09 May 2023

They don’t even to ask you to sign-up! No customer data, no onboarding, no activation - all customer growth principles thrown out of the window.

mind == blown!

What are the numbers so far?

Here’s a quick financial understanding of where we are on the numbers front:

How much does the bid cost?

• 2018: Combined (TV + Streaming) bid won by Star for ~16k INR Crores [Hotstar is a fully owned subsidiary of Star India, which is a daughter company of 21st Century fox, which was acquired by Disney in 2019, not very complicated :) ]
• 2022:
  • TV: Whooping 23.5k CR to Star
  • Streaming: 23.7k CR to Jio owned Viacom18 network
• Interestingly:
  • This is the first time that the TV and streaming bids are owned by competing networks.
  • This is also the first time that streaming rights have crossed the TV rights (and that Jio is paying ~4.74 Cr per IPL season)

How do these networks make money then?

TV’s sole revenues are ads (paid in slots of time and rates pre-decided based on viewership potential), whereas streaming typically gets ads (paid in impressions received i.e. CPM) and subscription revenue.

In the previous IPL 2022 season, TV secured ~3100 Cr worth of ad revenue, whereas streaming (Hotstar) earned around ~1500 Cr from ads, and ~1200 Cr from Subscription. Important to note that:

• TV typically gets a 2:1 share of all ad revenue.
• Subscription revenue accounts for ~45% of all streaming revenue. This is the bucket that Jio is chosing to forego by giving away the IPL for free.

This season however has been underwhelming on the ad budget side. A typical 20% increase in ad budget was expected and turns out that has not been met due to an uncertain macroeconomic environment. Star TV has sold about ~3000 Cr worth of inventory whereas Jio has managed to sell about ~1000 Cr worth of inventory. Both are at about ~60-65% because advertisers are waiting till the end to get better deals or see turnout and then take a call.

How will this pan out for Jio? What’s their end-game?

It is clear that Jio is choosing to forego the ~45% of subscription side of the revenue in interest of getting the masses onboard the IPL.

I have observed that the way a brand shapes up its ads, gives a lot of insights into their strategy. Specially with respect to the exact words they choose in the ads. I can imagine the ad copy going through multiple rounds of revisions just because it doesn’t meet the company strategy :)

A quick look at Jio’s ads points out 2 things:

• It’s clearing up issues of the past when a lot of live TV was available only for Jio sim holders “watch the TATA IPL free on any sim”
• They are running campaigns and tournaments incentivising people to watch the match even when their favourite team is not playing, specifically calling out it out with their catchy jingle Jio Dhan Dhana Dhan

There are 2 clear ways out for Jio right now, in increasing order of priority according to me:

1. Increase the ad inventory pie, as a whole: This one’s a no brainer. Giving out the IPL for free will get more “on the edge audience” to start watching the IPL. With smartphone and internet penetration at an all time high, a free streaming of the IPL will get a LOT more people to tune into the IPL . The masses getting onboarded will logically get more ad budget into the IPL

2. Shift the ad pie share, in favour of streaming: With the simple one out of the way, this is what I think is Jio’s main game. The typical 2:1 ad inventory split needs to shift towards the streaming side for Jio to make significant money here. The selling point here can’t just be that the tier 2 and tier 3 India is coming to the IPL on Jio but also that the affluent India is coming on to Jio.

How will Jio achieve this?

• Increase the ad inventory pie i.e. get more people to watch the IPL:
  • Making the IPL more localised: Jio already has made the IPL a local gala - feed in 16-17 languages with some amazing commentators hired for local commentary
• Shift the share of pie, i.e. get advertisers to give more to Jio:
  • Get the affluent India to shift from TV to smart TV:
    • Jio recently got a special approval from the BCCI to stream the IPL in 4k resolution, giving viewers an amazing experience on the TV screen
    • Further improving the experience with multiple camera angles, 360 degree cameras, chats with commentators etc are in plan by Jio
  • Speak the language of the advertisers: While Jio is doing the usual CPM based inventory which is common for digital, they are also selling the more native 10 second ad slots that TV advertisers are more familiar with. This gives the budget holders a very easy comparison point given it fits their existing mental models.

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While Jio has not been able to increase it’s ad share pie instantly, this was expected given native TV advertisers being hesistant and okay with waiting out for one season. They also have a huge line up of Originals (~100 new shows and movies) that they announced post the start of the IPL (and apparently had been under the hood for 4 years now)

The next few IPL seasons are going to be really interesting with how Jio’s end game pans out.