📰Streaming Wars

Hello. India is Netflix’s third largest industry driver. Home to world renown Bollywood, India’s entertainment industry is amidst a transformation as streaming giants are deploying billions to capture the next generation of audiences. We’ll explain more, and then close with Gupshup, a round-up of the most important headlines.

Markets

Read here for an appendix on the above.

Analysis

Streaming Wars: Who’s Who and How Much Are They Spending?

One of India’s fastest-growing and most under-discussed industries is media and entertainment. The entertainment and media sector in the country is projected to grow at an annual rate of 9.7 percent, with revenues anticipated to hit $73.6 billion by 2027. This is supported by surging demand from India’s growing digitalization: a report by IAMAI and Kantar Research projects that India's internet user base will surge from approximately 622 million in 2020 to 900 million by 2025, expanding at an impressive CAGR of 45 percent over the period.

The advertising-based video-on-demand (AVoD) market is forecasted to grow at a robust compound annual growth rate (CAGR) of 24 percent, reaching $2.6 billion by 2025. Meanwhile, global and local giants, including Netflix, Amazon Prime Video, and Reliance’s JioStar, are investing billions with content investment reaching $5.8 billion (₹489.5 billion) in 2023 compared to $3.3 billion (₹278.5 billion) in 2018. 

Already, the country has become Netflix’s third-largest revenue driver.

India is arguably the world’s most important battleground for the ongoing streaming wars. Here are the major players:

Domestic Players

Domestic platforms, such as JioStar and ZEE5, benefit from an intimate understanding of regional diversity and cost-sensitive consumers. JioStar’s affordability and its deep integration of regional-language content position it as a market leader, further bolstered by Reliance’s vast ecosystem. JioStar invests $1 billion (₹84.4 billion) annually, including significant allocations for sports rights, enabling it to dominate cricket broadcasting—a crucial driver of viewership which is synonymous with the drive for sports streaming on American media giants.

Foreign Players

While growing steadily, foreign players like Netflix and Amazon Prime Video face challenges in adapting to India's price-conscious market and navigating cultural nuances: Netflix has made substantial cuts to subscription fees and increased its portfolio of Indian original content, spending $500 million annually in collaboration with Amazon. These platforms are increasingly focusing on hyper-localized series and films to appeal to India’s diverse audience. The performance of American companies in India has been strengthening but still remains unprofitable. Netflix’s market share dropped from 41 percent to 30 percent throughout 2023 even after subscription price cuts. Additionally, the company reported $4.1 million (₹350 million) of profit for FY23 with a turnover of $378 million (₹31.9 billion) which came from the export of services. This does not include content investments which are filed through a SubCo, thus hiding that value which likely sinks net income. 

Joint Ventures

Reliance's JioStar has emerged as a powerhouse after merging its media arm with Disney’s Indian unit, commanding over 50 million subscribers. Uday Shankar, JioStar’s vice chairman, highlighted the gains in expertise regarding technology, distribution, and global content libraries. The venture leverages Disney’s intellectual property while tailoring offerings to local tastes. Similarly, Viacom18, partially owned by Paramount Global and Reliance, enhances domestic capabilities with access to global franchises and technologies.

Macro

• India’s Economic Affairs Secretary Ajay Seth said that recent consumer trends slowing down is not indicative of GDP growth going down past 6.5 percent. Seth did add that the government might undershoot spending goals due to contentious elections which could prove worrisome for infra growth. (Business Standard) 

• Top Indian cities like New Delhi, Mumbai, and Bengaluru see housing prices jump 23 percent due to luxury units. The average aggregate house price rose to $145,000 (₹12.3 million) from April to September due to luxury units having high demand. Bloomberg News reported that NRIs (non-resident Indian nationals) have been snapping up homes and will likely make 20 percent of all house sales in 2025.  

• RBI says that India is expanding payment links with more countries like Sri Lanka and the UAE. India is forging mobile payment links with regional allies and economic allies. The advent of this plan has come with the Central Bank’s decision to launch a central bank digital currency. The RBI sees CBDCs as the most cost-effective solution for trade, any cross-border, and all remittances. (Economic Times)

Equities

• Bharti Airtel trades up after purchasing a 24.5 percent stake in UK-based BT Group for $4 billion (₹337.6 billion), marking its second major international move. The first was expansion into Africa back in 2010. (Economic Times) 

• Motilal Aswal predicts that earnings growth will likely slow to 12 percent by FY26. The wealth management advisor argues that easy returns are less likely to be seen as market valuations have risen to reflect expectations for earnings growth. Global and domestic headwinds will also lead to softer earnings growth such as high rates and inflation eating at margins. (Economic Times)

Alts

• Millenium and Jane Street’s case regarding Indian options strategies continues: The two proprietary trading firms are in a court case after Jane Street alleged that MLP stole a valuable Indian options trading strategy. MLP is arguing that Jane Street is still extremely profitable in India after two traders in charge of trading in India left the firm. (BBG)

• Adani Group’s energy business is looking to raise $600 million for 7.45 percent interest rate. The revised yield is higher than what Adani first posted in October at 7 percent but tightened since earlier this year at 7.75 percent. The tightening was more idiosyncratic with the BJP being bullish for the company, thus reducing spread. There were over $1.95 billion in orders for the bonds on Wednesday. (Economic Times) 

• Adani to buy a stake in PSP Projects in order to boost its construction arm. Adani is purchasing a 30 percent stake for $81.1 million (₹6.85 billion) to reinforce engineering and construction capabilities for infrastructure projects. PSP will retain controlling interest and most board seats. (BBG) 

• ANI sues OpenAI alleging that the AI firm misused its copyrighted news content. ANI is seeking $236,000 (₹20 million) in damages. OpenAI argued in the Delhi High Court that there are no servers in India and thus it is impossible for any data training to happen on ANI work. Additionally, ANI is on a block list for OpenAI’s training materials. (BBG) 

Policy

• Exit polls are predicting that Modi’s BJP will achieve a narrow victory in Maharashtra. Pollsters are now predicting 145 seats to go the way of BJP with 131 going to the opposition with 288 total available. Investors would welcome the BJP given the more business-friendly nature and the ability to fund large infrastructure projects like Adani’s plan to revive Mumbai’s slums. (Economic Times) 

• Putin is planning his first India visit since start of Russia’s invasion of Ukraine. Modi and the Indian government did not respond for comment but Russian officials were bullish on the talk after the two leaders met at a BRICs summit. (South China Morning Post)

See you Friday.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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