Behind the Scenes: Unravelling how the media industry is being driven by one of India's largest company

I want to watch a movie, what all options do I have –

1. I can go to a cinema theatre and watch a movie
2. I can watch a movie in an OTT platform using a internet connection
3. I can watch a movie being played in the television using a DTH service provider

What are the elements in the supply chain so that facilitates me to watch a movie?

First and foremost, production houses such as Eros Now and Balaji Telefilms produce movies.

Then I will have to decide as to how am I going to watch this movie.

1. If I decide to watch this movie in a cinema theatre, then I have to book tickets using the service of a ticketing partner such as Book My Show.
   
   
2. If I decide to watch this movie in an OTT platform such as Disney Hotstar, Jio Cinema, Voot and Alt Balaji then I need a subscription of these platforms and a steady internet connection which would be provided by telecom operators such as Jio.
   
   
3. If I decide to watch this movie in the television, I need to tune in to a specific television channel such as Colors TV 18 using the service of a DTH operator such as DEN Networks and Hathway.

You may note that in the above scenarios, I have highlighted names who are forming the elements in the supply chain to facilitate me in watching a movie. Now, let me connect the dots.

1. Eros Now and Balaji Telefims
2. Book My Show  
3. Disney Hotstar, Jio Cinema, Voot and Alt Balaji
4. Jio
5. Colors TV 18
6. DEN Networks and Hathway

There is something common in the items listed from 1) to 6). They all are linked to the company - Reliance Industries Limited! 

The company Reliance Industries Limited has -

• 5% stake in Eros International PLC
• 25% stake in Balaji Telefilms Limited. Alt Balaji is controlled by Balaji Telefilms Limited.
• Majority control of Network 18. Colors TV 18 and Book My Show is controlled by Network 18.
• 67% stake in Jio
• Majority control of DEN Networks and Hathway

Through these investments Reliance Industries Limited has the ability to directly or indirectly participate in the supply chain of entertainment industry.

These investments mandates explanation of the topics – Forward Integration and Backward Integration

What is forward integration -

Forward integration is moving forward in the value chain and entering business lines that use existing products. This will also take place where organizations enter into businesses of distribution channels.

When you own a production house and you go on to acquire a television channel it is called as Forward Integration.

What is backward integration -

Backward integration is concerned with creation of effective supply by entering business of input providers. This strategy is employed to expand profits and gain greater control over production/supply of a product whereby a company will acquire or build a business that will increase its own supply capability or lessen its cost of production.

When you own an OTT platform and you go on to acquire a movie production house it is called as Backward integration.

Benefits of forward and backward integration to Reliance Industries Limited -

Through these investments Reliance Industries Limited has integrated the entertainment portfolio both forward and backward. Let us take the example of the soap opera Naagin to understand the benefits of Reliance Industries Limited’s benefits of forward and backward integration.

Soap opera queen Ektha Kapoor who manages the businees operations of Balaji Telefilms is the  brainchild behind the soap opera Naagin. The rights of the Naagin is owned by Balaji Telefilms. Any television channel desirous of telecasting Naagin has to pay telecasting rights to Balaji Telefilms.

By now you would have guessed who telecasts Naagin. The soap opera is telecasted by the television channel Colors TV 18. So, Network 18 is liable to pay Balaji Telefilms for the telecasting rights.

The Television Rating Points (TRP) is very high for Naagin, being one of the reasons why Ektha Kapoor has marched it towards season 6. The TRP being high, companies such as HUL and Reckitt Benckiser willing to promote their brands such as Surf Excel and Harpic respectively pay Network 18 to purchase advertisement slots in between the usual 2 to 5 minute ad-break scheduled while telecasting Naagin in Colors TV 18.

On top of this, to view Colors TV 18 in your television you are required to pay a monthly subscription fee to your DTH service provider. Let us consider your DTH service provider is either DEN Networks or Hathway.

Balaji Telefilms has earned revenue in the form of telecasting rights and Network 18 has earned revenue from sale of advertisement slots. Reliance Industries Limited being shareholder in both Balaji Telefilms and Network TV 18 enjoys its share of profits and dividends.

 
Since, your DTH service provider is either DEN Networks or Hathway, Reliance Industries Limited being shareholder in the DTH service providers enjoys its share of profits and dividends.

To make it more interesting, if you wish to watch it on Voot and even if you are not required to avail a subscription, you would for sure need an internet connection. What if your telecom service provider is Jio? Reliance Industries Limited would now earn revenue from you for availing telecom services from Jio.

Now with the merger of Disney Hotstar, the machinery is well oiled. Jio can bundle Hotstar subscription with its internet pack and lure you to port your telecom service operator and choose Jio. Airtel might provide you subscription to Amazon Prime Video and Netflix, however Jio by providing subscription of Hotstar  enhances viewership count of Hotstar which in turn will increase its revenue through advertisements being played in the OTT application.

Jio Cinemas logged over 48.7 Crore views for the match between RCB and CSK on May 18th 2024

In an OTT platform the number of viewers is a factor which is taken into consideration for deciding the price a company is willing to pay for the advertisement slots. If your service provider being Jio has bundled the subscription of Hotstar in your internet pack, you would definitely use Hotstar. 

When you use Hotstar for viewing content the viewership count increases and because of this Reliance Industries Limited gets the ability to price advertisement slots higher, this in turn would increase the revenue generated from Hotstar.

Up until now, you might have thought that Jio has offered Hotstar subscription for free because you are a loyal customer but by now you should have understod the logic for bundling it with your internet pack. 

Digital streaming rights of the Indian Premier League (IPL) was acquired by Jio and was provided for free to the end consumer. However, you need a steady internet connection to stream it in your mobile phone. To stream the entire match a minimum of 2GB data is required. 

A per day daily limit of 2 GB would not be sufficient if you are streaming the matches in 1080p. Only data analysts employed by Jio know how many customers have bought extra internet pack on a per day basis just to continue their IPL streaming.

On top of this there was news that DEN Networks and Hathway, both of them being DTH service providers, increased the channel subscription price of Star Sports. Why did this happen? The rational answer is to make sure that you realize streaming IPL in the Jio Cinemas would be cheaper than viewing the match telecasted in Star Sports.

ALT Balaji is building a different youngster consumer base because of its content and to stream it you would need to buy Alt Balaji subscription. The subscription revenue is earned by Balaji Telefilms. A steady internet connection is required to stream this content. What if your telecom service provider is Jio? Reliance Industries Limited would now earn revenue from you for availing telecom services from Jio.

A well-oiled entertainment machinery being integrated both forward and backward is already built up by Reliance Industries Limited and the merger of India operations of Disney with Network 18 has further expanded the supply chain. The company has in place an eco-system that produces and distributes entertainment content.

Reliance Industries Limited now has the power to decide the revenue from advertisements being played during streaming cricket.

• IPL – Jio Cinemas in digital streaming platform and Star Sports in television streaming platform
• Other International Cricket Matches – Disney Hotstar in digital streaming platform and Star Sports in television streaming platform.

Now you might think how will Reliance earn if I go to the stadium to watch the IPL match. 

Question - How are you going to book the tickets to the watch the match ?

Answer - Book My Show

Book My Show is leading the ticketing sector as it is being extensively used to book entertainment shows such as stand up comedies, public events, music concerts, sport matches and of course cinemas. The company Bigtree Entertainment Private Limited which operates Book My Show, is part of Reliance Industries Limited. Just like how railways have established a monopoly in railway ticket booking, Book My Show controls a huge share of the entertainment ticketing sector.

Conclusion

If we start digging other areas of Reliance Industries Limited you would also realize that Reliance Digital, is engaged in sales of the smart phone, laptop, television and other accessories such as speakers and headphone that you are using to watch your preferred entertainment.

The list is endless. The main point we wish to drive is, a big fishing net has been swung out by Reliance Industries Limited out in the ocean of entertainment to catch the fishes who want to taste entertainment. The next time you hear the news of a company acquiring or being merged with any other company, try checking how can the company integrate the acquisition or merger in its existing business and how the company would strengthen its market dominance because of the acquisition or merger. You would too start connecting the dots.

Thank You
Happy Reading !