The combined entity will own 115 TV channels (Star India – 77 and Viacom18 – 38) and two strong streaming platforms—Disney+ Hotstar and Jio Cinema—if the deal fructifies. The combined entity will have over 2 lakh hours of content library.
While Walt Disney is in talks with multiple parties, including Reliance, sources indicate that the deal will take some time to materialise given the complexities involved, including the valuation of Star India, which is also known as Disney Star.
Disney is looking at multiple options for its India business, including the complete sale of its TV and streaming assets besides a strategic partnership.
Reliance owns a majority stake in Viacom18, which also has Uday Shankar and James Murdoch’s Bodhi Tree and Paramount Global as shareholders.
“If the deal between Reliance Industries and Walt Disney goes through, it will lead to consolidation in the industry from four national media players to two strong players, Star-Viacom 18 and Sony-Zee,” said Kurate Digital Consulting Senior Partner Uday Sodhi.”The media and broadcasting sectors will become a duopoly, which will help these companies ward off the impact of a decline in the pay-TV base,” he added.
It’s a step closer to the consolidation of the media sector, which many experts say is imminent now.
Vivek Menon, managing partner at NV Capital, believes that consolidation was bound to happen in the traditional broadcasting space due to the rise of streaming.
“The dizzying growth of various OTT platforms over the last couple of years, especially post-COVID, was a clear indication of consolidation in the linear industry. If Reliance goes ahead with the Disney deal, it would be a case of duopoly, with Star/Viacom18 and Zee/Sony on one side, and smaller regional players on the other side,” he added.
Reliance-Disney could potentially be one of the biggest deals in the Indian M&E industry, which stood at Rs 2.1 lakh crore in 2022 and is expected to reach a market size of Rs 2.34 lakh crore in 2023 at 11.5% growth, according to the FICCI-EY report.
Star-Viacom18 will enjoy a huge advantage in two of the biggest segments in the Indian M&E market—TV and digital—thanks to their over 40% share—Star (30%+) and Viacom18 (10+%)—of the TV broadcast market and their near dominance of the digital video streaming market (with Disney+ Hotstar & Jio Cinema), eclipsing global giants like Netflix and Amazon Prime Video, who are yet to build scalable streaming businesses in the Indian market.
The deal, if it happens, will also lead to major overlaps between Star India and Viacom18 in certain segments, like Hindi general entertainment, kids, and certain regional markets.
According to Broadcast Audience Research Council data, the combined TV viewership share of Star Plus and Colors hovered between 40% and 50% in the last three months. In the Kannada market, the viewership shares of Colors Kannada and Star Suvarna ranged between 40% and 48%. The combined shares of Star Pravah and Colors Marathi would be upwards of 60%.
Legal experts believe that Star and Viacom18’s large market share in certain genres could attract the attention of the competition watchdog Competition Commission of India (CCI), which had given conditional approval to the merger deal between Culver Max Entertainment (Sony) and Zee Entertainment Enterprises Limited (ZEEL).
“The proposed combination between the entities controlling Disney Star and Viacom18, while there is a difference of opinion with regard to the valuation of the proposed transaction, certainly does breach the threshold provided under Section 5 of the Competition Act 2002. In view of the fact that it breaches the threshold prescribed under the Act, the proposed combination will have to be subjected to an approval process by the CCI,” said TMT Law Practice Managing Partner Abhishek Malhotra.
“In the process of evaluating whether or not to permit such a combination to be consummated, the CCI shall look into the market share of the combined entity and also as to whether or not such a proposed combination, if it were to be allowed, would have an appreciable adverse effect on competition.”
As of today, Sony-Zee is the biggest merger deal in the works in the M&E industry. In that deal too, the CCI ordered Sony-Zee to sell three channels in October 2022 to allay concerns about the merger’s possible effects on the competitive landscape.
These included Hindi GEC Big Magic besides Zee Action, and Zee Classic, which are movie channels.
The combined spread of channels will cover multiple lucrative genres and language markets. For example, Star India has a strong presence in Hindi GEC, Hindi movies, Tamil, Telugu, Malayalam, Marathi, and Bengali markets, whereas Viacom18 is a significant player in Hindi GEC, kids, and youth entertainment with a weak presence in regional markets, excluding Kannada.
In terms of top line, the Star-Viacom18 combo with combined revenues of Rs 25,000 crore in FY23, will be much bigger than the Sony-Zee combined entity, which had a topline of close to Rs 15,000 crore in FY23.
The Star-Viacom18 combo will have economies of scale, which will give it an upper hand when it comes to dealing not just with advertisers but also with content distributors like Airtel, Tata Play, Dish TV, and Hathway Digital.
The combined entity will be a strong force in entertainment and sports on both linear and digital, with powerful Hindi general entertainment channels like Star Plus and Colors coupled with a near monopoly in sports through properties like IPL, ICC digital rights, BCCI, Cricket Australia, Cricket South Africa, Premier League, LaLiga, and Olympics 2024.
Apart from the benefits on the revenue side, the combination also stands to benefit from lower content production, marketing, and distribution expenses.
“Star-Viacom18 will have a clear advantage as the combined entity will become a behemoth in both the TV and streaming business. The combined entity will enjoy economies of scale, which will allow it to dial up monetization on both the ad and subscription sides. It will also get a big boost in streaming with Disney+ Hotstar and JioCinema,” Sodhi added.
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