Explore how the Reliance-Disney merger is reshaping India’s media landscape, creating a dominant force in entertainment. Gain insights into the impact on competitors and the strategic moves driving this historic agreement.
In a significant move that is poised to reshape India’s media and entertainment landscape, two industry titans, The Walt Disney Company and Reliance Industries, have inked a binding agreement to merge their respective media operations in the country. This merger, which is set to be officially announced this week, presents a formidable challenge to existing giants in the industry such as Zee Entertainment, Sony Pictures Networks, Sun TV Network, as well as prominent streaming platforms like Netflix and Amazon Prime Video. It has the potential to trigger further consolidations within the sector.
The combined entity will form India’s largest media and entertainment conglomerate, boasting a vast array of assets including over 100 TV channels, two prominent streaming platforms – Disney+ Hotstar and JioCinema, exclusive rights to premier sporting events such as the Indian Premier League cricket tournament, and a rich international content catalog.
The merger will see the convergence of Reliance’s media arm Viacom18, which encompasses 38 TV channels across eight languages, the JioCinema video OTT app, and Viacom18 Studios, with Disney’s extensive media portfolio in India. This portfolio includes Disney Star’s 70-plus TV channels in eight languages, the popular streaming platform Disney+ Hotstar, and a thriving film studio.
The anticipated merger is expected to bring about significant changes in the media landscape, intensifying competition for rivals like Zee Entertainment Enterprises Limited, Sony Pictures Networks India, SUN TV Network, Netflix, and Amazon Prime Video. It may also catalyze further consolidation within the industry.
The merged entity, likely to be led by Uday Shankar, Co-Founder of Bodhi Tree Systems and former Disney APAC head, will see Reliance owning a majority stake of 61%, Disney holding 33%, and Bodhi Tree Systems retaining a 6% share. The exact valuation and integration of Disney’s other local assets into the deal are still being finalized. Additionally, there is speculation that Reliance may consider acquiring Disney’s minority stake in the broadcast service provider, Tata Play.
The merger comes at a time when The Walt Disney Company is looking to reduce its exposure in India amid stiff competition. Disney+ Hotstar has faced challenges, experiencing consecutive quarters of subscriber decline following the loss of digital rights for the Indian Premier League to Viacom18’s JioCinema. However, it did witness a surge of 7 lakh subscribers during the October-December 2023 period. Furthermore, the Indian linear TV industry has been grappling with a shift in ad revenues towards digital platforms.
According to Vivek Menon, Managing Partner of NV Capital, Disney’s global performance has faced headwinds in recent years, with its stock price declining significantly. The merger aligns with Disney’s strategy to conserve cash and raise capital by diluting its holdings in the Indian market.
This merger marks Disney’s third major venture in India, following previous alliances with the KK Modi Group in 1993 and Ronnie Screwvala’s UTV Software Communications in mid-2006. Disney’s acquisition of 21st Century Fox in 2018 further bolstered its presence in India through Disney Star.
Analysts predict that the merged entity, with a combined revenue of Rs 25,000 crore in FY23, will command a substantial 40% market share in both linear TV and OTT markets. It will emerge as a dominant player in sports, holding rights to premier cricket properties like the Indian Premier League, International Cricket Council events, BCCI’s India bilateral matches, and other sports leagues such as Pro Kabaddi League and Indian Super League. Additionally, it will have access to a diverse international content catalog from HBO, Paramount, and Disney.
Reliance is expected to invest $1-2 billion for its 61% stake in the merged entity, with a portion allocated for the buyout of Paramount Global’s stake. Bodhi Tree currently holds a 15.97% stake in Viacom18, while Paramount holds 13%, with the latter set to exit the company as part of the merger.
Despite being the larger entity, Disney’s valuation has seen a decline, attributed in part to anticipated losses in its sports business. Viacom18, valued at around $4 billion during Reliance Industries and Bodhi Tree’s previous investment, represents a significant component of the merger.
This merger marks the second major consolidation in the Indian media and entertainment sector, following the failed merger between Sony Pictures Networks India and Zee Entertainment Enterprises Limited announced in September 2021. With a combined revenue of Rs 25,000 crore, the Viacom18-Disney India merger surpasses the scale of the Zee-Sony deal.