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Can Ambani's bet on content reshape telecom?

The Network18 acquisition is the first step in Reliance's plans to converge media with telecom, a move it hopes will make its 4G services more attractive to people

Surajeet Das Gupta  |  New Delhi 

Mukesh Ambani
Mukesh Ambani

Mukesh Ambani-led Reliance Industries' acquisition of Network18 gives it control of a diversified portfolio: media properties which include news channels, entertainment channels, education channels, e-commerce, publishing and films. With Reliance Industries facing relentless political heat during the recent general elections, many say the acquisition is meant to give it a strong voice in the media. They argue that Reliance Industries moved fast on the acquisition as the Telecom Regulatory Authority of India, which also regulates the electronic media, is putting together recommendations aimed at restricting the role of big business in the media.

Reliance Industries, however, has said that the acquisition is meant to "differentiate its 4G (fourth-generation telecom service) business by providing an amalgamation of telecom, web and digital commerce". It is in line with global trends where such consolidation is happening: in the US, Comcast, the country's largest cable company, bought NBC Universal which owned a host of entertainment and business channels. It has now made a bid to buy out Time Warner Cable. Telecom service provider AT&T wants to buy DirecTV, a satellite TV provider, for $49 billion in order to expand its consumer base across platforms.

The common thread

So will acquiring Network18 help Reliance Industries to get synergies between telecom and news and entertainment? To answer this key question one has to understand what Reliance Jio, the company's telecom arm, is doing. For one, it plans to lay down fibre optic network directly to consumer homes or to the kerb in as many as 100 cities in order to provide three services: telephony, broadband and high-speed IPTV as an alternative to cable and DTH. It has already started wiring up in a big way in Delhi and Mumbai apart from a few other cities. Two, it will offer 4G services on mobile phones and on laptops and desktops through dongles. With only 10 per cent of the 860 million mobile subscribers using some form of data (50 per cent of them use only 2G data), it is a woefully small market. Tariffs are high and therefore usage is low. One hour of digital content costs over Rs 100. That is why only 3 per cent of the 900 million TV viewers watch programmes on their mobiles or personal computers, that too only for a few minutes. Reliance Jio wants to disrupt the market with low data tariffs. One factor that will drive traffic is content. And this is where the Network18 acquisition, with its wide variety, fits in.

Some question the move. They argue that with a host of channels in each genre, sourcing inexpensive content is not an issue. Also, under government rules, broadcasters cannot have exclusive content - they have to provide it to all platforms, cable or DTH. (However, a telecom service provider can push exclusive content to its mobile subscribers.) Analysts say the Network18 bouquet has less than 9 per cent share of viewership in the 140 million satellite and cable homes. But no IPTV operator can afford not to cater to 91 per cent of the consumers who see other programmes. Critics of the strategy point out that laying a fibre optic network is expensive and returns might come only after over a decade. Also the amount of bandwidth required for IPTV is huge and that's why experiments with this technology by others, including Bharti Airtel, have not really taken off.

Those in the know say Reliance Industries sees content and owning channels as a profitable business, just the way Star TV sees it as a good business. And Star TV, owned by Rupert Murdoch, does make healthy profits. More important, it sees the potential to harness telecom technology to expand the content market. With telecom technology, especially with broadband and high-speed internet, it can expand the TV subscriber base as well as increase the usage of content. Currently, people in India watch TV on an average for three hours a day - half as much as people in the US do. By yoking mobile devices, it is possible to increase TV viewership by making TV accessible without the consumer being at home in front of the idiot box. It can also increase the number of multiple-screen households (at present it is only 8 per cent) by enabling tablets and computers for TV viewing. This again increases overall usage, which means more data usage as well as more advertising and subscription revenues from content.

Taking a cue from Netflix


Like Netflix, which offers streaming video across devices such as computers, mobile phones and TV, the ownership of Network18 will give Reliance an edge in producing some exclusive content and charging consumers a monthly rent for it. This could drive data usage in a big way. For example, those consumers who use streaming video services consume seven times more data than those who only subscribe to pay TV channels in the US. Of course, many would argue that like Netflix, Reliance Jio can buy content from others. But the ownership of the Network18 channels will help Reliance Jio to negotiate better rates with other broadcasters, especially Sun TV and Zee which are broadcasters as well as DTH service providers.

Insiders say that Reliance Jio is looking to harness technology to provide services which will be difficult for others to replicate. For instance, it can offer local news and happenings in the 100 cities where it is laying fibre to its customers on mobile phones and TV. That could be a killer content for which it can depend on Network18. Also, the deal has provided Reliance Industries with an array of e-commerce portals where investments could make them key revenue earners: travel portal yatra.com (amongst the top three in the country) and Topper, a channel which caters to the educational need of children. The company has invested in another school educational portal called extramarks.com.

Reliance Industries has kept its future plans a closely guarded secret. But it is the first in treading in a new business model in India of converging telecom and media, which of course has been tried in a limited way even abroad. The question is, will the model work?

CHASING ACQUISITIONS FOR MORE VIEWERS

Many argue that Reliance Industries' strategy ahead could be to go in for more acquisitions of broadcasters so that it can increase its viewership base. It could also invest in cable or DTH operations to increase its subscriber base. The Network18 bouquet, for instance, is strong in Hindi general entertainment (it is in top three in the pecking order), news (business and general) as well as in children's programmes (number three).

However, it has no presence in sports, a not-so-strong presence in the regional market despite ETV, and no movie channel. In sports, Network18 might have to wait at least two years before the broadcast rights for the Indian Premier League are up for grabs again as most of the other properties have already been sewed up by others. Of course, analysts say it can build on its strength through acquisitions, which looks to be the way to grow for them. "I think it will go for inorganic growth and buy one of the larger all-India or regional players. Once it does that, it will come pretty close to being the number one," says a top executive in a well-known channel.

CONTENT TO SUIT ALL TASTES

PUBLISHING

* Forbes
* Overdrive
* Chip
* Entrepreneur
* Auto Monitor
* Modern Pharma

NEWS

* CNBC-TV18
* CNBC Awaaz
* CNN-IBN
* IBN7
* ETV
* IBN Lokmat

PORTAL BUSINESS

* in.com
* Ibnlive.com
* Moneycontrol.com
* Firstpost.com
* Burrp
* News18

E-COMMERCE

* HomeShop 18

FINANCIAL INVESTMENTS

* Bookmyshow.com
* Yatra.com
* Ubona-mobile VAS
* Stargaze-multi-screen theatre
* Colosceum-production house
* Topper channel for kids

ENTERTAINMENT

* Colors
* Rishtey
* MTV
* MTV Indies
* Vh1
* Nick
* Sonic
* History 18
* Comedy Central
* ETV

FILM PRODUCTION

* Bhaag Milkha Bhaag
* Queen
* Madras Cafe
* Bombay Talkies
* Special 26
* Sons of Sardaar
* Kahaani
* Singh is King
* OMG
* Gangs of Wasseypur

DISTRIBUTION AND AGGREGATION

* ETV
* TV18
* Viacom 18

First Published: Tue, June 03 2014. 23:20 IST
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