Reliance Industries (RIL), the Walt Disney Company and Viacom 18 Media Private Ltd formally announced the merger of their TV and digital platforms on Thursday. Following the joint venture (JV), experts told businessline that the bargaining power will now shift in favour of platforms rather than the advertisers both in broadcasting and digital sectors.
According to Reliance, the JV will be a combination of ‘Star’ and ‘Colors’ on the television side and ‘JioCinema’ and ‘Hotstar’ on the digital front to provide entertainment and sports content to Indian viewers. RIL will control the JV through a direct ownership of 16.34 per cent and another 46.82 per cent through Viacom 18. The balance 36.84 per cent will be held by Disney.
Reliance said the JV will become one of the largest media and entertainment companies in India with pro forma combined revenue of approximately ₹26,000 crore for FY24.
Commenting on the merger, Karan Taurani, Media Sector Analyst for Indian Equities Globally, told businessline, “Disney and Reliance will have better pricing power because they will have last-mile connect of Jio in terms of distribution of content. You will see better pricing as compared to other players who are paying hefty premiums for partnerships.”
Taurani foresaw the announcement to pose problems for smaller fringe players on the digital side as well as global OTT giants in terms of scaling up due to Jio’s free-content proposition. He also expected other players like Zee to suffer in terms of growth rate following the merger.
“There will be pressure in terms of their profitability for players like Zee because they will need to invest aggressively in terms of content to compete with a mighty giant like RIL-Disney.”
Monopoly expected
Meanwhile, Ajimon Francis, Managing Director of Brand Finance India, predicted a “monopoly” in the broadcasting sector. “Usually, the government and regulators want to ensure that there are at least two-three players in every market but broadcast seems to be a no-go. Star is gone, Sony is faring somehow, who else is left?” Francis told businessline. He added that while the merger gives more negotiation power to Reliance in terms of ad rates, the JV’s margins will improve from the next IPL season.
The JV will be spearheaded by three CEOs — Kevin Vaz for entertainment organisation across platforms, Kiran Mani for combined digital organisation, and Sanjog Gupta for combined sports organisation.
RIL has invested ₹11,500 crore ($1.4 billion) in the JV. The JV has allotted shares to Viacom18 and RIL as consideration for the assets and cash, respectively. The transaction values the JV at ₹70,352 crore ($8.5 billion) on a post-money basis, excluding synergies.
Nita M. Ambani will be the Chairperson of the JV, with Uday Shankar as Vice-Chairperson providing strategic guidance.
The JV operates over 100 TV channels and produces 30,000+ hours of TV entertainment content annually. The JioCinema and Hotstar digital platforms have an aggregate subscription base of over 50 million.
Transformational era
Mukesh D Ambani, Chairman and Managing Director, RIL, said, “With the formation of this JV, the Indian media and entertainment industry is entering a transformational era. Our deep creative expertise and relationship with Disney, along with our unmatched understanding of the Indian consumer will ensure unparalleled content choices at affordable prices for Indian viewers.”
Robert A. Iger, Chief Executive Officer, The Walt Disney Company, said, “By joining forces with Reliance, we are able to expand our presence in this important media market and deliver viewers an even more robust portfolio of entertainment, sports content and digital services.”
Uday Shankar, Co-Founder of Bodhi Tree Systems, said, “As media consumption continues to move to an integrated TV-digital ecosystem, the merger of Viacom18 and Star India offers a unique opportunity to reorient the industry to better-serve diverse cohorts of consumers across the country. “
In a separate transaction, RIL has bought out Paramount Global’s entire stake of 13.01 per cent in Viacom18 for ₹4,286 crore. Consequently, Viacom18 is owned 70.49 per cent by RIL, 13.54 per cent by Network18 Media & Investments Ltd and 15.97 per cent by Bodhi Tree Systems on a fully-diluted basis.