Lupa-Viacom18 deal: Murdoch's re-entry may see a bigger foray into sports

MTV introduced an entire generation of Indians to music videos, VJs and the irreverent humour of countdown shows. Viacom, the company that owned it, had given the Asian rights to the then budding Star TV in the early nineties. Soon it came to India on its own. In 2008, it created Colors and other channels in a joint venture with Television18. Till last year the Rs 3,200-crore Viacom18 was among the five largest Indian broadcasters with 38 channels such as Nick and ETV, a large motion picture studio that has churned out hits like Padmavat and Bhaag Milkha Bhaag and an OTT app Voot. The party, it seems, has ended.

Last week, Bodhi Tree Systems, an arm of James Murdoch’s Lupa Systems, announced that it will be picking up a 40 per cent stake in Viacom18 for Rs 13,500 crore. The press release is hazy on details. WhatsApp messages to both Uday Shankar, a partner in Bodhi Tree and former chairman of Disney Star, and to a spokesperson for Reliance Industries Ltd (RIL), which holds a 51 per cent stake in Viacom18 through a subsidiary, went unanswered. Therefore, it is not clear how much of this money goes to the US-based Viacom (now Paramount), whose shareholding will be reduced to about 9 per cent. The deal marks the partial exit of the $28.5 billion Paramount from the India market. That, then, is the first implication of this deal.

The second is that it marks the re-entry of Murdoch, former Star chairman, back to India sans father Rupert Murdoch. Joining him is not just Shankar but also a management team of Star veterans such as Nitin Kukreja, who is managing director of Lupa Systems. This is the team that took Star from a struggling Rs 1,600-crore broadcaster to a Rs 14,000-crore media conglomerate. The one that created Hotstar, bid for and won the rights to the Indian Premier League or IPL and created the Pro-Kabaddi League. This deal, say analysts, is largely about investing in sports — read that as the IPL, which has a (reported) reserve price of Rs 36,000 crore this time.

“Uday (Shankar) has a lot of core competence for scaling up sports for Viacom18. From a one-horse race it is a three-horse race in sports, entertainment and media,” says Abneesh Roy, executive director, Edelweiss Financial Services. The battle for dominance in video will be fought between a handful of firms — Disney-Star, Jio, Google, Netflix, Amazon Prime Video, Sony-Zee and maybe a couple of others. To be relevant, Viacom18 needs a big property and if it gets the IPL, it will have some skin in the game. That is implication number three.

The RIL subsidiary that holds a stake in Viacom18 will also invest an additional Rs 1,645 crore and park its JioCinema app into the joint venture. “James and Uday’s track record is unmatched. For over two decades, they have played an undeniable role in shaping the media ecosystem in India, Asia, and around the world. We are very excited to partner with Bodhi Tree and lead India’s transition to a streaming-first media market,” says Mukesh Am­bani, chairman of the $64 billion RIL, in the press release.

Analysts and industry observers have long held that RIL is enamoured with Shankar and his ability to think big. It has been wanting him on board for a long time “This looks like Reliance raising money for cricket rights without spending its own money while also getting on board an executive who knows how to get it,” said Parry Ravindranathan, Converjpay co-founder and former managing director of Bloomberg Media on Twitter, last week.

He’s hit the nail on the fourth implication — RIL’s renewed push into entertainment media, an area it hasn’t had much success. “Reliance is such a huge group but its media business is too small. It hasn’t met the initial expectation. Just like retail, it will keep at it till this business meets its expectation on scale,” Roy pointed out.

Much of what will happen also depends upon how much money will be infused into Viacom18 and how much will go to Paramount. But analysts reckon some of the expansion could also be across languages — an area where competitors Disney-Star and Sony-Zee are way ahead.

That brings this to implication number five. On the back of rising content costs, pandemic-hit margins and the digital onslaught, the global med­ia map is being redrawn with firms like Apple and Google emerging as key players. In India, too, the battle for scale is intensifying leading to cons­olidation. It explains the re­c­ent spate of mergers and acqu­i­sitions such as that of mu­l­­ti­plex firms PVR and Inox, and of Sony and Zee. Many of the remaining top ten firms — notably Sun TV and Times Group — are bound to merge if they want to survive in a market full of heavies. Ana­ly­sts reckon that Sun would make a great target for Viacom18.

But that is a story for another day.