The latest offering from Reliance Jio by Mukesh Ambani threatens to disrupt and monopolise communication and entertainment as never before; that is if he has his way. Telecom competitors like Airtel and Vodafone Idea might have to kiss goodbye to any hope of getting out of the red; and there is the chance that it will be curtains for the multiplex cinema industry as well.
As it is entertainment habits are changing fast. An outing to the multiplex near your home is a Rs 2,000 hit. Two tickets for Rs 1,200, plus popcorn and a couple of Cokes is fun while it lasts; but hurts when you sleep on it. In comparison, an annual subscription for Hotstar or Amazon Prime ranges from Rs 299 to Rs 999. A movie, a delicious home-grilled sandwich, and a cold Coke, all for less than Rs 100!
Sounds a better option, doesn’t it? No wonder average multiplex occupancies have fallen to less than 30 per cent.
Poaching audiences
Now let’s see what the Ambanis have announced. From September 5, when Jio will be three years old, the Jio fibre plans for fixed-line broadband will launch with lightning high speeds of 100mbps and packages starting at `700 a month. Calls anywhere in India will be free.
Jio fibre customers who opt for annual lifetime plans will get an LED 4k HD TV and a set top box too absolutely free. That’s the first hit against multiplexes. Then the finale. For couch potatoes on the premium plan, Jio’s ‘First-day-first-show’ will beam newly released films to your drawing room.
It was not surprising that shares of the two biggest listed multiplex operators, PVR and INOX, who account for around 1,500 screens, fell sharply by over 2 per cent after the announcement.
But PVR and the rest are putting up a brave face. They say the at-home and multiplex audiences are exclusive. The dividing line is protected by a film industry standard that allows movie producers to sell their rights to digital platforms only after eight weeks of theatrical release in cinemas.
But these gentlemen from the PVRs and INOX-es are either living in fool’s paradise, or do not know Mr Mukesh Ambani well. Look at history. The sanctity of theatrical rights was protected about two decades ago for six months after release; then it declined to three months and now it is eight weeks.
What stops it from being chipped and chopped to a couple of days?
Second, it is all about money! If Reliance Jio works out packages that give the movie producer not only a handsome upfront payment for his rights, but a tiny share too in the first-day-first-show revenue, the sheer volume of millions who watch will ensure better revenue to the producer; and the film industry’s theatre embargo is out of the window.
Digital monopoly
Reliance’s target is a takeover of the digital over-the-top (OTT) space, in preference to other traditional areas like TV and the movie theatres. There are over 40 OTT services today like Hotstar, Netflix and Zee5 offering entertainment to viewers over the Internet, bypassing cable, broadcast and satellite television platforms.
Television, which is in close to 300 million homes is still ahead, but OTT is catching up fast. With the smartphone riding cheap Wi-fi and easy access to these app-based services, the smallest screen is what is galloping the fastest with estimates currently ranging from 80 million to 300 million paying subscribers. A recent Assocham-PwC study estimates OTT to be a `5,300 crore market by 2022. It’s the future.
Jio intends to outflank competition. It will provide the pipes and distribution platform. It will provide exclusive content. It has bought into movie producer Eros International; it has bought out 26 per cent of TV series and film production company, Balaji Telefilms. It pretty much controls the cable network through buyouts of the largest distributors, DEN and Hathway. Now, their fibre optic networks are in the process of being linked to the bigger Jio universe.
Jio’s march may not have been possible without a cosy regulatory regime. An India Ratings report says by 2022 Jio will hold 45 per cent of the subscribers for 4G services. This feat would not have been possible in three years without the Telecom Regulatory Authority of India (TRAI) looking the other way at the predatory pricing that has knocked competitors out of the market.
The latest Foreign Direct Investment (FDI) norms for digital media also seem to have been designed to help Reliance. There were earlier no restrictions for foreign investment in digital media, unlike print (maximum 26 per cent) and television (49 per cent). By default, foreign players could come in with 100 per cent. The new norms will restrict FDI to 26 per cent making capital scarce for new and old players in the digital space.
Will offshore digital firms like HuffPost, Google and Microsoft India have to now dilute?
Isn’t it convenient that after Jio set up its infrastructure, a new FDI notification comes into restrict the growth and expansion of competitors?