The mega merger between Reliance’s media business with Disney’s India units will drive value not only for the two players but also the entire streaming market in India.
The merger comes at a time when heightened competition in the streaming space had squeezed margins for most players. For example, Disney + Hotstar has seen its paid subscriber base declining from 57.5 million in Q3FY23 to 38.3 million in Q3FY24, mainly due to Jio Cinemas winning exclusive rights for live sports (IPL 2023, FIFA World Cup) and registering 70 per cent growth in active users in December 2023. The competition had also driven down advertisement rates. India’s OTT landscape is competitive with 40-plus players.
The consolidation in the space would benefit the industry as a whole. According to industry experts, advertising rates could climb 20-25 per cent post consolidation. “Bargaining power of the broadcasters (now fewer and larger) would increase at the cost of the advertisers. There would also likely be some rationalisation in content costs as well, leading to industry-level margin improvement,” analysts at UBS said in a note.
“That said, this deal will also likely make it more difficult for smaller players like Zee, with 16-17 per cent viewership share, and Sony, with 8- 10 per cent share, to individually compete with a dominant player with 40-plus per cent linear share and 50-plus per cent MAU share, coupled with deep pockets and a growth mindset,” UBS said.
According to a Jeffries report, ”The potential combination will sport the most lucrative cricketing rights in India and has 40 per cent share of the advertising market. This opens avenues for better ad inventory monetisation and content cost reduction with lower competition.”
Bank of America added that the combined strengths of both media giants will extract many synergies, especially as Reliance also has a telecommunications business. “Management in the filing has mentioned that they consider this as a compelling, accessible and novel digital focused entertainment experience to people in India and Indian diaspora globally. We believe that the merged-co has room to extract synergy benefits on both revenue and cost front. Both companies have a strong media presence in the country and could leverage RIL’s strong telco infra,” said Bank of America.
Bernstien estimates that a combined JioCinema and Disney+Hotstar will have an undisputed market leadership in the streaming space with more than 85 per cent of the monthly active OTT user base between the two.
“The JV will also become the biggest player in sports, holding rights to marquee cricket properties like the Indian Premier League (IPL), International Cricket Council (ICC) rights for men and women global events, and BCCI’s India bilateral matches across TV and digital platforms. It will also own other sports assets such as Pro Kabaddi League, Indian Super League, English Premier League, NBA, and the Olympics,” said Axis Capital.