By Girish Bhise
On 28th February, Reliance Industries Limited and Walt Disney signed a definitive agreement to merge their media operations in India. This will create a media behemoth valued at $8.5 billion (₹70,352 crore). As part of the deal, the media undertaking of Viacom18 will be merged into Star India through a court-approved scheme of arrangement. Nita M Ambani would chair the board of the combined entity, and former top Disney executive Uday Shankar would serve as vice chairman.
Contours of the deal
Reliance and its affiliates will hold a 63.16% stake (16.34% by RIL, 46.82% by Viacom18) and 36.84% by Disney. The transaction is subject to regulatory, shareholder and other customary approvals. Deal is expected to be completed in the Q4CY24 or Q1CY25. Reliance has also agreed to invest at closing ₹11,500 crore into the joint venture to grow the over-the-top (OTT) business
Merged Synergies
Merged entity will be granted exclusive rights to distribute Disney films and productions in India. Additionally the entity will also have the license to more than 30,000 Disney content assets, providing a full suite of entertainment options. Disney has about 80 TV channels in nine languages, and Viacom18 has 40 channels in eight languages. Hence the merged entity will have 120 TV channels plus two digital streaming platforms. Disney and Reliance also stated they will reach 750 million users in India with the merged entity.
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Reliance and Disney’s TV viewership share in the top 10 channels is estimated to be 40% as per Broadcast Audience Research Council (BARC). Disney+ Hotstar maintained its lead in the Indian OTT market with a 24% market share in Q4 2023. Meanwhile, Jio Cinema held a 6% share. Together, the joint venture will command a substantial 30% market share in the OTT sector, surpassing Prime Video’s 22% and Netflix’s 13%.
Big Picture
The creation of Rs. 70,000 Cr media behemoth with over 100 channels in several languages, two leading OTT platforms under its belt and a viewer base of 750 million across the country, would reshape the industry landscape . This would make the entity command a market share in OTT space of ~31% outstripping competitors like Zee 5 (~10%),and Sony Liv (4%) and Netflix.
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Reliance recent foray as a newcomer can quickly establish itself as a formidable player to the fiercely competitive video streaming market. The creation of this new Indian behemoth comes in the aftermath of Sony Group Corporation ending its more than two-year attempt to merge its TV and streaming businesses in India with domestic giant Zee Entertainment Enterprises Limited. If the merger would take place it would have resulted in a a $10 billion deal.
The Disney-Reliance merger indeed seems to address some pressing challenges for Disney in the Indian market. Disney’s struggle with retaining subscribers and securing valuable media assets in India has been evident, especially with the decline in Disney + Hotstar subscribers from 57.5 million in Dec 22 to 38.3 million in Dec 23. Reliance’s aggressive moves in the entertainment industry, such as outbidding Disney for streaming rights to the Indian Premier League and securing a multi-year pact to broadcast HBO shows previously held by Disney, showcase its growing influence and ambition in the sector.
Combining Disney’s renowned content with Reliance’s aggressive market strategies and strong foothold in India could create a formidable force in the Indian entertainment industry. Monopoly in sports properties may lead to higher ad revenues
Star India’s previous monopoly over sports broadcasting has given way to a duopoly between Viacom18 and Disney, albeit briefly, before the anticipated merger between Disney and Reliance creates a potential return to monopoly. The joint entity resulting from the Disney-Reliance merger would indeed wield considerable control over lucrative sports properties in India.
Encompassing a wide range of events from the Indian Premier League to ICC cricket tournaments, Wimbledon, Pro Kabaddi League, BCCI domestic cricket, and more. With Disney holding the digital rights for ICC matches until 2027 and Jio Cinema securing streaming rights for IPL until 2027 after outbidding Disney, the combined entity would consolidate its dominance over both linear TV and digital platforms in the Indian sports market.
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This concentration of power raises questions about market competition, pricing, and access to sports content for consumers and other broadcasters. It will be interesting to see how regulatory bodies and competitors respond to this evolving landscape and whether any measures are taken to ensure fairness and competition in the Indian sports broadcasting market.
Positive outlook for Indian media sector
Just recently, Union Minister for Information and Broadcasting, Anurag Thakur, predicts India’s ascent to the third-largest media and entertainment market globally within five years. According to him, the OTT (segment) is currently growing at a rate of 28%. Certainly, there are several key factors to watch out for regarding the Disney-Reliance merger and its
Potential Impacts
Regulatory Scrutiny
The merger deal is likely to undergo scrutiny from the Competition Commission of India (CCI) due to the expected market dominance of the combined entity, especially in television and streaming. The CCI will assess whether the merger would significantly reduce competition and harm consumers.
Impact on Subscriber Tariffs: With the merger potentially leading to a dominant position in the market, there may be concerns about the impact on subscriber tariffs. The merged entity could have more leverage in negotiating pricing, which could affect consumer costs for accessing content.
Advertising Market Dynamics
The combined entity’s strong position in the cricket ecosystem could result in advertisers having less bargaining power. This could lead to changes in advertising rates and strategies, impacting both advertisers and media companies.
Competition in the Media Industry: The merger is likely to intensify competition within the media industry, affecting the profitability and margins of other media companies. Smaller players may face increased pressure, and there could be consolidation or closures of certain channels or media outlets.
Overall, the Disney-Reliance merger has the potential to significantly impact the Indian media and entertainment industry, from regulatory perspectives to market dynamics and consumer experiences. Keeping an eye on these key areas will provide insights into how the merger unfolds and its implications for various stakeholders.
(Girish Bhise founder and CEO at ValueAdd Research and Analytics Solutions. Views expressed are the author’s own. Please consult your financial advisor before investing.)
