Daybreak - Reliance is going after DTH and cable TV subscribers

Episode Date: March 31, 2023

With the IPL set to begin today, a few days ago Jio announced a move that many say could be the next big disruption. The Reliance Group, which has the digital rights of the event, is streaming the games for free on its OTT platform, JioCinema.The main goal is to get people to switch the traditional way of viewing cricket, especially IPL, from TV to digital streaming.So on 27 March, Jio launched its most affordable fixed broadband plan yet. The plan offers unlimited data at 10 Mbps for Rs 198 per month. Before this, Jio was giving fixed broadband customers 30 Mbps bandwidth for Rs 399 a month. Will the new broadband plan get enough viewers to switch to digital streaming? Tune in.

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Exactly a week ago on Daybreak, I told you about Reliance's OTT platform, Geo Cinema's decision to stream IPL for free. The move took the market by storm and also had advertisers feeling a bit worried. But at least half a billion people are expected to stream the games. And that only means, more eyeballs for the brands, right?

So why would advertisers be worried? Well, there are a bunch of reasons for their skepticism. And one of them was that Reliance wants to change the traditional way of viewing cricket, especially IPL. They want people to switch from television to digital streaming. Advertisers were concerned if viewers will have enough reasons to switch from television to digital streaming. Rival OTT platform and ad executives had pointed to.

to the fact that the majority of Geo's telecom subscribers are prepaid customers, which means that they have limited amounts of daily data to spend on the matches. geo meanwhile is offering perks like 4K streaming, multi-camera views and highlights, all of which mean more data consumption. But now it looks like Geo has come up with an answer to these questions. geo has come up with something that many analysts are calling the next big disruption. On the 27th of March, Geo launched its most affordable fixed broadband plan so far. Unlimited data at 10 mbPS for $198 per month.

Before this, Gio offered its fixed broadband customers 30 MbPS bandwidth for 399 rupees a month. Now, so far, India has among the lowest number of broadband users, in the world, just about 30 million. And this has left telcos, analysts and policy makers scratching their heads for a while now. Figuring out the most favorable price point, the sweet spot has been a fundamental problem. So can $198 a month for 10 MBPS data hit that spot? The Ken reporters Pratap Vikram Singh and Somajit Saha tried to look for an answer. While some believed that the new plan will work, others think that it's a lot. It is just a marketing gimmick that will not last once it faces competition from others.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I Don't Chase the New Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 31st of March. Did you know that only 9% of households in India have a broadband connection? For comparison, Indonesia has twice as many households with a fixed broadband connection, and in China, the number is a whopping 103%.

In India, as you might have guessed, the market leader is reliance with a 31% share, 7.7 million subscribers, and they're aiming even higher with a goal of reaching 50 million users. To sweeten the deal, they're offering a super affordable plan to attract new subscribers. Of course, their competitors like Bharti Group might try to counter it with their own cheap plans, but analysts believe that it is unlikely to hurt Reliance's revenue too much. And if you really think about it, Gio's pricing is actually quite fair. It's not really anti-competitive. They're just offering a sasha fixed internet service plan.

Until now, Gio offered its fixed broadband customers 30 mbPS bandwidth for $399 a month. Now, it is offering 10 mbPS for 198 a month. And Gio is actually calling the new plan the backup plan, which the company expects it to be for some subscribers. Gio wants subscribers using its competitors' services to use this plan as a backup first. Of course, over a period of time, some will shift over completely. This is similar to what happened with the launch of Gio's mobile services in 2016. So is $198 a month this sweet spot?

Or are Indian subscribers waiting for an even cheaper and slower home broadband pack? It'll take a few quarters to find out. In the meantime, Gio is doing its best to make this deal as attractive as possible. Stay tuned to find out how. In Gio's new broadband plan, a user has to pay a five-month upfront fee and an installation charge. It comes up to 990 plus 500 rupees excluding GST. It is also offering 400 live TV channels and 6 OTTs for an additional 100 rupees a month. If you pay 200 rupees extra, you get 550 live TV channels and 14 OTTs.

Subscribers will also have the choice to upgrade to speeds of 30 mbPS or 100 mbps for one day or two days or a full week by paying an extra between $21 to $152. According to ICICICEI Security's March report, there are about 110 to 130 million paid TV subscribers in India, which so far is a market that is dominated by DTIHs like TataPlay, Bharti Tele Media, MSOs and cable companies. But like I told you earlier, GEO's plan is to make more of these users switch to its internet and streaming plan.

The DTH companies have already been steadily losing subscribers to OTT platforms. Many feel that geo and OTT's move to stream live channels has distorted the level playing field. While broadcasters, DTH operators and MSOs come under the Telecom Regulatory Authority of India's regulations, there is no framework binding on OTT platforms so far. Of course, government-owned Prasar Bharti's free dish offers hundreds of channels for free and you could say that there is a strong public interest argument in Prasar Bharti's favour. But what about OTTs? They are obviously ecstatic. But do you know who else is offering paid channels for free without coming under any broadcasting regulations? GEO. There have been

many attempts to bring this to the attention of the tri or the telecom regulatory authority which regulates the broadcast space. And most likely it will also be the agency to regulate OTT in the future. But again, we'll have to wait and see what happens. And that brings us finally to India's largest sporting event ever. Reliance took the crown, I mean the digital streaming rights for IPL from Disney Hot Star last year, for a whopping $2.9 billion. Now, according to reports, it has set an internal target of $450 million as advertising income from this year's IPL. But this estimate has now been cut down to less than $300 million. Also, we have to remember that IPL will not be bringing in much money in terms of subscriptions for Gio this year because it is

going to be streamed for free. So even if we were to generously assume that Gio Cinema makes more than its initial target of $450 million per year, they still wouldn't have earned back the cost of securing the IPL digital rights, $2.9 billion. And we're not even calculating the operational costs of broadcasting the IPL at an unprecedented scale like this. Coming up next, what was Reliance thinking? How is it not taking all of this into account? The OTT and ad executives that Pratap and Somerjid spoke to are of the view that there is one other reason that the Reliance Group is going to see significant financial benefits

from controlling the digital rights for IPL. As you know, Reliance owns a pretty big chunk of India's internet service. service providers or ISPs by itself. And senior content delivery network or CDN executives say that this IPL edition is going to test the structure of the country's CDN infrastructure in ways that it has never been tested before. Reliance's CDN partners are working very hard right now to fireproof their systems. So if users are convinced to ditch the TVs for streaming, it will translate into a huge surge

in the purchase of internet service. And as India's largest telecom firm with a massive prepaid user base, Reliance Geo will likely benefit the most. Or users could also subscribe to its brand new and more affordable fixed broadband plan. And by the way, if there was any doubt left as to Reliance's goals here, three internet service providers or ISPs owned and backed by Reliance, including Hathaway Cable and Datacom, removed Star India's channels from their base packages last week. Star, as I'm sure you know, holds the TV rights for IPL. While the tournament is yet to begin as I record this, behind the screens, the game is already on.

Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.