Advertisers brace for rate hike as JioHotstar exits 'completely free' viewing

New Delhi: JioStar, the newly formed media behemoth born from the union of Reliance Viacom18 and Disney Star, on Friday combined JioCinema with Disney+ Hotstar into an all-new JioHotstar. 

The new app will come with a cost once the viewer is identified as ‘loyal’ by its advanced algorithm at different stages of their viewing journey. This includes all premium content, including live cricket such as the upcoming Champions Trophy and IPL.

Reliance-owned Viacom18, which won the digital streaming rights for the 2023 IPL season, offered free viewing, a move it called the democratisation of cricket content.

This move attracted millions of new IPL viewers during the two seasons, creating a large base of potential subscribers that the new app will aim to convert.

JioHotstar will offer its users their content on mobile for Rs 149 for 3 months; on two screens for Rs 299 for three months; on four screens for Rs 499 for three months. 

With the tiered access introduced, their treasure trove of content will now be behind the paywall for the discerning and loyal audience base.

In January, BestMediaInfo.com reported that Kiran Mani, CEO - Digital, JioStar, hinted at exploring models seen in gaming and anime, such as micro-transactions, tipping, and tiered access.

What changes now?

According to Ashish Bhasin, founder, Bhasin Consulting Group, “The IPL's current universal appeal attracts a wide range of advertisers, from FMCG companies seeking massive reach to car or finance companies aiming for impactful engagement. A paywall will likely cause FMCG brands, focused on sheer numbers, to reconsider their IPL advertising strategies, potentially finding it less attractive.” 

On the other hand, Bhasin said, the niche brands targeting a specific demographic might see it as a boon. 

Kumar Awanish, Chief Growth Officer, Cheil India, called this a masterstroke in business by Reliance. Back in 2023, when Reliance announced that IPL viewership would be free of cost, the decision was welcomed but the industry smelled a major disruption coming its way, Awanish stated. 

Awanish added that now that they are moving their content behind a paywall, from a purely business point of view, it is good for JioStar. 

“They have people glued to their content. Consumers who have engaged with their content and are addicted to it will anyway stick to the platform, regardless of the subscription changes,” he told BestMediaInfo.com. 

Uday Sodhi, Senior Partner, Kurate Digital Consulting, said, “With a substantial userbase, which has only proliferated post the merger, this move presents a favourable opportunity for the company to implement a modest subscription fee for users. It's unlikely that this will significantly impact the overall viewership of IPL across television and digital platforms. 

Considering that movie tickets often cost between ₹400 and ₹500, it seems reasonable to expect that consumers would be willing to pay for cricket viewing as well. This move should ultimately benefit JioStar by generating increased revenue from their cricket rights.” 

Vishal Agrahari, VP- Paid Media, BC Web Wise, said, “The paywall is a concern for advertisers who have already committed to digital IPL sponsorships based on projected reach numbers. For these advertisers, cost per reach will likely increase, and ad frequency could be impacted as users, upon discovering the paywall, may stop watching IPL on JioStar after a few matches. 

These reach-focused advertisers may need to replan their media mix and shift their budget to other channels to compensate. Advertisers targeting an affluent and engaged audience, however, are less likely to be concerned.”

A top digital agency head called this move extremely confusing for advertisers. Looking at it from two key metrics - reach and time spent - the agency head said, “Reach, defined as a login, is unlikely to be affected since even a short login counts. However, time spent is expected to decrease, given the reduction of free hours.”

Going forward, the digital agency executive suggested, “This change creates confusion, as previous benchmarks were established during a completely free period. The platform needs to clarify its proposed model. Specifically, it's crucial to understand the breakdown of subscribers between Jio and non-Jio. 

A predominantly Jio subscriber base would minimise the impact of the paywall. Conversely, a majority non-Jio subscriber base would significantly reduce the return on investment (ROI) for advertisers.”

What the digital agency honcho was pointing at was that the shift was sudden for advertisers to understand. Having committed to packages based on the previous free model, the advertisers are now grappling with uncertainty and seeking clarity on how to adapt their strategies.

The branching

With a tiered paywall, JioHotstar has curbed spillovers. In fact, a very concrete segmentation is visible. With different subscription fees, based on the user experience, JioHotstar has made it easy for advertisers to choose their target audience. However, experts believe that JioStar might charge a premium on ad rates for cuts of audiences. 

Speaking on ad rates, an industry expert requesting anonymity, said, “The introduction of a paid model may lead to increased advertising rates. The previous premium for CTV audiences was close to 100% of the regular rate, indicating a potential for significant cost increases. Furthermore, the combined data from Hotstar and Jio may result in a narrower audience definition, as overlapping viewers will be counted as a single user. This reduction in audience size could further impact advertising costs and effectiveness.”

Contributing to the conversation, Cheil’s Awanish, said, “There are advertisers who are looking for a niche audience, and then there are those who do not require any kind of filtration in the target audience. 

For the latter, television will become an easy choice since they are not bothered about the premiumness of the consumer. But brands who are looking for a niche audience for their product will have to gauge the matter assiduously.”

Agrahari from BC Web Wise said, “This paywall could be particularly valuable for premium brands like Nike and Puma, who seek to connect with sports enthusiasts and a high-affluent demographic.

A key question is whether CPM rates will remain the same. JioStar may initially try to maintain or even increase rates, citing the perceived higher value of the engaged audience. However, advertisers may resist if they believe the reduced reach doesn't justify the cost.”

Money matrix

To understand the evolving financial landscape of this venture, it is necessary to understand the mechanics of it. To begin with, BCCI bagged a whopping Rs 48,390 crore from JioStar for IPL rights valid for a period of four years: 2023-27. 

Disney Star pocketed the television rights for Rs 23,575 crores, while Viacom18 got the digital rights for Rs 23,758 crores. Lacing it with an interesting factoid, the price for only television rights was almost equal to the valuation of the entire Disney Star during the merger that took place just a year and a half after the IPL auctions.

With the IPL acquisition cost and the merger, the recoupment of investment is only natural for JioStar. Hence, JioStar doubled down with the subscription-based model coupled with the advertising-based model.

IPL boasts of a brand value of a staggering $12 billion, highlighting that the IPL is one of the global leaders among all sports leagues. With the merger in the equation, this IPL is touted to be the biggest one yet. 

With all this under the spotlight, the advertising rates had to mirror the magnanimity of the property itself.  

Without bundling ad rates for TV and OTT, adhering to the CCI order, the unified entity sought a 9.75% TV ad rate hike. For SD+HD feeds on television, the broadcaster floated a rate of Rs 18 lakh for a 10-second slot, up 9.75% from Rs 16.4 lakh in the previous year. 

As reported by BestMediaInfo.com, JioStar abolished the slot rate for mobile that was floated by JioCinema last year. For the 2024 season, JioCinema had floated an ad rate of Rs 16 lakh for a 10-second slot. Now, the broadcaster is offering mobile advertising only on a CPM basis, keeping the CPM rates unchanged across mobile and CTV.

This essentially means that any advertiser advertising on digital will find a more engaged audience at rates similar to the previous year.

The only increase in digital rates was witnessed for Free Commercial Time (FCT) on CTV. The FCT rates saw a 30% increase, rising to Rs 8.5 lakh from the 6.5 lakh charged by Jio Cinema last year. This was attributed to the fast adoption of CTV in India. The new rate is estimated to be in the same range if an advertiser buys inventories on a CPM basis.