Anatomy of Reliance-Disney merger: What are the strategies and challenges?

The Rs 23,000 crore (revenues FY24) venture, announced in February, was cleared by the Competition Commission of India this week

The joint venture between Reliance Industries (RIL) and Bodhi Tree Systems owned Viacom 18 Media, and The Walt Disney Company will create India’s largest media company. 

The Rs 23,000 crore (revenues FY2024) venture, announced in February, was cleared by the Competition Commission of India (CCI) this week.

“The speed with which it has cleared regulatory hurdles is impressive,” says Daoud Jackson, senior analyst, media and entertainment, Omdia. 

While the CCI is yet to release its final order, here are five things you should know about the new entity and its place in the Rs 2.3 trillion (2023) media and entertainment business.

What does it own?

“It is a giant hammer on everyone’s coffin,” says Kunal Dasgupta, founder iTap Entertainment and Gaming and former CEO of Sony. The RIL-Disney combination will create a broadcaster with 110 channels such as Star Plus and Colors and a leading 32 per cent share of all television viewership on the back shows such as Bigg Boss and Anupama.

That is a hold over 285 million of the 890 million TV viewers, with large slices in Hindi, Marathi, Telugu and Bengali speaking markets. According to Media Partners Asia (MPA), the duo will have 40 per cent share of the total revenue market for broadcasters and 45 per cent of the premium streaming market.

Disney-Star has the digital and TV rights to all men’s and women’s events played under the International Cricket Council (ICC) from 2024 to 2027.

Viacom18 owns the streaming rights to the Indian Premier League or IPL.

Between them $9 billion has been paid for all cricket there is to broadcast or stream.

In a notice to the firms, CCI has questioned their almost 90 per cent viewership share in sports (cricket) on television and their ownership of the streaming rights as well.

“The merged Voot/JioCinema/Hotstar/Jio TV would have 184 million unique visitors (unduplicated for June 2024),” says Atul Nandoskar, sales director, Comscore India.

That is a little under half the reach of India’s largest OTT – YouTube.

Who controls it?

Technically, the shareholding is split between RIL, Viacom18 and Walt Disney Company. Since RIL owns over 84 per cent of Viacom18, either directly or through Television18, it controls this venture.

It will have five seats on the board, Disney will have three and there will be two independent directors, according to a report MPA did in February.

Many people close to the deal reckon that as various rounds of capital are raised, Disney’s shareholding will keep going down, since it has no appetite for investment in India.

There is a fear that the venture could get lost in RIL. It is just about 2 per cent of the top line of the Rs 10 trillion (revenues FY 2024) Group that is into gas, retail and telecom among other things.

Who will run it?

Uday Shankar, vice-chairperson of the joint entity and former CEO of Disney-Star is the man in charge. He is also the reason this deal happened, say insiders.

Bodhi Tree Systems, which is owned jointly by James Murdoch’s Lupa Systems and Shankar came in as an investor in Viacom18 in April 2022. It currently holds close to 16 per cent of the company.

What that figure translates into, in the merged entity, is not clear. The point, say insiders, is that RIL doesn’t need Bodhi’s money but Murdoch and Shankar’s experience in creating value in media.

Shankar took Star from Rs 1,600 crore in revenue in 2007 to Rs 18,000 crore in 2020. His hires at Viacom18 over the last 12-18 months indicate his thinking. 

Kiran Mani and Ishan John Chatterjee have held global positions in Google (and YouTube). Bharath Ram (ex-Flipkart, Instagram) recently joined as chief product officer, Vijay Sheshadri (ex- Swiggy, Symantec) as the chief technical advisor. Then there is Kevin Vaz who headed Star’s entertainment television business for long. 

He and Mani will function as co-CEOs, say reports.

The team coming together is designed to build “something for the future while leveraging the benefits of incumbency,” as one insider puts it.

What is the strategy? What are the challenges?

“Our digital-first approach will deliver unparalleled content at affordable prices,” said RIL chairman Mukesh Ambani at its Annual General Meeting this week. 

The strategy will be low cost, mass reach, to get the maximum eyeballs across TV and streaming and therefore a larger share of an ad pie, say insiders.

With almost Rs 5,000 crore in operating profits the duo’s entertainment TV business is integral since sports and digital continue to bleed.

Over the last decade video (films, television, streaming) has been re-defined globally by Google, Meta, Netflix, Amazon and others. They offer audiences across genres and geographies at one-fourth the price of broadcast walking away with 70-80 per cent of all digital advertising.

To tackle them, the new venture has to combine the reach of both TV and streaming – it comes to 300 million people a month roughly. That is second only to YouTube’s 462 million.

Over the next six months the choices it makes on technology, integrating the backend and its speed to market is what will determine whether RIL-Disney can be a force for change, thinks Vivek Couto, co-founder and executive director, Media Partners Asia. 

All of this has to happen before the next IPL in the summer of 2025. The clock to monetise all those expensive cricket rights is ticking.

What is the value and the valuation?

When Disney bought Fox, the company that owned Star India in 2017, the latter was valued

between $10-13 billion. Going by MPA figures, for this deal, Disney India (which is essentially Star) was valued at $3-3.5 billion and Viacom18 an estimated $4 billion with the remainder taken up through RIL-infused cash ($1.4 billion). In March this year Couto said the venture could go for an IPO (Initial Public Offering), say five years down the line, at twice its current value of $8.5 billion.