How Bharti Airtel is trying to make its media business subscription-driven

Nishad Patki, 35, a trained musician and engineer, had been singing with a band for years. Soon after he went solo in May 2021 came an ad from Bharti Airtel’s Wynk looking for independent artists. Patki sent an unreleased song, was shortlisted in August and within 10 days hit a million streams. “I was like ‘wow’. I can do this full-time,” he said. His three songs on Wynk have hit 11 million streams. The 70 per cent revenue share allowed him to quit his job as assistant professor at the Sinhgad College of Engineering in Pune. “New artists are having a tough time. It is a challenge to get onto a streaming platform and find an audience. We have the technology to enable them to build a career in music and help big labels discover these new artists,” said Adarsh Nair, CEO, Airtel Digital. Wynk Studio has signed on 130 artists so far.
 

Airtel is not being altruistic. Nor is it taking on YouTube or short video apps. The idea is to build a media ecosystem that pays for itself. In a market dominated by free music, making money on it is tough. Getting young, unknown artists helps slash content costs. If an artist makes it, a label like Universal or Sony could snap him up but all his music from the first few years remains with Wynk. Besides creating the studio, Wynk has put its downloads behind a paywall. It claims to have 5 million paying subscribers. Streaming video has been similarly rejigged. After being free for long, Airtel Xstream was relaunched earlier this year as a pay service offering 18 streaming video brands such as SonyLIV and Lionsgate. It has already hit 3.5 million subscribers. Then there is Airtel Digital TV, a DTH operator with over 17 million homes.
 

Put it all together and media and entertainment brings in roughly Rs 4,000 crore in revenue. That is a tiny sliver of the Rs 1.17 trillion that India’s second largest telecom operator posted in revenues in the financial year ending March 2022.
 

What is the point of Airtel’s media brands?
 

“Wynk, Xstream, Airtel IQ, payments bank, and Airtel Ads play a role in reducing churn and improving stickiness,” said Gopal Vittal, managing director and CEO, in a recent earnings call. Airtel Digital, which operates the firm’s music and streaming video business, has 189 million monthly active users — over half of Airtel’s total base of 330 million mobile plus broadband subscribers. Its function is to remain asset-light and leverage the capital already sunk into the physical infrastructure it took to reach this base.
 

The point about Airtel’s media presence then is that it is strategic. “Jio and Airtel own the national information highways reaching about 80 per cent of India’s connected population. They do media to retain consumers with differential offerings. It allows them to improve on their ARPU (average revenue per user) while keeping the data cost affordable for consumers,” said Mihir Shah, vice-president, Media Partners Asia.
 

For perspective, note that Reliance’s Jio Infocomm, the largest telecom operator, gets an estimated Rs 5,000 crore to Rs 7,000 crore or about 9 per cent of its revenue from its assorted media businesses (see chart).

Streaming show
 

In the 5G auctions this August, Airtel has committed Rs 43,804 crore over the next few years. Analysts reckon that now more than ever Airtel needs the media business to help deliver better ARPUs on telecom, and that is where pay comes in.

Airtel Xstream was at 40 million users when it was shut down in 2021. “Running a video platform is more expensive than running music, especially when we are streaming billions of streams. So, monetisation became critical,” said Nair, who took charge as CEO in 2019. “We wanted the video industry to partner with us on a pure revenue share model. This required some serious pivots including temporarily shutting down our old video business and restarting as a pure SVoD (subscription driven video-on-demand) business,” he said. Airtel’s pitch is that it already has a customer base, technology, and the marketing muscle that supports this whole network. All the OTTs have to do is share content.
 

If a pre-paid user signs in from Kerala, he would get ManoramaMAX (a Malayalam OTT) free. In West Bengal, it would be Hoichoi. Currently, “80 per cent of the 3.5 million subscribers are on our starter plan where they access one video channel, the remaining are on our Xstream premium all-channel-access Rs 149 per month plan”, said Nair. There are plans to add an AVoD or advertising video-on-demand layer to this.
 

Is this, then, just a step away from having its own OTT? Nair is categorical that Airtel will not be launching either a music label or a video OTT. “As a telco they need everyone on board and therefore need to be an aggregator,” said media consultant Anuj Gandhi.
 

That, incidentally, is what the Rs 1.6-trillion entertainment business needs. Large-scale cable broadband is not yet a reality. The only major form of distribution online comes from telecom operators, of which there are just two with significant scale. When they aggregate and insist on pay revenues, it improves reach and revenue for the business overall. A few thousand Patkis and many more OTTs is what will make this ecosystem deliver what Airtel wants.