains an important profit pool for the industry," he added. Part of the advertising loss on linear television advertising is being offset by rising connected TV reach and consumption, Shah said. The CTV advertising market is projected to expand from $0.5 billion in 2025 to US$2.6 billion within five years, equivalent to the size of the traditional TV ad market today, MPA noted. In 2026, Shah sees the M&E industry players reassessing operating models, correcting past excesses, and shifting from scale-led growth to monetization-led discipline....