By Shirish Nadkarni
It might have been signed, sealed and delivered on February 28, 2024, but the Reliance-Disney mega-merger is by no means a done deal. In any case, not for another year and a half, at the very minimum, thereby giving time for the affected parties to launch a counter offensive.
Although the multi-division, multi-faceted business conglomerate Reliance Industries will look to merge its TV and streaming assets with Walt Disney Co, thereby creating the largest player on the Indian broadcasting scene, the marriage will require CCI (Competition Commission of India) approval, which may take several months or lead to the shutdown of channels in case of a big overlap.
Post CCI approval, the National Company Law Tribunal (NCLT) approval may take another eight to 12 months to green light the more than Rs700 billion (US$8.5 billion) new entity, to be helmed by Reliance chairman Mukesh Ambani’s wife, Nita. With his ambitions of scale, Ambani has already achieved country-wide market leadership in the telecom and retail sectors. The Disney-Reliance deal will be his play to achieve a similar result in the media business.
This deal, being touted as one of the biggest in the media and entertainment industry worldwide, is a win-win for both parties, as it will place them far, far ahead of their competitors. Following the January 2024 collapse of the US$10 billion merger between Sony and ZEE, no worthy competitor has emerged to challenge the hegemony of the new Goliath in the media and entertainment (M&E) sphere in India.
How will the Reliance-Disney deal affect the media landscape in India? What will be the effect on content consumption in the country and the countries served by indigenous broadcasters?
“The joint venture (JV) will have over 750 million viewers across India, and will also cater to the Indian diaspora across the world,” said the joint statement from the two corporations. Reliance’s Viacom18 will merge with Disney’s Star India. A look at the equity pattern of the new entity shows that Reliance Industries will own 16.3% of the merged entity, Viacom18 will own 46.8% and Disney 36.8%.
“The merged entity will be granted exclusive rights to distribute Disney films and productions in India, with a licence to more than 30,000 Disney content assets, providing a full suite of entertainment options for the Indian consumer,” the statement added. “The JV will be one of the leading TV and digital streaming platforms for entertainment and sports content in India, bringing together iconic media assets across entertainment (e.g. Colors, Star Plus, Star GOLD) and sports (e.g. Star Sports and Sports18).”
The billionaire industrialist, who has just celebrated a lavish wedding of his youngest son in the presence of the Who’s Who in the international Richie-Rich list, was gung-ho about his latest multi-billion dollar deal.
“This is a landmark agreement that heralds a new era in the Indian entertainment industry,” Ambani gushed. “We have always respected Disney as the best media group globally and are very excited at forming this strategic joint venture that will help us pool our extensive resources, creative prowess, and market insights to deliver unparalleled content at affordable prices to audiences across the nation.”
Bob Iger, CEO of Walt Disney Co, said: “India is the world’s most populous market, and we are excited for the opportunities that this joint venture will provide to create long-term value for the company.
“Reliance has a deep understanding of the Indian market and consumer, and together we will create one of the country’s leading media companies, allowing us to better serve consumers with a broad portfolio of digital services and entertainment and sports content.”
Through this deal, there will be a whopping 120 channels – Viacom18 has 40, including Comedy Central, Nickelodeon and MTV, along with Disney Star having 80 – across general entertainment, sports, children’s TV, documentaries and lifestyle. This amounts to about 49% of the broadcasting market of India.
When it comes to streaming, the merger will see the combination of Disney+ Hotstar, which currently leads the country’s subscription-based video streaming market with 38.3 million subscribers, and JioCinema, a prominent player in the ad-supported video streaming market.
As of September 2023, JioCinema had about 237 million monthly active users. This means that the new merged entity would have a combined library of 200,000 plus hours of content, which would include television dramas, movies and sport events.
Morgan Stanley analysts further noted that this new entity would also have exclusive digital and broadcast rights to some of the key sporting events – including the next four years of the Indian Premier League (IPL) cricket, flagship International Cricket Conference (ICC) events, domestic Indian cricket, the football FIFA World Cup, the English Premier League and Wimbledon tennis.
Bernstein analysts have reported that the combined operations of Disney’s Hotstar and JioCinema will have a market leadership within the Indian over-the-top (OTT) market with about 85% monthly active OTT user base.
“This merger will have a very big impact on the entire media and entertainment ecosystem,” Karan Taurani, Senior Vice-President, Elara Capital, is reported to have told AFP. “It’s going to be one of its kind.” He further said the merger could help put their streaming platforms on a “path towards profitability” in the medium to long term by bringing down content costs.
Ken Leon, Research Director at CFRA Research, told CNBC, “The JV will not hurt Disney’s earnings. The merger is a win-win for all parties. Cricket is everything in India … I think Bob Iger made the right decisions here.”
The consequences of the Reliance-Disney merger extend across streaming, pay-TV, channels, advertising, sports and content. The merged giant will be able to capture: 35% of total TV viewership; 40% of the total revenue market for broadcasters, including ad sales and affiliate fees; and 45% of the premium video-on-demand (VoD) streaming market, including subscription video-on-demand (SVoD) and premium advertising-based video-on-demand (AVoD), but excluding YouTube and Meta, according to calculations by Singapore-based consultancy Media Partners Asia.
The Reliance-Disney group is also likely to sign a long-term supply deal for Walt Disney content and be able to generate considerable internal cost savings. It may also lead to a bid to buy Disney’s 30% stake in the Tata Sky satellite business.
Sony, which suffered a string of unsuccessful acquisitions in India (ETV, Maa and a failed tie-up with Viacom18 in 2020, needs to find another way to grow from a mid-sized player to a larger agenda-setter. Its Tokyo bosses seem excited by the prospects, but both organic and acquisitive growth remains tricky.
Zee, which can be viewed as a family-controlled traditional business with a stock market listing, may have fewer worries. Despite its poor margins, debt and legal woes, Zee’s vast content library may sustain it and attract other partner companies.
Although the Indian media and entertainment market is seen as dynamic and growing, investment in the content market has already been slowed by hesitancy around the corporate activities, by the global corporations’ woes and by re-evaluations of content priorities in India.
Finding and producing Indian shows that work internationally (outside the diaspora) is tricky, as Prime Video is discovering. Netflix, which is positioned as an upmarket niche player in India, has nevertheless become a bigger buyer of third party-produced film rights. And, across the board, spending may need to shift more into mass market content as platforms compete for advertising and expand further into AVoD and “freemium” – and compete for “the next 30 million subscribers.”
Netflix could remain strong, and niche on an Indian scale, but its mix of local and foreign shows could be challenged by the new Viacom18 / JioCinema and Disney combination. It has hinted at a possible move into live-streaming
Media consolidation, pruning of channel portfolios and the sports calendar may also have consequences for broadcasters’ affiliate fee revenues. The squeeze is expected to particularly hurt local and news channels and smaller clusters.
“Smaller networks such as Times and Warner Bros Discovery will be the most vulnerable,” MPA said, in a new research note. “Sony too, given its limited regional presence, will likely get challenged by local distribution platform operators. In contrast, larger players like Zee and Sun, boasting a wider and concentrated portfolio of channels, will be last and least to be affected.”
Video constitutes about 30% of total revenues for both YouTube and Meta, MPA estimates. With over 300 million Instagram users, India is the biggest market for Instagram Reels, ahead of the U.S. and Brazil.
For YouTube, the big screen TV has become the fastest-growing segment, reaching some 60 million users, as of the first half of 2023. “In 2023, both platforms maintained their dominance, collectively commanding a 55% share of the total online video market and approximately 75% of the rapidly expanding AVoD segment,” the MPA report said.
Close to the ground, able to operate in diverse local languages and owning content, India’s TV channels have the chance to grow their broadcaster-VoD operations, but they lack Meta and Google’s technology and may look for mergers or alliances to get there.
In the streaming space, beyond the bigger players, India speaks a welter of languages and most of these are well catered to by small specialist streamers. The giants serve the so-called regional market by using their financial clout to dub content into various languages, but their next push is to commission original programming in all of India’s major language groups.
The merger of JioCinema and Hotstar poses a challenge for global OTT platforms, as India’s market values bundling and is price sensitive. The combined entity can offer a comprehensive package, including web series, movies, sports, originals, and a global catalogue. This bundled premium plan, possibly in collaboration with Jio’s large subscriber base, may hinder the ability of global OTT platforms to raise Average Revenue Per User (ARPU).
On the sports front, the merged entity is set to become monopolistic, with Disney and Jio collectively controlling approximately 75%-80% of the Indian sports market across both linear TV and digital platforms. This dominance in sports, primarily cricket, positions them to command a substantial share of the overall ad market, showcasing strong growth in an industry where sports is a key driver of viewership on both linear TV and digital platforms.
With this kind of dominance in the premium segments, the players in the Indian M&E industry will be hoping that the Competition Commission of India and/or the National Company Law Tribunal are able to come up with a cogent reason to scuttle the Reliance-Disney merger. Nevertheless, considering Ambani’s clout in the circles that count, the chances are that the giant new entity will be able to launch market operations by the third quarter of 2025.
As the mega-merger is bound to disrupt the M&E landscape in India, will the coming together of Reliance and Disney receive the blessings of CCI and be solemnised by the country’s National Company Law Tribunal? If so, when?