BENGALURU -- Indian conglomerate Reliance Industries seized a weapon that may help it win its battle with Disney for the top spot in the country's huge streaming market. Reliance's Viacom18 unit has bid successfully for the digital rights to the Indian Premier League (IPL), the country's annual cricketing extravaganza.
However, it remains unclear who will win the larger war. Disney Star, the Indian subsidiary of Walt Disney Co. of the U.S., retained the rights to broadcast the tournament on TV on the Indian subcontinent for 235.75 billion rupees ($3.02 billion), about 1.5 times what it paid for both TV and digital rights for the period from 2018 to 2022.
While TV remains important in India as a source of stable advertising revenue, Disney lost out to Viacom18 on streaming, which analysts see as the medium of the future. Viacom18 paid 237.58 billion rupees for streaming, slightly more than Disney Star paid for the TV deal.
Disney Star's loss is, of course, Reliance Industries' gain. By letting the digital rights slip, Disney Star risks losing out in India's highly competitive over the top (OTT) segment, where it is still the clear market leader.
Along with the rights to stream and broadcast the tournament outside the subcontinent, which was shared between Viacom18 and local media group Times Internet, the total proceeds from the rights sale came to a staggering 483.9 billion rupees.
Viacom18's aggressive bid for the streaming rights shows that it is gearing up for a robust digital play. The push is important because Viacom18, a joint venture between Reliance Industries' TV18 and Paramount Global, has been a laggard in both the TV and the streaming markets despite the heft of its parent.
According to regulatory filings, the company had revenue of 32.76 billion rupees in the financial year ended March 2021, while its net profit came in at 5.82 billion rupees. Meanwhile, Disney Star, India's biggest entertainment company, notched a profit of 8.15 billion rupees on revenue of 126.64 billion rupees, estimates London-based investment bank Elara Capital.
Disney's streaming platform in India, Hotstar, is the country's biggest, with about 51 million subscribers who are largely drawn in by the IPL. Trailing Hotstar are Amazon Prime with 22 million subscribers, and Netflix with 6.1 million, according to research specialist Media Partners Asia.
In that context, Viacom18's play for IPL, an annual cricket tournament that keeps Indians glued to screens, is no surprise. Such was the urgency that Viacom18 fattened its war chest in April with a 135 billion rupee investment from Bodhi Tree Systems, an investment firm backed by James Murdoch and former Star India head Uday Shankar, the man credited with championing Star's digital offering.
The move is also in sync with Reliance Industries' Chairman Mukesh Ambani's vision to build a content empire to support his telecom venture, Jio, which counts Big Tech giants Alphabet and Facebook as investors.
Streaming rights for the IPL may benefit to Jio, Reliance Group's Indian telecom venture. The splurge on digital rights to the IPL will help Viacom18's streaming platform Voot pull in subscribers, while Jio could offer telecom packages that include a Voot subscription in the run-up to the tournament. There is also a possibility that more people will buy a Jio subscription to watch the tournament on Jio TV, a free streaming platform for the telecom company's subscribers. It will also improve the brand recognition of Reliance's retail venture, which competes with Amazon and Walmart's Flipkart.
All indicators point to digital as the way to go. Audio and video streaming services in India are expected to earn up to $15 billion in revenue by 2030, up from $1.7 billion in 2020, according to RBSA Advisors. GroupM, an adverting agency, forecasts digital ad spending in India will balloon to 486.03 billion rupees this year, up 33% from 2021. The firm expects TV ad spends to top 423.88 billion rupees in 2022.
Further, Elara Capital estimates digital viewership of the IPL will surge from about 421 million in 2022 to 722 million in 2028, when the current bidding cycle expires. By contrast, TV viewership is expected to decline from 380 million to 351 million over the period. As a result, it expects the TV broadcast rights holder to earn 430 billion rupees from subscription and advertising next year, a figure it forecasts will to surge to 563 billion rupees by 2028. Revenues from streaming subscriptions and digital advertising is expected to quadruple to 900 billion rupees during this period.
But while the opportunities look enticing, the risks are equally large. "In our view, the only entities that make money in IPL are the BCCI (the Indian cricket board) and teams," which get a share the revenue from BCCI, Abneesh Roy and Amritasai Sista, analysts at Edelweiss, noted in a report on Tuesday. "It would be difficult, in our view, for the winners to make any profits in the initial years."
"The only entities that make money in IPL are the BCCI (the Indian cricket board) and teams," said analysts at Edelweiss in a report published June 14. There are two main reasons for this. First, Indian consumers pay a pittance for streaming. Amazon Prime, which comes with additional shopping benefits on Amazon, costs 1,499 rupees a year. In December, Netflix lowered its mobile-only subscription plan to 149 rupees a month or 1,788 rupees a year. By comparison, a Disney+ subscription in the U.S. costs $8 dollars, or around 624 rupees, a month. Netflix costs $9.90, while Amazon Prime Video costs $8.99.
Second, despite growing at a fast clip, a large chunk of digital advertising is directed toward Facebook and Google. According to local media reports that cited regulatory filings, cumulative advertising sales by Google and Facebook's India outfits, which function as ad inventory resellers for the parents' global subsidiaries, surged to 232.12 billion rupees in the 2021 financial year.
Sustaining a streaming business thus requires a parent with deep pockets. Reliance, which raised about $20 billion for Jio in 2020, fits the bill.
The difficulties of earning revenue from streaming may have encouraged Disney Star to opt for the TV broadcast deal over streaming. In a statement on Tuesday, Rebecca Campbell, chairman for international content and operations at Disney, indicated that the asking price for the Indian streaming rights was far too high.
Disney's streaming platform in India, Hotstar, is the biggest in the country, with about 51 million subscribers, many of whom are fans of the IPL. © Reuters "We made disciplined bids with a focus on long-term value," Campbell said. "We chose not to proceed with the digital rights, given the price required to secure that package."
The company will instead explore "other multiplatform cricket rights, including the future rights for the International Cricket Council and Board of Control for Cricket in India, which we currently hold through the 2023 and 2024 seasons, respectively."
Disney executives have publicly stressed the importance of digital platforms in the company's plans. CEO Bob Chapek hopes to attract up to 260 million digital subscribers worldwide by 2024 and Hotstar was deemed a crucial piece of the puzzle.
The flight of customers from Hotstar may, however, be hard to stop.
"In terms of subscribers, Star's subscriber base may [be pared by] at least 40% to 50% due to the loss of IPL property... if other cricket properties are not acquired. The share may decline more than 70% in the medium term," noted Karan Taurani, senior vice president at Elara Capital.