BT Buzz: Decoding Mukesh Ambani's Jio First Day First Show business model

The announcement by Mukesh Ambani, Chairman, Reliance Industries of the 'Jio First Day First Show' offering for premium JioFiber customers (wherein the customer would get to watch a film at home on the day of release) has triggered a lot of chatter around emergence of new business models in the film industry. The roll-out of the service may be a good year away, but the obvious question that comes to mind is how Jio will be able to release a film when there is an eight week ceiling to release films on any digital platform.

Salman Khan-starrer, Bharat, for instance, released on June 5 in theatres but made its debut on Amazon Prime Video only in August, eight weeks post its theatrical release. Today, digital and satellite rights constitute over 40 per cent (in certain films it is close to 70 per cent) of a film producer's revenue, but box office revenue is sacrosanct.  In fact, even before a movie goes on floor, producers sign a minimum guarantee deal with distributors for theatrical revenues. "Releasing a film only on Jio will make it a loss-making proposition for the distributor and he will never allow it unless he is compensated for it," says film producer and entertainment industry expert, Ashish Kaul. This explains why exhibitors such as PVR initially expressed concern over the Reliance announcement of releasing films on the Jio platform.

Ambani in his address let out just the tip of the iceberg, which has kept industry guessing on how the business model will pan out. Will movies be offered as part of a value-added service or will consumers be charged for it, is still anybody's guess. On the face of it, the Jio offering sounds like a great way for film-makers to reach out to a much wider audience. A blockbuster such as Baahubali 2, for instance, which raked in Rs 1,500 crore at the box office, was watched by less than five crore people, which is less than 5 per cent of the population. If Jio makes a business case saying that it will enable producers to reach out to 50,000 consumers on the first day of release, it will be an attractive option for film-makers. If the cinema industry today churns out revenues of Rs 13,000 crore per year, releasing films on platforms such as Jio which promises a reach of 50,000 crore, could well increase the revenue 15 times.

The reality, however, is not that simple. "Over 75-80 per cent of theatrical revenues come from multiplexes and by saying that you will completely shut down a steady source of revenue just because a digital platform promises to give you a wider audience is unlikely to happen. There are clear windowing agreements which exist," explains Girish Menon, Partner and Head, Media and Entertainment Practice, KPMG.

"The whole charm of a movie is watching it on the big screen. A digital release could spoil the fun of the movie, so, why will producers want to release on a platform like Jio," asks Sunil Lulla, Former Group CEO, Balaji Telefilms, who says that right now there is no clarity and everyone, is merely speculating.

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New Business Models

The Jio announcement could lead to the emergence of new business models believe industry experts. Keeping in mind the reach the platform is promising one can expect to see lot of deals being done specifically for Jio. "It will depend on the kind of revenue Jio will generate and how many users will download the app," says Nandu Ahuja, Senior Vice-President (India Theatrical), Eros International Media.

In the short to medium term, Jio will most likely emerge as a revenue source that would be incremental to theatre. "I don't see this as cannibalising theatre. Producers in the long term will be smart enough to understand which product will deliver higher ROI on a particular platform," points out Vikram Malhotra, Founder, Abundantia Entertainment. So, are we going to see more content driven films (the likes of Badhaai Ho or Article 15) that may not have adequate marketing budgets or even star cast to pull audiences into theatres being released on Jio? This could even lead to producing films just for Jio. In fact, there are companies such as Saregama whose movie-making arm creates content only for digital platforms such as Netflix. Producing digital only films are not new, as Netflix and Amazon Prime Video are already doing it, but producing a film for Jio would imply a significantly higher reach and hence the capability to monetise better.

Producing content for a digital platform needs different sensibilities says Kaul. "Digital is all about individual experience, so the way stories are told is also different. The way content is shot is also different from a film," he further explains. Jio so far has been more of a content aggregator and if it has aspirations of showcasing digital-only films it may also look at acquiring more content companies. It already has stakes in Balaji Telefilms and Eros.

If Jio in the short-term will emerge as a platform that will deliver incremental audiences, producers may even consider the platform to release their films only in those areas which do not have access theatres. It is well known that India is under-penetrated in terms of screens. "From a technology point of view a service like this is possible. This would require clear agreements between all parties in the distribution value chain," says Menon of KPMG.

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Advantage Regional

While Bollywood film-makers speculate, it is the regional film industry which could emerge as a huge winner thanks to Jio.  "Mumbai for instance, has over 55,000 Bhojpuri people, but there is only one Bhojpuri film released a month. If Jio releases a Bhojpuri film every week, this audience will lap it up," explains Kaul.

Ahuja of Eros agrees, "Jio could play a big play a big role for regional films". He says that while theatrical plays a big part for Tamil and Telegu films revenues, many Bengali, Malayalam and other regional films which are made on lower budgets are dependent on satellite and digital revenues.

The analyst community also expects films to become a lucrative source of revenue for Jio in the long run. According to a senior analyst of a leading brokerage firm, if Jio charges even Rs 50 for a new film there will be plenty of takers. "Even if half of the base uses the service, it will be a big revenue source. One has to keep in mind that a large part of India is not serviced by theatre," he points out.

Kaul also says that he will be surprised if Jio offers the First-Day-First-Show service just as a value-add to its premium consumers. "They may give it free as an introductory offer, but will definitely charge over time."

All eyes are on Jio's First-Day-First-Show offering. It could turn out to be a win-win for film-makers and Jio.

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