Indian Premier League moving away from paid content on digital is a potential threat for TV advertising in the medium term, Karan Taurani, Senior Analyst at Elara Capital said.
In a report, Taurani stated, "Providing IPL content-free could have a negative impact on TV advertising and on TV medium consumption, given that firstly, digital is a better platform for this content as it is available free vs TV where it is subscription-based and secondly, it will attract a larger audience vs Hotstar in the past, which charged a subscription fee for its platform."
He also pointed out, "On the other hand, advantages of the TV medium remain 1) it's mass viewership and reach, 2) cheaper cable average revenue per user (ARPU) as 95% of the market uses bundles & does not subscribe a la carte, 3) large scale advertisers, such as FMCG, autos and telecom, which allocate sizeable budgets for mass campaigning on TV, and 4) sports is viewed in large groups on TV, which too augurs well. The Smart TV proposition may be a threat for linear TV only in the medium term, as penetration of the former is low at ~10%; this can scale up with the rise in broadband penetration."
Taurani went on to state, in our view, it will be difficult for Viacom18-Jio Cinema to recover even 30-40% of its content acquisition cost via the digital route if the content is free at least in the near term.
"However, in the medium to long term, due to the change in consumption habits on digital media and growing smart TV penetration, there is the possibility of their digital ad revenue scaling up, but it may still continue to be much lower as compared to TV medium ad revenue (IPL)," the report read.
As per Taurani, this move of Jio Cinema to stream IPL free on its app has a lot of risks attached to it, as ROI may not be easily recovered. However, the strategic initiative to scale up Jio subscribers and Jio Cinema's customer base may be an advantage. Poor user experience on the Jio cinema app may be the only big risk for user acquisition, user retention and content monetisation.
According to Taurani, providing free IPL also would have a negative impact on India’s OTT market, as ARPU may drop down further or remain stable in a market where most OTT platforms are already available at cheap prices vs global averages.
"The domestic OTT market was already having a tough time, given the fragmentation and high content cost. Lower visibility on ARPU would add to its concerns. Further, from Jio’s standpoint, this would push Jio Cinema’s subscriber base toward new records, as they may start to compete with the likes of YouTube India, which has a monthly average user (MAU) base of 520 mn, the largest in India," the report said.
"It would further help Jio Cinema to cross-sell its other content offerings and assist with mobile subscriber retention. This, in turn, can help Jio Cinema compete with social media platforms, such as Facebook and Instagram as well as YouTube, which has an 80% share in India’s video advertising segment, apart from mere broadcaster OTT platforms, which have a smaller share," the report further read.