Transformational week for Indian Media & OTT
Plus our exclusive analysis of Indian OTTs' subscription pricing
Hey Streamers 👋,
A warm welcome to the 26th edition of the “Streaming in India” newsletter, your weekly news digest about streaming players, OTT trends and more in one of the fastest growing video markets! Appreciate your support and in case there are topics that we might have missed out so far, we are open for suggestions and feedback. If you are not already a subscriber, please sign up and join 2,500+ others who receive it directly in their inbox every Wednesday.
^ Ms Nita Ambani, newly announced Chairperson of the combined Reliance - Disney Star Joint Venture seen along side the richest man in India and Reliance owner, Mr. Mukesh Ambani (worth an estimated $115 billion)
By the time this newsletter drops, a lot of information and analysis will be offered by media pundits, gurus and critics alike, however we had to share our thoughts on the biggest media, entertainment & OTT “MOVE” in recent Indian history, disrupting the “eyeball” / attention economy, pending a Competition Commission of India approval.
And over this past weekend, Indians everywhere held their breath in amazement and awe as the Ambani family put on a show for their youngest heir Anant Ambani’s pre-wedding wedding celebrations spread over 3 days in Jamnagar, Gujarat. Bollywood stars, famous cricketers, politicians BUT also Mark Zuckerberg, Bill Gates, Rihanna (in the pic above), Ivanka Trump, and more were present showcasing a show of strength, power and dominance. Every Indians’ instagram feed was filled with videos, pictures, behind the scene moments, and candid shots from the pre-wedding extravaganza (Rihanna was supposedly paid $6.25 million and the total cost of the event was Rs. 1000 crores ~ $120 million) and it was a total treat or not, you be the judge!
We want to run today’s newsletter slightly differently as there is a lot to share and we will dive right in -
1. Formation of Joint Venture:
Reliance Industries Limited, Viacom 18 Media Private Limited, and The Walt Disney Company have inked binding agreements to create a joint venture (JV). This collaboration merges the media operations of Viacom18 into Star India Private Limited under a court-approved scheme. With Reliance's commitment of $1.4 billion + $4 billion from Viacom18 at closing, and Hotstar / Star India at a combined $3.2 billion, the JV is valued at ~ $8.5 billion, marking a significant union in India's media landscape.
The valuation of Star India and Hotstar is much lower compared to the pre-covid valuation of $14 billion - $15 billion which may be due to the 1) Loss of IPL digital rights leading to ~50% ad revenue decline and 40% subscription revenue decline for Hotstar, 2) TV ad revenue remaining flat over FY19-23 and 3) Sports content incurring notable losses due to slower revenue growth.
2. Dominance in Content and Market Reach:
The merged entity will wield substantial control, with RIL taking the lead with 16.34% ownership, followed by Viacom18 at 46.82% and Disney at 36.84%.
This powerhouse will cater to over 750 million viewers in India and beyond, granting exclusive rights to distribute Disney content in the region. With 108+ channels, two major OTT platforms, and film studios, the JV is poised to dominate India's entertainment market.
3. Disruption in OTT Sector:
The amalgamation of JioCinema and Hotstar presents a challenge to global and local OTT platforms. The bundled offerings, spanning web series, movies, sports, and originals, could hamper the ability of competitors to increase Average Revenue Per User (ARPU) in a market that values bundling and affordability.
4. Potential for Profitability:
The JV holds promise for improved profitability over time, driven by synergies in reducing costs and enhancing revenue streams. By leveraging Jio's subscriber base and Disney's content library, the entity aims to bolster subscription revenues while streamlining operational expenses, ultimately paving a sustainable path to profitability.
5. Monopoly in Sports Content:
With control over significant sports properties, including the Indian Premier League (IPL), the merged entity stands to dominate the sports market, potentially leading to higher ad revenues.
This monopolistic position in sports content could reshape the landscape of ad market dynamics in India.
6. Telco Integration and Customer Retention:
The merger leverages telecom-OTT synergies, aiming to enhance customer retention and acquisition through bundled offerings. With Jio's (India’s largest telco also a Reliance company) extensive subscriber base, the JV could emerge as a one-stop content destination, posing challenges for competitors like Bharti Airtel in the content ecosystem.
7. Synergy Prospects and Risks:
The JV anticipates cost synergies, particularly in production and advertising expenses, while enhancing the user experience through technological advancements - Disney+ Hotstar has arguably built the most scalable & reliable OTT platform in the world with the ability to manage tremendous scale showcasing several live IPL tournaments earlier and the last one day international world cup in India saw it break it’s own highest concurrency record for a live match multiple times, eventually settling at a world record 59 million concurrent users during the India - Australia final.
However, regulatory approvals, customer experience concerns, and continued losses due to high sports content costs pose risks to the venture's success.
8. Shareholding Structure and Valuation:
Post-merger, Reliance will hold a significant stake in the combined entity, alongside Viacom18 and Disney. The valuation of the JV at $8.5 billion underscores its strategic significance, despite challenges in sports rights and market uncertainties affecting Hotstar's pre-COVID valuation.
9. Significance to the Ambani Family and Cultural Influence:
The formation of the joint venture holds significant importance to the Ambani family, owners of Reliance Industries Limited (RIL), with Ms. Nita Ambani slated to assume the role of chairperson of the JV.
This appointment underscores the family's deepening involvement in the entertainment industry. Ms. Ambani's transition to the chairmanship follows her departure from the RIL board, signalling a shift towards charitable pursuits, exemplified by her leadership at the Reliance Foundation.
Beyond business, the Ambani family is closely associated with Bollywood luminaries, regularly hosting events attended by industry personalities.
Ms. Ambani's cultural contributions extend to the Nita Mukesh Ambani Cultural Centre (NMACC), a renowned venue for artistic performances in Mumbai. Moreover, her engagement with RISE, which oversees entities like the Indian Super League, Mumbai Indians cricket team, & Lakme India Fashion Week further illustrates the family's multifaceted involvement in promoting sports, fashion, and cultural endeavors in India.
The joint venture not only represents a strategic business move for Reliance but also aligns with the Ambani family's broader vision of enriching India's cultural landscape.
10. Global Ambitions and Outreach:
Another crucial aspect of the joint venture lies in its global ambitions, as highlighted in the announcement. The JV aims to cater not only to the vast Indian audience but also to the global Indian diaspora.
This suggests the possibility of Hotstar and JioCinema offering a diverse slate of content, including originals, live Indian sports tournaments, cultural programs (example - live streaming of events from the Nita Mukesh Ambani Cultural Centre), Indian movies, and catch-up television from their linear bouquet to audiences worldwide.
This strategic approach underscores the venture's intention to expand its reach beyond domestic boundaries and establish a significant presence in the international media and entertainment arena.
^ Image: Morgan Stanley
Indian OTTs’ pricing overview
Note that OTTPlay offers 9 OTT app and 150 live channels as part of it’s annual subscription of Rs. 360 per year, Watcho is at 14 OTT apps bundled for Rs. 1,599 per year and Tata Play Binge offers 26 apps bundled for a price of Rs. 3,588 per year just to give you an idea of the bundled offerings by three of the better known OTT and content aggregators in the country.
Jio Cinema is an ad supported platform for it’s Indian content including all the live sports, however has an annual subscription of Rs. 999 for the Hollywood bundle which includes HBO content.
The cheapest regional language app is AAO NXT in Odiya from the state of Orissa, Eastern India, at Rs. 299 per year and the most expensive regional content app is Adda Times which is a Bengali OTT platform from the state of West Bengal.
The other two big names in OTT, Zee5 and SonyLIV are at annual subscriptions of Rs. 699 and Rs. 999 respectively. One can argue that given the depth and diversity of Zee’s content library, a Rs. 699 / year price point is great value sitting at the mid section of the overall pricing table (and assuming that Netflix at Rs. 5,988 is an outlier).
At some point Fancode (one of the larger sports OTTs in India) will have to re-evaluate their all you can watch annual pricing strategy which is at Rs. 999, given that Jio Cinema is offering all live sports for free and ad supported.
ALTT and Ullu, both offering majority of erotic / semi-porn content showcase pricing which reflects the state of play and business dynamics at each of these company.
ALTT is at an annual subscription price of Rs. 250 and Ullu (with an upcoming IPO) is at Rs. 495 (almost double of ALTT, however with surging popularity).
From the South Indian OTT stable, ManoramaMAX (Malayalam) and aha (Telugu) charge the same annual subscription price of Rs. 899, coming in higher than SunNXT (Tamil, Kannada, Malayalam & Telugu) at Rs. 799.
Amazon Prime Video and Disney+ Hotstar are tied for annual subscriptions at Rs. 1,499. Hotstar’s current pricing is not justifiable given that they don’t have IPL now, however all that is set to change with the new JV.
The average annual subscription cost across 31 OTTs (leaving aside Tata Play Binge and Netflix) is Rs. 735 OR $9.
This is only $0.75 per month, which just emphasises that India is a low ARPU market where platform owners rely on volume of subscribers to maximize returns.
This further fuels the argument to go back to the basics of hybrid business models including a combination of ad supported, transaction video on demand and subscriptions to increase revenues.
And finally there will not be a one size fits all, however OTTs will have to look at other interesting strategies of releasing a new episode every week to retain subscribers, gaming and e-commerce (potentially ads in games as well), syndication, branded content, diaspora optionality and live events etc to fuel the revenue numbers.
Overall, the analysis of the OTT subscription fee table underscores the dynamic nature of the Indian OTT market, characterized by fierce competition, diverse pricing strategies, and evolving consumer preferences. OTT providers must continually innovate and differentiate their offerings to attract and retain subscribers in this rapidly growing and evolving digital entertainment landscape.
That’s all for today folks. If you enjoyed this breakdown, please consider sharing it with your friends and colleagues.
The OTT content of the week is Indrani Mukherjea Story, Buried Truth on Netflix (Just FYI and to add to the drama, the Bombay High Court has dismissed the Central Bureau of Investigation's plea seeking to halt the release of the Netflix docu-series, 'The Indrani Mukerjea Story: Buried Truth'), which is inspired by real events and with new revelations and access investigating the disappearance of 25-year-old Sheena Bora. It reveals the shocking aftermath.
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