Eight years ago, Reliance Industries (RIL) turned the domestic telecom industry on its head with the launch of Jio cellular services, bundling free voice calls and feature-rich data plans at a fraction of the cost, thereby increasing access to all. That moment has arrived in the country’s over-the-top (OTT) sector now with the recent launch of the Rs 29 per month subscription plan by JioCinema, the digital platform which is part of the Reliance-backed Viacom18 network.
The cheapest OTT subscription plan for both one device (Rs 29) and multiple devices (Rs 89 for four devices a month), JioCinema will offer premium Indian, Hollywood and other global content, keeping its sports feed out of the paywall, for now.
Global rivals such as Netflix and Amazon Prime Video are believed to be watching the space closely, as JioCinema not only lowers OTT entry barriers in India, but will also consolidates with Disney+ Hotstar in a year, as part of the larger merger between Viacom18 and Disney-Star announced in February.
Data by SensorTower, which tracks OTT subscriber numbers, has pegged Disney+ Hotstar’s monthly active users (MAUs) at 333 million and JioCinema’s at about 95 million in the December quarter of 2023. In the March 2024 quarter, JioCinema is estimated to have crossed 110-120 million MAUs even as Hotstar’s numbers have fallen to below 200 million.
“Monetisation models will undergo a change,” says Karan Taurani, senior vice-president, research, at Mumbai-based brokerage Elara Capital.
“Competitors may not be able to raise prices of their subscription plans. That will become challenging, with free sports content and economical subscription plans for other genres by JioCinema. Global rivals will therefore have to look at an ad-supported monetisation model in India, which players such as Netflix are doing in international markets,” he says.
Mukesh Kumar, associate partner at Redseer Strategy Consultants, believes that flexibility in payment could help rivals in the face of JioCinema’s competitive intensity.
“We think multi-tier subscription, pay-per view and sachet packs can expedite paid user conversion. Because relying on advertising alone might become a challenge in recovering the cost for any OTT player since content is expensive,” Kumar said.
As per Media Partners Asia, India’s OTT video market, which generated $3 billion in 2022 in terms of revenue, is projected to more than double to nearly $7 billion by 2027. Of this, the advertising video-on-demand (AVOD) market, which is currently at about 60% in terms of size, will touch about 75% by 2027. While the subscription video-on-demand (SVOD) market, which is at about 40% now in terms of size, will shrink to about 25% by 2027, media experts said.
Analysts at RBSA Advisors say that India remains a price-sensitive market for OTT services, with the average revenue per user (ARPU) steadily falling to under $1 a month now from about $5-7 per month a few years ago. While Netflix triggered the first fall in OTT ARPU to levels of about $2-3 per month in December 2021 when it slashed prices to Rs 199 per month for a basic plan (from Rs 499 earlier) and Rs 149 per month for a mobile-only plan (from Rs 199 earlier), JioCinema has brought prices down to under a $1 now.
Jio’s larger gameplan
Some experts believe that there is a method to the madness behind JioCinema’s predatory pricing strategy. As a top media agency executive explains, it not only boosts JioCinema’s user base but also feeds into a larger ecosystem of services offered by the parent company Reliance.
“Profitability is not the immediate focus, amassing a huge consumer base is. The increase in users on JioCinema can lead to higher engagement and revenue in other business areas, such as telecommunications, digital services, or retail. Therefore, for conglomerates like Reliance, the value gained from offering lower priced content on their OTT platforms can be leveraged across a diverse business portfolio, enhancing overall profitability,” the executive said.
This point is endorsed by analysts Gaurav Malhotra and Della Desai at brokerage Axis Capital, who believe that Reliance has set the media and telecom “flywheel” into motion by lowering OTT subscription plans. “One is that it boosts OTT viewership. Second is that it aids cross-selling of services, thereby supporting the telecom offering, which will result in higher data usage and ARPU,” they said.