Jio Cinema’s move to stream IPL free is risky: Karan Taurani

Indian Premier League moving away from paid content is a potential threat for TV advertising in the medium term, feels Karan Taurani, Senior Analyst at Elara Capital.

”In our view, it will be difficult for Viacom18-Jio Cinema to recover even 30-40% of its content acquisition cost via the digital route, if the content is free at least in the near term (over the next two years); however, in the medium to long term, due to 1) the change in consumption habits on digital media and 2) growing Smart TV penetration, there is the possibility of their digital ad revenue scaling up, but it may still continue to be much lower as compared to TV medium ad revenue (IPL),” he pointed out.

The Indian Premier League (IPL), the most expensive sports brand in the country, recently sold its digital media rights to Viacom 18-Jio Cinema for INR 234.9bn (for a period of 5 years), including the 18-match cluster. India’s digital video advertising market size is INR 130bn (~30% of the country’s digital ad pie) and it is dominated by social media and aggregators (YouTube), leaving a mere 15% for broadcast and other OTT platforms.

As per media reports, Jio Cinema will offer free IPL content on its app. Providing IPL content-free could have a negative impact on TV advertising and on TV medium consumption, given 1) digital is a better platform for this content as it is available free vs TV where it is subscription-based and 2) it will attract a larger audience vs Hotstar in the past, which charged a subscription fee for its platform. On the other hand, advantages of the TV medium remain 1) its mass viewership and reach, 2) cheaper cable average revenue per user (ARPU) as 95% of the market uses bundles & does not subscribe a la carte, 3) largescale advertisers, such as FMCG, autos and telecom, which allocate sizeable budgets for mass campaigning on TV, and 4) sports is viewed in large groups on TV, which too augurs well. The Smart TV proposition may be a threat for linear TV only in the medium term, as penetration of the former is low at ~10%; this can scale up with the rise in broadband penetration.

According to the analyst, providing free IPL also would have a negative impact on India’s OTT market, as ARPU may drop down further or remain stable in a market where most OTT platforms are already available at cheap prices vs global averages (for e.g., Netflix and Amazon have the lowest pricing in India).

“The domestic OTT market was already having a tough time, given fragmentation and high content cost. Lower visibility on ARPU would add to its concerns. Further, from Jio’s standpoint, this would push Jio Cinema’s subscriber base toward new records, as they may start to compete with the likes of YouTube India, which has a monthly average user (MAU) base of 520mn, the largest in India. It would further help Jio Cinema to cross-sell its other content offerings and assist with mobile subscriber retention. This, in turn, can help Jio Cinema compete with social media platforms, such as Facebook and Instagram as well as YouTube, which has an 80% share in India’s video advertising segment, apart from mere broadcaster OTT platforms, which have a smaller share. The surge in advertising video on demand (AVOD) user base also augurs well for programmatic advertisers, such as Affle India, as there is a potential for higher conversions on homegrown OTT apps with a larger user base, rather than YouTube and social media apps owned by global giants,” he adds.

According to him, Jio Cinema’s move to stream IPL free on its app has a lot of risks attached to it, as ROI may not be easily recovered; however, the strategic initiative to scale up Jio subscribers and Jio Cinema customers base may be an advantage. Taurani feels that poor user experience (tech) on the Jio cinema app may be the only big risk for user acquisition, user retention and content monetization.