Tuesday, October 27, 2015

How Distributors Will Face intense competition from Reliance Jio ?

Reliance Jio's entry into the cable TV and OTT space will lead to heightened competition for TV distributors like MSOs and DTH operators. Since Jio has obtained a cable MSO licence and will have to strike deals with LCOs, the competition will be more direct for MSOs vis-à-vis DTH operators. Despite the changing dynamics of the industry, broadcasters remain the best placed to capitalise on Jio’s launch. Jio's entry is likely to accelerate the conversion of analog cable subscribers to digital, thereby improving the monetisation of broadcasters like ZEE. Jio’s OTT platform, Jio Play, offers another avenue for the broadcasters to earn subscription revenue.

We would like to highlight that if the last 2 phases of digitisation are completed without much delay and monetization happens on time (which is highly unlikely in our view), incremental revenue for ZEE due to Jio would be restricted to the revenue from Jio Play. However, we believe that a delay in implementation of Phase 3 and 4 is very much on the cards and Jio’s entry could hasten the progress of digitisation in India, which is beneficial for broadcasters. Since the incremental subscription revenue from Jio will come at no significant cost, the entire benefit would directly add to ZEE’s bottom-line.

Our channel checks suggest that major broadcasters have already provided sample content for the pilot testing of Jio’s app, Reliance Jio Play. Similar to ZEE’s Ditto TV and STAR India’s Hotstar, Jio Play will enable the viewer to view live as well as dated content. However, content deals with broadcasters are yet to be signed. Broadcasters are known to play hardball with any new distributor especially with a limited subscriber base. In order to get sweetened content deals with broadcasters, Jio will have to garner a sizeable subscriber base within a short period of time. In addition, Jio striking content and carriage deals with broadcasters can be a long and tedious process.

1 comment:

Mike Kruger said...

This is a great blog and I thank you for all the insight into India's DTH industry.

Would you care to share your assumptions behind the estimate you made on March 27th? You wrote: "We estimate that the pace of subscriber addition can accelerate from 10m p.a. to 12m if Phase 3 digitisation is successful."

I find it difficult to estimate the increase in subscriber addition from Phases 3-4 as I don't know the percentage of subscribers that have already been coming from these areas (perhaps >60%?)

That said, I think your estimate is probably reasonable. Interestingly, the CEO of Dish TV gave a similar forecast on their 1Q16 call: "If it is properly implemented you can see an uptick of about 20%-25% in the run rate of the all the DTH operators and over a period of time when the Phase-3 gets fully digitized the total DTH industry over a period of 3 to 4 years can add another 20 million over and above their current run rate [which is 9-10m net adds per year], about a million."

Thank you in advance,
mikekruger94 at gmail.com