Ambani has a plan to upstage Netflix, YouTube

Mukesh Ambani is determined to demonstrate that Indian consumers are willing to pay for online video content. Late last year, Ambani, who holds the title of Asia's wealthiest individual, finalised a partnership with Disney to establish the largest entertainment enterprise in India. He is the principal shareholder through his conglomerate, Reliance, which spans energy, retail and telecommunications.

JioStar, with a valuation of $8.5 billion, boasts the largest array of television networks in India, along with the country's most popular subscription-based streaming platform, JioHotstar. Uday Shankar, a prominent figure in India's media landscape and investment sector, is responsible for the daily management of the business.

According to Bloomberg, JioHotstar announced that it has exceeded 100 million subscribers, marking it as the first streaming service in India to achieve this significant milestone. This achievement is particularly noteworthy in a market where convincing consumers to pay for entertainment has historically been challenging. Ambani's success can be largely attributed to the popularity of cricket, especially the Indian Premier League.

“This new combination of JioHotstar is trying to change TV,” said Vivek Couto, owner of the consulting firm Media Partners Asia. “You have this big industrial juggernaut and a maverick entrepreneur. What does success look like for this business?”

India's entertainment media industry

International media firms have long been captivated by the potential of India, a nation with a population of 1.4 billion. Capturing even a mere 5% of this vast market could yield a profitable venture. Major players like Paramount, Disney and Time Warner entered the scene with high aspirations but faced significant challenges. They made poor hiring decisions, lacked patience and failed to appreciate the market's diversity.

Rupert Murdoch is often credited with successfully navigating the Indian landscape, although many attribute this achievement to his son James, who collaborated closely with Uday Shankar, now a co-owner and vice chairman of JioStar. The influx of streaming services began nearly a decade ago, coinciding with the rise of internet accessibility driven by Ambani’s Jio, which offered mobile plans at prices comparable to a cup of coffee in the United States.

In 2018, shortly after Netflix's entry into India, co-founder Reed Hastings expressed optimism about reaching 100 million subscribers in the country. He reinforced this commitment a year later by investing hundreds of millions in localised content. However, Netflix faced challenges in attracting a substantial subscriber base, as its pricing was perceived as high and competition from other services was intense.

Nevertheless, there are indications that the market is beginning to improve, particularly among the affluent demographic. OTT and streaming platform Netflix's subscriber count has reportedly risen to approximately 15 million, marking a significant increase over the past few years. Industry observers agree that the company is starting to establish a stronger presence through a combination of licensed films and original local productions. Additionally, the number of individuals subscribing to music services has tripled since 2020.

Online subscription growth

These figures remain relatively modest. Netflix enjoys popularity among affluent Indians who are keen to access more provocative content that is unavailable on local television. A mere fraction of Spotify and YouTube users opt for the premium subscriptions of these platforms.

In contrast, JioHotstar has significantly more ambitious goals. The platform aims to rival Netflix in the premium segment while also competing with YouTube in the budget-friendly category. It boasts an extensive library of local content, along with licensed offerings from major studios such as Disney, HBO, NBCUniversal and Paramount, in addition to short dramas. Users can access the service for free up to a certain limit, after which a subscription fee is required to continue viewing.

The typical JioHotstar subscriber spends less than $1 per month, which positions advertising as a crucial element of the company's profitability strategy. According to Media Partners Asia, the market for streaming video advertisements is three times larger than that of subscription services. Platforms like YouTube, Facebook and Instagram collectively attract hundreds of millions of users in India, with YouTube being the largest market in terms of user base.

Are Indian users misers?

Shankar has strategically positioned cricket, a sport immensely popular in India, at the core of his business approach. The company is investing over $1 billion annually to secure the rights for the two-month Indian Premier League tournament, encompassing both television and streaming platforms. 

According to Couto's estimates, JioHotstar must attract between 200 million and 300 million subscribers to make this investment viable. The financial burden is so significant that the company cannot rely solely on revenue from the matches. Therefore, management must also engage a substantial audience that will remain for broader entertainment offerings. 

The expansion of streaming services is crucial in a market facing challenges similar to those encountered globally. India's pay-TV sector is declining and the film industry is experiencing turmoil. Overall, the entertainment sector grew by only 3% last year, as reported by Ernst & Young, which is slower than the growth rate of the country's economy.

“The economy appears to be growing, but it’s not yet translating into the ad boom everyone was expecting,” Couto said.

Bollywood, which refers to the Hindi film industry, appears to have disconnected from its audience, ceding a significant portion of its cultural influence to filmmakers from southern India. Many prominent producers are contemplating selling their companies to external investors, as evidenced by Dharma Productions' decision to divest a 50% stake to a pharmaceutical magnate. 

When engaging with an average Indian screenwriter or producer, one may find their sentiments echoing those of their counterparts in the United States or South Korea. Streaming platforms are now scaling back after investing billions in the pursuit of subscribers. This trend of consolidation has resulted in Netflix, Amazon and JioStar emerging as the primary purchasers of most high-quality programming. According to Media Partners Asia, the number of locally produced original series has declined by approximately 30% from its peak in 2021.

Output slumps

Executives in India are exhibiting a more positive outlook compared to their counterparts in the United States. Over the past decade, India's gross domestic product (GDP) has experienced a remarkable doubling, positioning the country on the verge of potentially surpassing Japan and Germany to become the world's third-largest economy. Despite the GDP per capita remaining relatively modest at around $2,500, the emergence of a burgeoning middle class has significantly invigorated the live entertainment sector, leading to increased demand and investment in this area.

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