Beleaguered telecom has made content red hot in India

There has never been a better time to be a content provider in India and the jet fuel turning production houses into power centres almost overnight is the fiercely contested telecom landscape.

India has now reached a wireless telecom subscriber base of 1.18 billion with the mobile phone now the primary means of not just communicating but also consuming news and entertainment. From music to movies to soap operas to cricket matches, the smartphone has turned into the centrifuge around which Indians perambulate.

One of the big reasons for this is extraordinarily cheap data rates introduced by Reliance Jio, India's behemoth of a startup launched by oil and textiles tycoon Mukesh Ambani who is fond of saying things like "data is the new oil." Launched in 2016, Jio has been on a war path, accumulating 215 million subscribers in just under two years. In doing so, its disruptive data pricing strategy has pummelled the bottom lines of its chief rivals Airtel and Vodafone -- whose merger with the number four player Idea Cellular was officially approved yesterday, creating the largest telecom provider in India.

Ironically, despite the carnage, Indian telcos have now decisively moved from voice to data -- something that the industry was trying hard to do before Jio's entry albeit at higher data rates. With smartphone penetration rates only at around 28 percent, the great game is now underway to capture the next 800 million subscribers and milk them for data gold. A bitter rivalry between Airtel and Reliance is now well underway to corner this El Dorado and content has become the path to doing so.

On one level, this is a no brainer considering India's great cinematic traditions and the fact that Indians have spend the past seventy years avidly consuming movies produced by a plethora of separate and distinct regional industries in separate languages within the country. Indians are also voracious consumers of news with a variety of English and local language publications that continue to flourish. Cricket and religion are, along with cinema, the lifeblood of existence and are destined for further exploitation through cellphones.

All good stuff, except for these two nagging details: A relative shortage of new and innovative content leading to a confusing web of deals, and no clear game plan of how exactly to monetize content acquisition.

Here's an example. Consider AltBalaji, purveyor of an avalanche of melodramas more overwrought than any known to humanity that Indians have ingested as life-giving nourishment. With over 11 million mobile app downloads and more than 2 million web viewers that span 90 countries where diasporic Indians make up much of its thirsty audience, the company once intended to be an OTT destination site, much like Netflix. Instead, however, it has decided to go the syndication route and has struck a number of deals to disseminate its content. Airtel, for instance, has a deal in place that allows its customers to access AltBalaji content through the Airtel App. Similarly, Airtel consumers can also access content from Hostar, ErosNow, SonyLiv, and Hooq in similar deals as well as with Amazon for Prime service.

Here's the catch. Guess who recently snapped up a 26 percent stake in AltBalaji's parent, Balaji Telefilms? None other than arch rival Reliance. Reliance also recently picked up a 5 percent stake in ErosNow, a famous Hindi film studio that is now a Nasdaq listed company with a web streaming service with 6-8 million subscribers into which Airtel has also entered into a content partnership with. Naturally, the same content deals above are also in place with Jio.

The problem for telecom operators is that content partnerships are fragile and fickle beasts. Take a look at Zee Entertainment's long term contract with Reliance Jio which Zee recently ripped up over money disagreements, only to then re-ink one with Airtel. Apparently, Zee has managed to snag a very lucrative deal for app-in-app integration at a far more attractive cost-per-download level, rather than a wholesale retail price one.

It looks like Reliance has figured out a workaround to this problem. Industry insiders say the company is actively recruiting scriptwriters and attempting to build a large production house of its own. The advantage that Reliance has is its current deep pockets and a no holds barred attitude towards building a subscriber base -- monetization be damned. A year ago, its Prime members, not to be confused with Amazon, had to pay Rs 99 annually for membership but Reliance has even ditched that revenue stream recently which makes up a loss of Rs 7 in terms of Average Revenue per User or close to 6 percent of its total ARPU for its flagship plan.

No one is really clear about how long the content party is going to last but this much is clear. Reliance, hell bent on acquiring subscribers, is going to be taking original content generation very seriously and its rivals are going to be scrambling to find a way to compete. Meanwhile, content providers will be cracking open Johnny Walker Black for some time to come.

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