Will Viacom18’s free-to-stream IPL gamble pay off in the long run?

JioCinema has just announced JioCinema Premium, a paid subscription service, wherein users will have to pay Rs 999 per year to see Hollywood content on the platform. The JioCinema website states that paid subscription service is only for premium content, while the Indian Premier League (IPL) matches will continue to be streamed on the platform for free.

After winning the digital rights for men’s IPL for Rs 23,758 crore for the 2023-27 seasons, Viacom18 decided to stream the tournament for free on its JioCinema platform. However, this decision by Viacom18 has raised concerns about whether the company will be able to recoup its investment in the short-term. Experts believe that the strategy is effective and will help Viacom18 to build a loyal customer base that can be monetised in the future. The move has also prompted questions about how it will affect other OTT platforms in India, particularly given the already low average revenue per user (ARPU) in the market. While the impact may not be significant, there is potential for JioCinema to disrupt the market and change the dynamics of sports streaming in the country.

Bhairav Shanth, Co Founder, ITW Consulting, believes that this is an effective strategy. He says, “Considering that Viacom18 holds the digital rights for a period of five years, it is understandable if they do not make a profit straight out of the gate. However, with the interest in IPL and the league growing year on year, there is no doubt that they will be able to turn this into a sound investment.”

According to Shanth, the “free” strategy is not a new one. In fact, he adds, a lot of tech products, from Google to Facebook, have grown through that strategy to acquire critical mass first and then monetise the user base judiciously. “Free-to-stream is an approach that we have seen employed by many providers in the past. Even Hotstar initially had a similar strategy to draw viewers to a digital platform, it is an effective move that brings in viewers (for building critical mass), but to hold their loyalty will be dependent on the programming that Viacom18 churns out. 4K, hype mode, etc., are steps in the right direction,” he adds.

“Given that Viacom18 has paid a huge amount to procure streaming rights for an expensive property, offering it for free on the JioCinema app is their boldest gambit,” points out Komal Mathur, Group Solutions Manager, Django Digital. He adds, “It will be interesting to see how they ensure a good return on that investment. This may come as an opportunity for them to serve their users with targeted ads during breaks and to add value to these targeted ads, they will require more data on the viewers which shouldn’t be that big a challenge for Reliance, given Jio’s 360-million strong subscriber base.”

“But the main question remains, who will buy these ads? Each IPL match is worth around Rs 100 crore, and so will the advertisers need high budgets? So far, IPL has managed to attract the bigger giants as well as highly funded Unicorns; the formula to the future will pretty much be the same with freshly funded firms with high ambitions who see value in the IPL proposition,” Mathur notes.

She further points out that JioCinema’s ad rates are considerably lower than Disney Star, which can open up opportunities for even small to medium advertisers. “Jio’s experiment with trying different models brings in a possibility of changing the digital landscape quite considerably and also brings in opportunity for brands with limited budgets to make it to digital IPL streaming. So, Viacom18 is more likely to attract more advertisers, but whether they will recover the costs or not, only time will tell. Dynamics of sports streaming is expected to change big time, considering that the trend of TV watching has diminished in the last two years. Technology and pricing have played a bigger role with the lowest data costs, which have led people to migrate to Smart TVs, Smartphones/ or firesticks,” she adds.

Meanwhile, Koushik Balasubramanian, Managing Director, Protiviti, feels that it is not the right moment to comment on whether Viacom18 will be able to recoup the investment. “With the growing intensity of watching content through digital platforms, a move like this creates a lot of interesting trembles in the market. This change should enhance the interests of the viewership by having access to the great moments on the move. At this point, it is not justified to comment on the recouping capability as it is just a beginning, and the players should find their way out to be successful and promising on their investments,” he points out.

The effect on other OTT platforms

How will the decision to make IPL free on JioCinema affect other OTT platforms in India, especially given the already low ARPUs?

Bhairav Shanth does not think there will be any profound impact. “We saw that the recent RCB Vs MI game had close to 1.2 crore viewers (which on streaming is comparable to the India vs Pakistan game at the T20 World Cup) at one point, showing that this strategy is working for JioCinema – to draw in the audience, a free-to-market strategy is a strong one, which is lucrative for brands as well. So, what they may lose in subscription revenue can be offset against advertising revenue generated. It will be interesting to see how Jio packages the next season of IPL.”

Cricket is the biggest crowd puller in India and Reliance is known for creating a disruption in the market in whatever sector they enter. So, it’s pretty much the same in case of sports streaming, points out Komal Mathur. “JioCinema entering the market with lowest or zero subscription prices and offering the most premium sports IP for free to a diverse audience with different tastes, preferences, and languages is resulting in price becoming the key differentiator in the OTT market space. But when it comes to streaming platforms in general, people are subscribing because of the content they provide. Consumers who are already subscribed to a certain platform may not unsubscribe because another platform is offering lower subscription rate, but there is a high possibility that people may subscribe to JioCinema over and above their current subscriptions, which could mean that ARPUs of other platforms may not be impacted too much,” Mathur points out.

She further adds that it will be interesting to see how in the longer run JioCinema can convert a major chunk of its AVOD audience to SVOD, especially when the market is overcrowded with 40-odd OTT platforms, which are already under revenue pressure. “Only time will tell if Jio’s entry to the market will cause a decline in existing OTT players’ market share,” she says.

Koushik Balasubramanian adds here, “The recent pandemic has taught us to identify opportunities even during a disaster situation. This segment is itself different and I don’t see any reason why there should be any impact in the long run for anyone. In fact, they should focus on identifying opportunities to grow further.”

Digital is no doubt the future of programming, but in a country like India, with a large rural audience, TV definitely has its place, asserts Bhairav Shanth. He adds, “For the next few years, we will see them co-exist for sure. Even in an advanced market like the United States, where streaming took off way before it did in India, major sports events are still consumed largely on linear/ cable TV. The recent SuperBowl was the most streamed ever, but even then 77% TV households tuned in. TV and streaming are likely to become complementary media even when carrying the same content, and will organise themselves around offline and online communities, respectively.”

Komal Mathur, however, has a different take on this. She points out, “IPL messaging by the digital broadcaster with jingles like “Old tareeka chhod. Dekh naya andaaz” and “Chhod de idiot box ka tension” clearly indicate that television is dying. Discontent within Viacom18 executives comes as no surprise, especially, when the network still operates a large TV business. This is bound to create rivalry within the sister concerns, making it difficult for the TV business to justify the premium they charge to sell their top properties.”

According to Mathur, Jio’s aggressive market penetration strategy is a total game changer, but Disney Star may have a better ROI due to high mainline TV ad revenue. As far as sports broadcasting is concerned, she says, there is no denying that digital is the future, but there’s still a long way to go.

Koushik Balasubramanian feels that a focussed approach on a particular segment doesn’t mean that we are demoting an existing segment. “Digital is part of the new future, and I believe that both TV and digital should co-exist as the viewership genres and interests are still different and changing rampantly.”

The unrestricted access and extensive mobility should help in reaching to a larger audience, triggering a huge interest among many who were not experiencing world-class quality content in the past within their reach, pushing them to move into a premium payment segment for the future to have a much more extravaganza, says Balasubramanian.

With Disney Star also making key IPL matches available on its free-to-air channels, will this trend of making premium content free for viewers continue in the future?

Bhairav Shanth feels that this step is a result of the unbundling of the broadcast rights. “Star now has to compete with JioCinema and that has prompted them to take steps to attract viewers to their platform. The free-to-air games are a result of this. As long as multiple different rightsholders have access, they will take consumer-friendly decisions such as airing key games for free,” he adds.

Removing restrictions is an ideation to attract more, specifically the non-accessed viewership category and binding them through an unimaginable and overwhelming experience, which should help in increasing the volumes and setting up high expectation in the long run for the future, opines Balasubramanian.

The fate of Pay TV

The declining pay TV households in India are affecting the future of sports broadcasting in the country, all thanks to the arrival of streaming.

Komal Mathur feels that digital is the future. She points out, “If we look at the numbers and ratings of IPL 2023, the opening match recorded a TVR of 7.29, which is the second lowest of all opening matches in the last six years, while JioCinema recorded 147 crore views in the opening weekend.” Continuing further, she points out, “There has been a significant drop in the viewership of IPL on television. One of the primary reasons is that the world of broadcasting is witnessing a paradigm shift to digital consumption with increased penetration of the internet, smartphones and smart TVs. There has been a change in consumption habits, more and more consumers are watching sports on their smart devices while on the move through OTT platforms. These platforms are providing sports enthusiasts with an immersive and a much more personalised experience.”

Apart from cricket, she adds, other sports like football, kabaddi and even Formula 1, which had a niche audience, have gained massive popularity and fan base from at least Tier 1 and Tier 2 cities through OTT. “However, the Tier 3 audience predominately still prefers regional/ local content, and JioCinema has made efforts to break that barrier as well. Hence, it won’t be unfair to say digital is the future,” Mathur contends.

Experts are of the opinion that this season of IPL will be different as it is getting broadcast on TV as well as digital. This poses challenges as well as opportunities as far as brands are concerned.

It’s the first time in history that IPL media rights have been spread across broadcasters, breaking the monopoly of one company, and it’s the first time that digital rights have been sold for more money than TV rights, points out Komal Mathur. However, she adds, JioCinema’s zero subscription model has made Reliance solely dependent on advertisers to earn revenues, especially at the time when brands are not willing to spend a lot due to inflation and global economic crisis.

“Given the low rates of ad inventory of digital platforms as compared to TV, it will be challenging for Viacom18 to gain ROI in the short term. However, it will also be a challenge for TV broadcaster Disney Star to attract advertisers and justify high advertising costs in the current economic scenario and collapsing TV viewership. IPL 2023 will be a game changer for broadcasters. Even with low ad inventory rates, Jio is likely to attract advertisers with low and medium budgets and provide them with highly targeted ads as compared to TV ads, where a huge spillover is bound to happen,” she adds.

When it comes to viewers’ experience, Mathur adds, Jio has made efforts to break all barriers of consumption and raised the bar by transforming the quality of streaming by offering 4K feed, multi-camera presentation and 12 languages.

For enthusiasts, OTT broadcasters might offer a more customizable broadcast experience (such as Hypeboost on JioCinema), whereas the more casual fans might be content with watching on TV. Marketers will choose between the two mediums based on their target audience and budgets, says Bhairav Shanth.

Monetising opportunities & challenges

Considering that IPL is the most expensive sports IP in India, it is important for Viacom18 and other broadcasters to monetise the content in the long term. Viacom18 will tread the path already taken by the likes of Hotstar, etc., in the past, says Bhairav Shanth. According to him, Viacom18 is already monetising the IPL through ads just like any other OTT platform does with live sports content in India (even in paid subscriptions).

“As a relatively new player to sports streaming in India, Viacom18 is broadcasting the IPL for free on JioCinema to build up an audience base for their platform. This is the same strategy Hotstar took when they first acquired the streaming rights to the IPL in 2015. It was the same with SonyLIV with other sports when it was first launched. Eventually, these platforms introduced a paid subscription model to monetize their content beyond ads. JioCinema might be taking a similar approach where they continue to stream the IPL (and WPL, La Liga, etc.) free for a couple of years to build their audience base before introducing a paid subscription to further monetise the content,” Shanth says.

Unrestricted content mobility and increased viewership, accumulated through this free medium, should help broadcasters in finding ways to monetize through other revenue channels such as advertisement, sponsorships, gaming mediums, etc., Notes Balasubramanian.

And this season of IPL will be as it is getting broadcast on TV as well as digital, posing challenges and opportunities as far as brands are concerned.

Since as far as 2015 IPL has been broadcast both on TV and digital, but this is the first time it will be with different rights holders for each, points out Bhairav Shanth. According to him, the challenge for brands is that they have to deal with different stakeholders to be present in the broadcast, and maybe negotiate separately.

“But while this marginally increases the administrative and managerial effort, it also presents opportunities in how they can package and structure campaigns on each medium. In fact brands can take a look at their objectives and decide whether those would be better served by reaching their TG on TV or on the digital medium. We are already seeing a lot of the brands advertising on digital this IPL using QR codes for calls to action, and this is an aspect that might present a lot of possibilities going forward,” he concludes.