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Amazon, Netflix, Disney and Reliance want you to keep streaming

News on streaming has been flooding in from around the world these past few weeks. Netflix declared dismal earnings and its first drop in number of subscribers in over a decade; CNN+, the much-hyped streaming cousin of the ubiquitous news network, lasted barely a month before it was switched off by its new owners WarnerDiscovery; and back home in India, former Star/Disney head Uday Shankar teamed up with his former boss James Murdoch to buy a big chunk of Viacom18, Reliance Industries’ media arm, to go big on streaming.

I have written about the tough economics of streaming before, but let me focus here on the ongoing battle for control of the world’s fastest-growing streaming market – India.

In recent weeks, Wall Street has soured on streaming companies, raising questions over the business model and future profitability. Stocks of all media companies with large investments in streaming have been dragged down after Netflix posted disappointing earnings. It’s ‘damned if you do, damned if you don’t’ for large broadcasters like Disney, Paramount, NBC, and WarnerDiscovery, who were told redemption and stock revival lies in moving their legacy operations to streaming.

But in India, it looks like we are just getting started. In late April, Amazon announced 41 new titles in various Indian languages.

For Amazon, this is a big opportunity to stay ahead of Netflix in a large market like India where the latter is struggling. So far, Amazon Prime Video has managed to get the Indian market right, aggressively chasing local content in various languages instead of relying on global content. Netflix too had made some promising moves with shows like Sacred Games but has struggled to keep up.

Amazon also launched Prime Video Channels in India a few months back which makes it a serious contender in over-the-top distribution as well where it partners with other OTT players like Discovery+, and Eros Now among others. Prime Video has over 350 channel partners globally, making it less reliant on just one business model.

Disney+, the other remaining member of the global streaming triumvirate, continues to be the market leader in India as Disney+ Hotstar. A big reason for its success is sports rights, which in India, is a pseudonym for rights to the Indian Premier League, one of the biggest and most lucrative sporting events in the world. That dominance is now going to get tested.

The biggest challenge with streaming has been the ever-growing mismatch between content acquisition costs and the ability to monetise that content.

Netflix spends close to $20 billion on content with over 220 million subscribers and it’s still under pressure even though it is arguably the most robust of the streaming companies.

This has led to content inflation across categories, and no content costs are as inflated as sporting content.

The media rights to the Indian Premier League for the next five years are up for grabs and bidding begins middle of June. Remember, Star (and via that, Disney) held it for the last five years and had handsomely outbid everyone then. At Rs 16,000 crore, Disney managed to turn a profit on the property only in its fifth year of holding the rights for both television and streaming. This time around, the Board of Control for Cricket in India is splitting TV and digital media rights for the first time, to reflect the growth of streaming. The base price for digital alone begins at a whopping Rs 12,000 crore, which means it will finally go for a price much higher.

While the contours of the $1.8 billion Viacom18-Bodhi Tree deal are unclear, it looks like Mukesh Ambani gets a part of his IPL bid funded and also gets an executive on board who has done it all before. It’s familiar territory for Shankar who snapped up the last IPL rights when he was the Star India chairman in the lead up to the Disney-Fox merger. Those rights at those prices likely helped bulk up Star’s valuation considerably for the Murdochs but never really made any money for Disney thereafter. It did, however, help Hotstar grow its subscriber base and Disney fashion its global streaming strategy from those learnings.

For Ambani, much like for Amazon, the game is bigger. The IPL rights play into his grander vision of using his vast content business (TV, streaming, digital) to expand his Jio mobile and broadband platforms and vice versa. Eventually, the Jio ecosystem will likely offer more and more services that connect every part of Ambani’s consumer-facing businesses. But Ambani seems to be learning from AT&T’s disastrous acquisition of Warner Media and its subsequent merger into Discovery – pulling it all together sounds neat but the content has to be a separate business that needs executives who can make it stand on its own.

Apart from Disney, Zee-Sony, and the Reliance-owned Network18, Amazon announced that it would be getting into live sports streaming as well, and sports betting firm Dream11 is also mulling bidding for the rights. Amazon has deep experience in streaming from operating Twitch and could be a formidable player if it gets hold of the rights. Bloomberg Quint

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