Will JioCinema’s Rs 29/month plan help it fight subscription fatigue among users?

Experts debate the reason for the low pricing and how it'll impact the Indian OTT landscape.

JioCinema has announced its new subscription offering ‘JioCinema Premium’, with plans starting at Rs 29 per month. This marks a significant decrease from its previous Rs 99 per month or Rs 999 a year subscription fee (ads included). 

The platform will now offer an ad-free experience delivered in up to 4K quality and offline viewing options. Members can access Bollywood and Hollywood content, exclusive series, movies, kids' shows, and TV entertainment, on any device, including Connected TVs. 

Setting such a low price is expected to help the platform fight the subscription fatigue among users. But, being a late entrant to the OTT space, can this penetrative pricing strategy be expected to help it become a preferred platform for the audience? 

According to Ormax Media’s Audience Report 2023, on average, a paying audience member subscribes to 2.8 subscriptions. These two to three subscriptions are generally the bigger players like Netflix, Amazon Prime or broadcaster-led OTT platforms like Disney+ Hotstar, Sony LIV and Zee5.

Uday Sodhi, senior partner, Kurate Digital Consulting, says Reliance seems to be employing an entry-level pricing strategy to attract subscribers. However, he is apprehensive about its sustainability in the long run.

“This appears to be an entry-level pricing strategy. Currently, most Indian consumers already have two OTT subscriptions, making it challenging for additional services to gain traction. As it is a late entrant, it likely needs to start with lower prices to encourage adoption. Eventually, it’ll likely need to raise prices to reach a sustainable level,” he says.

Divya Dixit, business strategy and growth advisor for startups, says this pricing strategy has the potential to be a significant game-changer.

“At just Rs 30, even a person with modest means, wouldn't hesitate to subscribe to JioCinema for ad-free content. Rs 30 won't even buy a movie ticket, but on JioCinema he can watch more than 10 movies,” she says. 

Karan Taurani, senior VP, Elara Securities, says the price cut could be because it may not have seen a big offtake for only exclusive Hollywood content and hence added more content for an ad-free experience. 

“It has an advantage as compared to its peers, It doesn’t need to tie up with partners due to a strong in-house distribution mechanism via Jio (mobile, fibre). This will potentially help them drive scale in their pay-based revenue, by tapping the premium customer who wants to watch content ad-free and is willing to pay for the same. It can gain competitive advantage versus the global OTT platforms,” he says.

Parallels to telecom strategy

JioCinema’s pricing strategy is reminiscent of Jio’s pricing strategy for its telecom offering. In 2016, it entered the market with extremely competitive and disruptive pricing offering free trials and eventually, it compelled all telecom operators to lower its cost of data and voice services. 

Also, according to a recent Comscore report, the potential merger between Star India and Viacom18 will lead to Disney+ Hotstar and JioCinema having a consolidated reach of 160 million unique visitors (UVs). This is expected to create a near-monopoly in the market. 

“By coupling this with highly penetrative pricing, Jio is leveraging its deep pockets to sustain a strategy its competitors can't match, echoing its approach in the telecom sector,” says Dixit, who has earlier worked with ALT Balaji and Zee5.

However, unlike with telecom, where its rivals were compelled to lower their prices, Dixit believes that significant price reductions are unfeasible unless consumers are willing to compromise on content quality. 

“Content is the largest cost for OTT platforms, and managing it within budgetary constraints is challenging. Other revenue streams like syndication and co-production may offset costs, but sustaining such low prices long-term is unlikely for platforms like Zee5 and Sony Liv. Even Netflix and Amazon, with their cheapest plan at 199 per month, can't match Jio's Rs 29 offering. While Jio may draw some volume away, loyal Netflix customers won't likely switch until they find comparable content elsewhere at a lower price,” she says.

With telecom, internet access was a commodity and it could be purchased from various providers at different prices. However, the fundamental difference with this strategy lies in the content offering as with OTT platforms, the content itself is the distinguishing factor. 

“Offering a lower price alone doesn't guarantee subscribers, as consumers prioritise content over pricing. Whether it's Sony, Netflix, or Amazon, consumers choose based on the content offered, not just the subscription cost,” says Sodhi.

On average, pricing for broadcaster-based OTTs in India is Rs 103 per month (Zee5, Sony Liv, Disney+ Hotstar premium plan), whereas the average pricing for global giant OTTs’ is Rs 358 (Netflix, Prime Video). In comparison, JioCinema’s premium pricing is at a steep discount of 86%. However, Jio Cinema’s depth of offerings in original and global content remains much lower as compared to global peers.

Impact on overall OTT landscape

JioCinema’s content offering is also expected to see an overhaul with the upcoming merger bringing in Disney+ Hotstar's content and exclusive IPL rights, coupled with its acquisitions like the Peacock library and international content. Will it then eat into other OTT platform’s subscriptions?

Sodhi does not foresee a significant impact on the OTT landscape. He says it won't affect other subscriptions as the price is too low to impact the pocket.

“The low amount isn't significant enough to warrant reconsideration of other subscriptions. It doesn't affect decisions in any meaningful way. However, Jio's subscription model could benefit OTT monetisation. With such a low entry price, more people may opt for subscriptions, potentially increasing the subscriber base. As prices rise later, more subscribers may still find it worthwhile to pay,” he says.

Dixit says India demands both economic pricing and sophisticated tech. She believes JioCinema needs to elevate its user experience and branding to capture a broader audience.

“India's market thrives on volume rather than high cart values, a realm where Jio excels. However, challenges persist, notably JioCinema's glitchy player and mediocre UI/UX, essential for competing with Netflix and Amazon. Their recommendation engine also needs improvement, likely hindered by insufficient data analytics. Furthermore, JioCinema's branding requires enhancement to appeal to tier 1 cities and premium audiences, crucial for competing with established platforms,” she says.

Meanwhile, she believes smaller local and regional OTT players may struggle to sustain themselves. “Jio could consider opening channels on its platform and invite smaller players to join, implementing a revenue-sharing model. Jio could offer them exposure in exchange for a percentage of their revenue, similar to what Amazon is doing,” she says.

However, Taurani says the price cut is a potential blow for the rival OTT platforms as they may not be able to raise pricing, due to Jio Cinema Premium’s disruptive pricing. 

“This will limit SVOD revenue growth prospects; broadcaster-based platforms have a freemium offering to their advantage (ad and subs revenue-based), however, global OTT giants may need to add an ad tier pricing or explore innovative means to drive SVOD revenue, as pure ARPU led hike may be a challenge. Broadcaster-based OTT platforms may also report lower revenue growth, as subscription revenue is approx. 40%-50% of their OTT revenue, which may not see a sharp jump in ARPU’s,” he says.