Reliance-Disney merger: Here’s how the deal can fundamentally transform India’s media and entertainment landscape

0 16

Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) and The Walt Disney Company have agreed to merge their digital streaming and television assets in India, creating an $8.5-billion media behemoth spanning at least 100 channels across entertainment and sports, and two digital streaming platforms. The entity also has exclusive rights to sporting events like the Indian Premier League (IPL) and Disney films and productions in India, as well as a diverse international content library.

The former rivals, who were locked in an intense battle over IPL rights until recently, have agreed to form a joint venture (JV) that will solidify RIL’s position in the Indian M&E space and reduce Disney’s presence in the country amid intense competition.  

This JV between RIL, its broadcast division Viacom 18 and Disney will bring together TV channels such as Colors, StarPlus, StarGOLD, Star Sports and Sports18 as well as streaming apps JioCinema and Disney+ Hotstar. The deal will combine the businesses of Viacom18 and Star India, where the media undertaking of Viacom18 will be merged into Star India Private Limited. The JV will be controlled by RIL. Under the terms of the deal, RIL will own 16.34%, Viacom18 will own 46.82%, while Disney’s share will be 36.84%. Disney may also contribute certain additional media assets to the JV, subject to regulatory and third-party approvals. RIL will invest Rs 11,500 crore (or approximately, $ 1.4 billion) into the JV for its growth strategy. Nita Ambani will be the Chairperson of the JV, while Uday Shankar, Co-founder of Bodhi Tree Systems, which owns a stake in Viacom18, will be the Vice Chairperson. Shankar, a former Disney India chief who has also led Star India, will provide overall strategic leadership.

“Despite being the larger of the two, Disney’s Star India has seen its valuation drop to roughly $4 billion, accounting for the anticipated loss from its sports business,” says Abneesh Roy, Executive Director (Research), Nuvama Institutional Equities. Viacom18 was valued at roughly $4 billion when Reliance Industries and Bodhi Tree infused over Rs 15,000 crore into the company in April 2023, he adds. Initially, Disney reportedly valued the India business at around $10 billion, whereas Reliance’s valuation of the assets was a purported $7–8 billion.

Disney’s linear TV and streaming businesses in India have been hit over the past few years. Disney+ Hotstar, particularly, has bled 23 million subscribers since losing the IPL digital streaming rights to JioCinema. In fact, since mid-2022, Viacom18 has been collecting several properties that once had a home at Disney in India—whether it is the IPL digital rights, rights to bilateral India cricket matches or HBO content.

Vivek Menon, Managing Partner of media and entertainment debt fund NV Capital, notes that Disney has encountered a turbulent period on the global stage over the past few years. The company’s stock price has plummeted from a peak of $200 to about $100 now. “In India, they needed to pump additional capital because of the high cash burn on IPL broadcasting rights and Cricket World Cup rights on digital. A merger fits their strategy to conserve cash as well as dilute their holding to raise capital from their India franchise,” he adds. The merger marks Disney’s fourth avatar in India, following partnerships with the K.K. Modi Group in 1993 and Ronnie Screwvala’s UTV Software Communications in the mid-2000s. Disney’s expansion continued with the acquisition of 21st Century Fox in 2018 for $71 billion, incorporating Indian operations under Disney Star (earlier Star India).

Analysts say the combined FY23 revenue of Rs 25,000 crore, which gives the merged company a 40% market share in linear TV and OTT sectors, could draw scrutiny from the Competition Commission of India (CCI) as the entity will become the single largest player in the field. The merger also reinforces their dominance in sports, with rights valued at nearly Rs 55,000 crore for major cricket properties over the next four to five years, projecting an 80-90% share of cricket advertising revenues in India. The deal also comes just before the commencement of IPL’s 2024 edition.

Uday Sodhi, former head of SonyLIV and Founding Partner of Kurate Digital Consulting, says JioCinema has aggregated content from HBO and NBC Universal. The merger will add Disney content also to the mix, he says, as the JV now has the licence to more than 30,000 Disney content assets. “This is great for the consumer. Netflix, Amazon Prime Video and the other OTT players will have to now face a stronger competitor and will have to up their game,” he adds.

This is the second big-ticket merger in the Indian media and entertainment sector, following the high-profile announcement of a deal between Sony Pictures Networks India (SPNI) and Zee Entertainment Enterprises Limited (ZEEL) in September 2021. However, the Zee-Sony merger ultimately fell through last month, after numerous twists and turns.


Source link

Leave A Reply

Your email address will not be published.