BackReliance strengthens content bid for Jio
Mukesh Ambani-led RIL announced an integration with leading music app Saavn for its digital music service JioMusic last week
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New Delhi: Reliance Industries Ltd’s (RIL) entertainment play just got bigger. Last week, the Mukesh Ambani-led company announced an integration with leading music app Saavn for its digital music service JioMusic, with the former’s implied valuation in the combined $1 billion entity estimated at $670 million.
The move comes at a time when the audio streaming market is growing rapidly in India. According to the Ficci-EY media and entertainment (M&E) industry report 2017, the number of music app downloads went up from 205 million in 2016 to 400 million in 2017. While Jio had focused on video until now, media analysts said that with the launch of Amazon Prime Music recently and contenders like Gaana already in the field, they have to grow their music pipeline.
“Overall it’s a positive development for the industry. As more people use legal streaming services, we can build a strong revenue opportunity for artistes and creators, while also making a healthy business for platforms. We expect the current 120 million user market to grow to 300-400 million in the next few years," said Prashan Agarwal, chief executive officer, Gaana.
However, there is more to the Jio move than just conquering the audio streaming segment. It comes on the back of RIL’s decision to buy a 5% stake in film company Eros International Plc last month, in addition to existing stakes in production houses Balaji Telefilms and Roy Kapur Films acquired in the last eight months, which will effectively make it India’s biggest content provider, said industry experts.
Jio did not respond to Mint’s queries.
“Of course RIL is looking at media and entertainment in a big way. Eros was a logical partner for it given its Hindi and regional movie slate and the digital presence with Eros Now and its originals," said Jyoti Deshpande, former group chief executive officer and managing director at Eros, and now head of the media and entertainment business at RIL as president of the chairman’s office. “Opportunities will unfold with time and we’re keeping an open mind to bring the two forces together and see how we can integrate investments," she said.
What Deshpande calls “a big boys’ game" with huge influx of money into the industry as a whole, is a story of content and consolidation in the Indian entertainment market, evidently led by firms like Reliance for its 4G mobile network operator Jio.
Telecom operator Airtel has committed to long-term content strategies too, with the telco’s alliances with over-the-top (OTT) platforms like HOOQ, Eros and SonyLIV and its entire content catalogue available on its 360-channel housing video streaming service Airtel TV.
“There are a couple of reasons telcos in India are getting into content," said Sameer Batra, chief executive officer at Wynk, Airtel’s music app. “First because the ecosystem in the country is getting really conducive in terms of accessible devices and pricing. Second, there is a direct correlation between consumer loyalty to a telco and its product offerings like music."
Batra said Airtel thinks of itself as an aggregator of the best content that can be offered to consumers today. Similarly for Reliance, the latest deal is essentially a logical progression—while an Eros blockbuster, a Viacom18 television serial (Viacom18 is a subsidiary of Network18 owned by RIL)) and an ALT web series will now be available on its OTT video service, Saavn’s established music library will feed the audio segment. All of this for RIL to sustain the big bet on telecommunication and 4G with Jio.
“Telco and content are not mutually exclusive. If I produce a film and show it only on my network, how will I monetize it?" said veteran film producer Amit Khanna. “In the digital value chain, Reliance is seeing entertainment as part of its expansion plan. And it has the money which others don’t, it’s as simple as that," he said.
Reliance launched its LTE mobile network operator Jio in 2016. By November 2017, it accounted for a 14.5% share of India’s wireless telecom market for the second quarter of the year, besides revenues of Rs6,140 crore for the September quarter and an implied paid subscriber base of around 131 million. In July last year, RIL acquired a 24.92% stake in Ekta Kapoor’s Balaji Telefilms Ltd in a deal worth Rs413.28 crore, an investment that Balaji said would be utilized to further speed up content development initiatives, especially for ALT, Balaji’s video streaming platform that aims to create 250-plus hours of original content a year.
In September, Reliance announced a multi-year digital content deal with Roy Kapur Films for the latter to produce exclusive long and short-form content as “Jio originals". Roy Kapur Films was launched by Kapur in mid last year to produce feature films and original digital content. In January this year, TV18 Broadcast Ltd took operational control of Viacom18 Media Pvt. Ltd, raising its stake in the company to 51%, a move that the company said would position it better for affiliates like Jio.
Kapur did not respond to Mint’s queries for the story, while ALT refused to comment.
“Ever since it launched its 4G services, Reliance has spelt out telecommunication and media convergence as a clear goal," said a media analyst, on the condition of anonymity. “For 4G to be economically viable, the company needs its data consumption to grow and the best way to get that to happen is video and audio. It’s therefore in Reliance’s interest to drive video consumption which in turn, boils down to content."
The problem is, media industry experts point out, it’s difficult to get exclusive content in India. That is where firms like Viacom18, Balaji and Eros with a steady stream of movie and digital output come in. Eros, for instance, is not only one of the biggest movie studios in the country but has also forayed into digital business with its streaming service Eros Now expected to touch 6-8 million subscribers by March.
The trend is obvious, there is a major play that Reliance has in Jio where it is looking at multiple content pipes, said Ajit Andhare, chief operating officer, Viacom18 Motion Pictures. “I think it’s (such investments) an absolutely sensible thing to do and it only creates more synergy for the larger company (Reliance) though ultimately the important thing will be that each of the companies generate value in its own domain. And that is what we are focused on, that at Viacom18, we make a difference as a studio," he said.
Further, appointments like Deshpande and Ajit Thakur (former head of Eros’ franchise division, Trinity Pictures and now head of film studios at Reliance) at RIL is an indication of how committed Reliance is to the M&E sector, analysts say.
“There is obviously a strategic interest in investing in media and entertainment but there is a pattern here, after ensuring a presence on OTT and broadcast networks, this could be a bid to get into film production and distribution," said Girish Dwibhashyam, head-content at movie streaming service Spuul. “That would complete the entertainment ecosystem for them. If it was just about content, they could have done a licensing deal with Eros."
Deshpande added that consolidation is the need of the hour in the Indian film industry that faces an urgent need to grow and scale up. Combined with the emergence of around 30 OTT platforms and evolving audience tastes, traditional movie production in Bollywood, in no exaggerated terms, is in a crisis, as evident in the 10-15% fall in theatrical collections in 2017 compared to 2016. The only recourse, experts said, is to look at players who have deep pockets and can continue experimentation.
“Clearly, there has been a lot of disruption, market sentiments and consumer behaviour are constantly changing. A lot of testing is happening at this time and it’s not always possible to do these things with a smaller budget," the analyst mentioned above said. “So size, scale, balance and creativity need to come together which will happen through these deals. To be able to revive the Bollywood segment, you need an entity that will leave no stone unturned to make sure the plan it has will work. And what Jio can achieve with its predatory pricing and deep pockets is incomparable right now."
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