Challenges Galore for Jio Platforms Entertainment + Super App

Mukesh Ambani led Reliance Jio Infocomm Ltd created a new company called Jio Platforms Ltd in Dec 2019 which houses the Telecom Business along with the App ecosystem (Jio Cinemas, Jio TV, Jio Sawaan, etc) This was created to raise global funds with businesses that can command high premium like that of FAANG (Facebook, Amazon, Netflix and Google) companies in the global market. FAANG global tailwind, the very best global partners and a prized opportunity.

On the Ground, it is a flip-flop a complete U-turn over the past four years. At one stage, prior to Jio’s mobile telephony launch, investors were discounting invested capital by 30–50%, effectively valuing Jio at a negative equity value. The market is now extrapolating that Reliance can endlessly create value by doing more of the same and is incrementally ignoring risks. The cutting-edge FAANG tech companies boast large free cash flows already; for Reliance, it is primarily the Oil business that continues to generate the bulk of cash flows over the medium term.

Reliance Jio Infocomm had a ready ecosystem of communication, entertainment, payment and utility applications, more sophisticated than most telecom operators then. In the process, it has leveraged cutting-edge technologies starting from UIDAI for electronic KYC, Analytics, AI and ML for establishing coverage polygons of Network and has reached highest-in-the-industry ~400mn subscriber base.

Jio’s product offerings do give an impression of certain scalability in the related business. Jio has not really been able to exhibit leadership (entertainment, communication) so far, and Reliance Jio’s right-to-win in a winner-takes-all is far from established. In the entertainment ecosystem space for instance, rival apps (Netflix, Hotstar, Amazon prime & Gaana) have gained a clear leadership. Displacing them will be a Herculean task. In the communication space, Jio Chat and Jio Meet face uphill task to unseat Facebook’s (WhatsApp, Instagram & FaceBook Chat) and similarly it is lagging by a wide margin when it comes to Video Conferencing as Zoom / Google Meet lead while even Microsoft Teams is trying to make inroads.

In the healthcare and IoT ecosystems too, RJio, despite a few acquisitions, is lagging; it would demand more focused partnerships and probably cash burn. The Education vertical has its set of strong participants, notably BYJU / Vedantu and while they may have some fault lines, snatching the pole position is a tall order.

Jio’s Super App – A Super Dream for Now.
The prospect of a super app is theoretically compelling, but India’s open architecture—like the US’s, and unlike China’s makes its success somewhat uncertain. Success of Chinese super apps such as WeChat and Alipay has inspired many. A swathe of companies have taken a leaf out of that book and are adding functionalities to core offerings to create a turnkey commerce ecosystem—from business communication to transaction and after-sales—so that customers do not have to venture out of their apps.

In the democratic world, internet evolution took off to chart a different trajectory: customers thereof prefer a separate app for each function with an uncluttered UI and clear value proposition. This largely explains why Spotify and Netflix, to name a couple, continue to expand their leadership despite presence of behemoths such as Apple and Google in the space. India draws parallels with the democratic world in the evolution of internet ecosystem when compared to what has unfolded in China; hence, we see limited scope of super apps succeeding in India.

Mukesh Ambani has a tenable vision that promises long-term growth potential in that direction, we believe it shall be a long journey nevertheless. The nature of the cash burn is likely to be in the form of intellectual capital such as R&D, promotions, differently skilled manpower etc which shall demand staggering capital as well. In its ambitious quest, Jio Platforms is in fact opening several battle fronts simultaneously, including digital, e-commerce and banking against some of the most deep-pocketed global majors.