Reliance's Jio playbook launches the new OTT flywheel, offering more for less

Reliance's Jio playbook launches the new OTT flywheel, offering more for less

Experts argue that although competitors may not boost rates, cross-selling between telecom and streaming is probable.

Certain analysts argue that JioCinema's exploitative pricing policy is not entirely random.

With the introduction of Jio cellular services eight years ago, Reliance Industries (RIL) completely upended the Indian telecom market by offering feature-rich data plans and free voice calls at a much reduced price, improving access for everyone. With JioCinema, the digital platform that is a part of the Viacom18 network, which is supported by Reliance, just launching the Rs 29 per month membership plan, that time has come in the nation's over-the-top (OTT) market.

JioCinema, the lowest over-the-top (OTT) subscription plan, will provide quality Indian, Hollywood, and other worldwide content for as little as Rs. 29 for one device and Rs. 89 for four devices per month. For the time being, its sports stream would remain free of the paywall.

As part of the broader merger between Viacom18 and Disney-Star announced in February, JioCinema not only lowers OTT entry barriers in India but also plans to consolidate with Disney+ Hotstar in a year, raising the possibility that global rivals like Netflix and Amazon Prime Video will be closely monitoring the space.

Disney+ Hotstar's monthly active users (MAUs) were estimated to be 333 million by SensorTower, a company that measures OTT subscriber figures, while JioCinema's MAUs were estimated to be about 95 million in the December quarter of 2023. While Hotstar's user base has shrunk to less than 200 million, JioCinema is expected to have surpassed 110–120 million MAUs in the March 2024 quarter.

According to Karan Taurani, senior vice-president of research at Mumbai-based brokerage Elara Capital, "monetization models will undergo a change."

It could be impossible for rivals to increase the cost of their subscription services. With JioCinema offering free sports programming and affordable subscription packages for other genres, that will become difficult. As a result, competitors from across the world would need to consider an ad-supported monetization model in India, something that companies like Netflix are already doing in other countries, he claims.

In light of JioCinema's intense competition, associate partner Mukesh Kumar of Redseer Strategy Consultants thinks that payment flexibility may benefit competitors.

We believe that pay-per-view, sachet packs, and multi-tier subscriptions may hasten the conversion of paying users. Since content is costly, OTT players may find it difficult to recoup their costs if they just depend on advertising, according to Kumar.

Media Partners Asia projects that by 2027, the income from India's over-the-top (OTT) video market—which brought in $3 billion in 2022—will have more than doubled to about $7 billion. By 2027, the advertising video-on-demand (AVOD) industry, which is already at a size of around 60%, is expected to reach a size of roughly 75%. According to media analysts, the size of the subscription video-on-demand (SVOD) industry, which is now at around 40%, will decrease to roughly 25% by 2027.

India is still a price-sensitive market for over-the-top (OTT) services, according to analysts at RBSA Advisors, with average revenue per user (ARPU) rapidly declining to less than $1 per month from about $5–$7 per month a few years ago. JioCinema has lowered prices to less than $1, while Netflix caused the first decline in OTT ARPU to levels of roughly $2–3 per month in December 2021 when it cut prices to Rs 199 per month for a basic plan (from Rs 499 earlier) along with Rs 149 per month for a mobile-only plan (from Rs 199 earlier).

Jio's overall strategy

Certain analysts argue that JioCinema's exploitative pricing policy is not entirely random. As elucidated by a senior executive in the media agency sector, this phenomenon enhances JioCinema's user base while simultaneously contributing to a broader suite of services provided by parent firm Reliance.

"Building a large customer base is the primary goal for now, not profitability. Higher involvement and income in other industries, such telecommunications, digital services, or retail, may result from JioCinema's growing user base. Hence, the executive said, "Conglomerates such as Reliance can enhance overall profitability by leveraging the value gained from providing lower-priced content on their OTT platforms across a diverse business portfolio."

Reliance's decision to cut OTT subscription pricing has, in the opinion of analysts Gaurav Malhotra and Della Desai of brokerage Axis Capital, put in action the media and telecom "flywheel." "OTT viewing has up, for starters. The second benefit is that it promotes service cross-selling, which strengthens the telecom offering and raises data consumption and ARPU, according to their statement.