Disney's struggle in India

Disney and Sony's journeys in India have been a study in contrast, where one thrives while the other, despite owning a large profitable business, is looking for an exit

It has been a month of contrasts. Over 30 years after it came to India, the $83 billion Disney is thinking of selling its business or allying with others.

 Meanwhile, Culver Max Entertainment, earlier known as Sony Pictures Networks, which has been in India for almost 30 years, is committing itself further. The entertainment arm of the $86 billion Sony Corp housed in Culver City, California (close to Disney’s Burbank head office), announced a merger with Zee Entertainment in December 2021. The merger has the Competition Commission of India’s approval but has run into legal bumps because of Zee founder Subhash Chandra’s earlier deals. When there was speculation that the merger may not go through, Sony endorsed it loudly by getting India Chief Executive Officer (CEO) N P Singh on stage at an earnings meet in Japan this May.

 At Rs 6,700 crore in revenues in the financial year ended March 2022, Sony, which entered India in 1995, is less than half of Disney’s revenue size in the country but nicely profitable. Sony, MAX, Sony SAB, among its 26 channels do well in their genres. It has a nice slice of the film business and its streaming app SonyLIV (Scam 1992, Rocket Boys, Gullak) was at over 24 million subscribers in January this year. All of this is on the back of very strong and overwhelmingly local programming, management and decision-making. Its merger with Zee will catapult it to the top three media firms in India, with over 27 per cent share of the viewership in television.

 As any media investor will tell you, India is a tough market. It has huge volumes, poor per unit monetisation, low margins, and needs a lot of effort and patience. Both Sony and Rupert Murdoch’s 21st Century Fox (then News Corporation) recognised that early on.

 From the time Mr Murdoch bought out Star TV from Richard Li in 1993, he never stopped chipping away at trying to build a business here. It took seven long years but Star hit pay dirt with Kaun Banega Crorepati (KBC). In the process, it brought many things to the media dark India of those days. Channel [V], India’s first music channel (1994), Star News, its first news channel (1998), Radio City, the first private radio station (2001). It revived an ancient Indian game through the Pro Kabaddi League, aided Amitabh Bachchan’s return to stardom and changed the rules of television for good. It has rarely let go of its leadership position since. Its 60 channels command a fifth share of all TV viewing in India. At 40 million subscribers and about 88 million unique visitors, Disney+Hotstar is among the top five streaming apps.

Much of this was achieved because of the way Mr Murdoch and, therefore, Star were built. Globally, on the entertainment and not the controversial news part, Fox is an extremely entrepreneurial company. This percolates to the markets it operates in. Star hired local managers, gave them freedom and encouraged them to take big bets. Every CEO of Star has endorsed that in my book, The Making of Star India (Penguin Random House, 2019).

In 2018, when Fox’s entertainment assets were sold to Disney globally for $71.3 billion, Star India was part of the deal. It was valued at about $15 billion and there was a huge amount of excitement around it. Robert Iger, who’s just returned as CEO of Disney and headed the firm then, had lauded the market and (then) Star India CEO Uday Shankar in interviews and his book.

 This was Disney’s third coming in India. It entered the country in 1993 with a tie up with the KK Modi Group. That went sour. It bought a stake and later acquired Ronnie Screwvala’s UTV. That didn’t get it anywhere either.

 While being interviewed for the Star book in 2018, Bruce Churchill, who headed Star Asia from 1996 to 2004, said: “A lot of American companies look at the international markets as a sales opportunity. News Corp started in Australia, then built a successful business in the UK and then went to the US. So we knew we could build an international business by going and building local stuff. We didn’t take the Australian papers to the UK. Some companies are more guilty of an American approach.”

 That is the best explanation of why Disney continues to struggle in India three decades after it came here. It is extremely US-centric, and any market outside is only seen as an additional revenue opportunity for its existing intellectual property. It is simply not designed to cope with a market as deeply local as India.

 Almost 90 per cent of the tickets sold in theatres, a bulk of the viewership on TV and OTT, is for Indian fare (and at Indian prices) despite all the global programming available. Disney acquired the market leader, and resident mover and shaker in India. But it had not achieved any of this, nor did it (possibly) appreciate what it took to get there.

 Not surprisingly, the acquisition and subsequent operational mess have played to the script. Many senior managers fed up with the Burbank-controlled micro decision-making have quit. As one puts it, “Star has become a mere colony.” It showcases more glaringly why other American media companies such as Warner, Sony, Paramount, have done reasonably well while Disney lurches from one deal to another. It simply hasn’t learnt anything about this market in 30 years.

 One could argue that Disney is pivoting from linear to streaming and therefore this decision. That linear is a sunset business. Given the crazy growth of DD Freedish, a free DTH service, that might not hold true for India. But let us leave that for a minute.

 Even if Disney sticks to the streaming business in India, what about its management style? If it insists on monetising American IPs, doesn’t bid for lucrative films and sports rights, keeps insisting that even logo and colour changes be cleared with Burbank, where does that leave Disney+Hotstar?

 When Disney India merged with Star, it was a tenth of Star’s size. The merger catapulted it to India’s second largest media firm.

 If Disney has found it difficult to capitalise on a large, market leading-profitable business in the four years since it took over, what is to say it will do better with the stump of the smaller streaming one?

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