Reliance Industries made a bold bet in the content business on Thursday, by picking up 24.9% stake in TV and film production house Balaji Telefilms for Rs 413 crore.
This follows the company's acquisition of media company Network18 for around Rs 4,000 crore in 2014.
The key factor in this deal appears to be digital video production. In April, Balaji Telefilms had launched a subscription-based video on demand service called ALT Balaji. The service went live with a line up of 8 original shows and has introduced few more shows in the following months.
The company said it plans to use the funds raised to "speed up its content development, especially for ALT". Here are are some implications from the deal:
Original content investment
In April, ALT Balaji CEO Nachiket Pantvaidya had said that they would be expanding the show lineup from 8 to 32 original shows this year and had committed a budget of Rs 50 crore.
"We are looking to launch 30 to 35 shows. Besides Hindi and English, we have also shot a show in Tamil, one in Punjabi is being shot right now and we have two concept in Bengali that are in the works,” Pantvaidya had previously told ET.
However, creating content at such a scale would've needed a significantly large budget. Also, for a service that depends entirely on subscriptions, it's critical to have a good lineup of original exclusive titles that will get people to purchase paid subscriptions, since licensed video content eventually gets commoditized after a period of time.
In Reliance, Balaji Telefilms now has a deep pocketed strategic investor that will help them create original content for ALT Balaji at scale with better budgets. It will also get some room to take riskier bets and develop more expensive & high quality original titles.
An improved content lineup will also help Balaji gain a better standing against rivals Hotstar, Netflix and Amazon Prime Video who are also aggressively ramping up their content spends in the country.
ET had reported in June that Amazon had set aside another $100-125 million for original programming and content acquisition for the current financial year after initially committing at least Rs 500 crore to create original content in India.
Distribution
Apart from the investment, Balaji will also likely gain access to Reliance's distribution muscle to increase the consumption of its video content among the urban masses.
Reliance Jio has been one of the fastest growing telecom operator in the country, registering more than 100 million subscribers in less than 6 months on the back of free 4G data and voice plans, in February this year. In April, Reliance had claimed that 72 million had signed up for its Prime subscription plan.
Last month, ALT Balaji also integrated Reliance Industries' digital wallet Jio Money to beef up its payment offerings.
It will be interesting to see whether Reliance bundles ALTBalaji with Jio's data plans and enable subscribers to pay for the service through an unified bill, something which rival Internet service provider ACT Fibernet is already doing in select cities like Bengaluru.
What does Reliance get?
From Reliance's perspective, the conglomerate will get access to one of Asia's largest production house along with a steady stream of original content developed by them, which can be used by Reliance's telecom & digital services venture Reliance Jio.
Note that Reliance Jio already has a free video on demand app in form of Jio Cinema and a live TV streaming app Jio TV which has already broken into the top 10 Android apps in the country.
The telco will also benefit from the increased uptake of video content that will result in more data consumption on its network leading to subscribers eventually opting for higher priced data plans.
Get Unlimited Access to The Economic Times
