[Piyush Gupta and Himanshu Gupta are students at NLSIU, Bangalore and NMIMS, Mumbai respectively]
The recent announcement of the Sony-Zee merger has sent ripples across the Indian Over the Top (OTT) market, hinting at a potential shakeup in the industry's dynamics. Amidst this backdrop, the Jio-Disney deal emerges as a pivotal development with far-reaching implications for both players and consumers.
Disney Plus Hotstar, a prominent player in the OTT landscape, found itself in direct competition with Jio Cinema, particularly following Jio's acquisition of IPL rights. The battle for subscriber supremacy intensified as both platforms vied for exclusive content and sporting events. However, the landscape shifted dramatically with the Jio-Disney deal, altering the competitive dynamics in the Indian OTT market.
In a strategic move to disrupt Hotstar's subscriber growth, Jio leveraged its vast telecom infrastructure to offer free streaming of high-profile sporting events like the Indian Premier League and FIFA 2022. This aggressive strategy aimed to lure subscribers away from Hotstar by providing premium content at no additional cost. The impact was palpable, with Hotstar witnessing a notable decline in subscribers in the previous quarter.
Meanwhile, Reliance's influence in the OTT realm extends beyond Jio Cinema, with its joint venture Viacom18 holding significant sway. The integration of Viacom18 into Reliance's ecosystem further strengthens its position in the market, potentially reshaping the competitive landscape.
The Jio-Disney deal underscores the convergence of telecom and OTT services, where Jio's bundled offerings could redefine consumer preferences. By integrating telecom and OTT services into joint plans, Jio presents a compelling proposition that rivals standalone international players like Netflix and Amazon Prime. This convergence not only enhances value for consumers but also consolidates Jio's market dominance across multiple sectors.
As the Indian OTT market continues to evolve, strategic alliances and acquisitions will play a crucial role in shaping its trajectory. The Jio-Disney deal marks a significant milestone in this journey, highlighting the strategic imperatives driving industry players in an increasingly competitive landscape.
In this backdrop, this article attempts to put the spotlight on the potential implications of this merger on the competitive landscape of India for the streaming platform market. The Jio-Disney deal raises concerns regarding abuse of a dominant market position. The consolidation of Jio's telecom and OTT services, coupled with its aggressive pricing strategy, could potentially limit competition and stifle innovation, especially in the live-streaming market of India. Moreover, the dominance of a single entity in the OTT space may result in reduced choices for consumers and higher barriers to entry for new players, ultimately leading to market monopoly.
Jio-Disney Merger: A step towards creating monopoly?
Section 4 of the The Competition Act, 2022 (Act) is the operative provision dealing with the abuse of a dominant position. This provision is broadly fashioned on the European Union prohibition on abuse of dominance contained in Article 102 of the Treaty on the Functioning of the European Union (TEFU). Section 4(1) of the Act states that there should be no abuse of dominant position by an enterprise in the relevant market. There are three stages in determining the violation of Section 4(1) of the Act: (i) determination of the relevant market, (ii) determination of 'dominance', and the (iii) determination of 'abuse' of that dominant position.
For the purpose of application of Section 4 of the Act in the Jio-Disney Deal, the relevant market can be delineated according to Section 2(t) of the act which defines relevant market as “a market comprising all those products or services which are regarded as interchangeable or substitutable by consumers because of characteristics of the products or services, their prices and intended use” (emphasis added).
In the context of this deal, the relevant market is the ‘online live streaming market’. This is due to the fact that the characteristics of the overall OTT market are significantly different from the online live-streaming platforms. While the OTT market that comprises international players such as Netflix and Amazon Prime drives their consumer business through the constant availability of new content which includes movies and TV shows, the online live streaming market platforms such as Jio Cinema and Disney Plus Hotstar drive their major revenue and consumers through the telecasting rights of the multitude of sports event.
Further, the distinction between the two markets is clearer when we consider the fact that neither the normal OTT platforms enter into the market providing streaming services for sports events nor the live streaming platforms enter substantially into the market for providing content services. While both Jio and Disney provide limited content in the form of web series and TV shows, these are neither the main source of their revenue nor their customer retention source.
This live-streaming market segment is also distinguished from the offline streaming market which consists of players such as Star sports or Doordarshan. This differentiation of the online and offline market is aligned with the recent approaches taken by the CCI in a number of cases where it considered the online and offline as two different markets. This position was also taken by CCI in the leading case of Cleartrip-MMT where the CCI opined that in view of the increased popularity and use of online travel aggregators (OTAs) by a large segment of consumers in India, the online channel appears to be a distinct mode of distribution, which cannot be simply replaced or substituted by other offline modes or direct sale without losing out significantly on consumer reach.
Therefore, in the context of analysing this potential merger, the relevant market becomes the market for online live-streaming service platforms which exist independently and distinct from the larger OTT market.
Jio has a dominant position in the relevant market
The essentials for delineating the ‘dominant position’ is prescribed under Section 19(4) of the Act which includes the size and resources of the enterprise and the size and importance of the competitors. The essentials are based on the principle propounded by the European Commission in the United Brand v. Commission of the European Communities where the Court observed the domination position to be - “a position of strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitor, customers and ultimately of its consumers.”
In the instant matter, Jio is in a position of domination in the relevant market due to two factors. Firstly, it has a higher market share as compared to other streaming platforms and secondly due to the bigger pool of resources such as telecom customers, that it possesses compared to its competitors.
While Section 19(4)(h) prescribes the creation of entry barriers for other competitors as one of the factors for determining the dominant position of an entity, Section 19 (4)(d) prescribes the economic power of the enterprise including commercial advantages over competitors. In the current circumstances, Jio can leverage its pre-existing vast telecom customer base to alter the pricing of its plans and include OTT as an add-on with the existing recharge plans. This will deter the customers from choosing other OTT subscriptions over Jio-Disney (post-merger), hence creating an artificial barrier for other players to enter the live streaming segment in lieu of fewer customers willing to migrate to their platform.
While the offline live-streaming segment consists of players such as Doordarshan, Star Sports, ESPN, Ten Sports etc, the online segment has a limited number of players that primarily consists of Sony Live, Disney Hotstar and Jio Cinema. The market breakup of the relevant market clearly puts a spotlight on the dominating position that Disney and Jio have acquired with a total concurrent viewership of more than 59 million and 32 million respectively. On the other hand, Sony Liv, which is another minor player in this segment, has managed to reach only 8 million concurrent viewers. This starkly points out the leading and dominating position that these platforms possess in the relevant market.
The presence of limited players in this segment underscores the need for CCI to rethink its decision in this case as the merger in this highly concentrated market can violate section 4 due to the potential creation of a monopoly.
Abuse of dominant position
Lastly, this deal has a significant potential to cause abuse of the dominant position by Jio due to the fact that it creates unfair entry barriers for its competitors to enter the market.
When considering the abuse of dominant position, there are two primary approaches for assessing abuse of dominance. (1) the ability of an enterprise to function independently of competitive forces in the relevant market. One has to check the capability to work independently of the market factors and check whether it has the power to drive the competitors out of the relevant market and impose restrictions on the consumer; and (2) The ability of an enterprise to control its consumers or competitors or the relevant market in its support. Such a position may boost the enterprise's power as it can freely adopt an strategy suited to increase its profits over the competitors or capture consumers in such a way that discourages new competition both in terms of competing firms and products.
In the present case, post the Jio-Disney Merger deal, Jio would lose one of the major, if not the only, competitors i.e. Disney Plus Hotstar in the live-streaming segment of the sports segment. This will leave Jio Cinema as the only contender in purchasing streaming rights of IPL and FIFA leaving a void in the competition atmosphere aiding Jio to abuse its position and pricing the services on its platform This is particular important to note in the backdrop of the quantum of revenue IPL generates that led it to becoming the 2nd most revenue generating sporting leagues in the world. On the other hand, with the increasing popularity of FIFA amongst Indians, the viewership is bound to rise.
Since Jio has gained substantial financial resources and licensing deals with the leading sports brands, etc. It would not be incorrect to say that it can alter the market conditions according to its suited needs. This will create the grim possibility of Jio operating independently of its competitors while at the same time giving it the leverage to control the consumers in the relevant market and indulge in influencing the pricing behaviour.
Way forward
The Jio-Disney merger signals potential monopolistic tendencies in India's live-streaming segment. With Jio's dominant position in the online live-streaming market and the creation of entry barriers for competitors, concerns arise regarding fair competition and consumer choice. The merger may empower Jio to control pricing and market dynamics, potentially harming industry players and consumers alike. This shows that the Jio-Disney merger has the grim possibility of creating a monopoly in the live-streaming segment harming the healthy competition necessary for the market in India which would subsequently impact the consumers. This underscores the need for vigilant oversight to ensure a level playing field in India's evolving live-streaming landscape.