There was a time when the media and entertainment industry (M&E)had about five to six players, not any more if the rumoured acquisition of The Walt Disney Company’s India business under Star India, by Viacom18 became a reality. This would leave the Indian M&E industry with what is believed to be just a few players. The first company will be formed post the merger of Culver Max Entertainment which manages Sony’s set of channels with Zee Entertainment Enterprises Limited (ZEEL) beside the firm if and when the acquisition of Star India is completed by Reliance. “If telecom as a sector can two large players, so can media and entertainment. While Star India is the number one player Viacom18 is in the fourth position, so its a merger of the number one and fourth players. Similarly, Sony and ZEE are the coming together of number two and three players. What this will do is that both the companies will have better buying and monetisation power,” a senior media analyst, told BrandWagon Online, on the condition of anonymity.
Email queries sent to Reliance (Viacom18) and The Walt Disney Company India, remained unanswered till the time of publishing this story.
The Indian M&E sector continued its strong growth trajectory, according to the FICCI-EY 2023, report. It grew by Rs 34800 crore (19.9%) to reach Rs 21,00,000 crore ($26.2 billion), 10% above its pre-pandemic 2019 levels. Furthermore, The Walt Disney Company India is holding out a $10 billion price tag as Reliance values the deal between $7-$8 billion.
There’s more to it than meets the eye!
There are multiple reasons behind Reliance eyeing The Walt Disney Company’s Indian business. The broadcast business of Star India remains strong to date – with its Hindi general entertainment channel Star India being the number one, week after week (Star Sports Hindi 1 grabbed the top spot with 32,62,61,000 average minute audience as per the data by Broadcast Audience Research Council India (BARC) for Week 42.
Not to mention the broadcaster in the last few years, has created a good lineup of sports content, besides a slew of regional channels. From the Indian Super League which the company runs in partnership with Reliance-owned sports marketing company Rise Worldwide to the Star Kabaddi League, besides rights to air ICC cricket matches. “If the deal comes through, it would ride mainly on 2 huge legs, content, and distribution. The width and depth of content rights Reliance will have at its disposal of Hindi GEC, OTT and regional languages, live sports content, etc, in comparison to any other player in India is humongous. This will change and affect the ecosystem of M&E and related sectors for a longish time. This will also lead to consolidation and opening up newer avenues in M&E in the Indian and global context. On the distribution front, we will see far deeper, faster penetration of the content,” Vinita Shah, a senior media and sports consultant, highlighted.
Viacom18 in a joint venture with TV18 currently also operates a distribution company IndiaCast. Not to mention, In June 2020, Reliance Industries merged Den Networks and Hathway with Network18 and TV18 to consolidate Reliance Industries’ media and distribution businesses. In October 2018, Reliance bought majority stakes in Den Networks Ltd and Hathway Cable and Datacom Ltd for Rs 5,230 crore. With the potential takeover, Reliance will have an edge when it comes to distributing the content across various platforms. What this means is that this will drive monopoly and will leave little or no room for competition to survive. “There is a distinct decline in TV viewership. The takeover would combine strengths to battle Netflix, Amazon Prime Video as well as the likes of Meta and Google. Digital advertising revenue has gradually become greater than traditional advertising revenue. The potential takeover gives Reliance greater leverage for long-format content. There is a good chance the market will become oligopolistic post the takeover,” Ajay Trigunayat, founder, AQT, said.
Uday Shankar post his exit from The Walt Disney Company India formed Bodhi Tree Systems in partnership with James Murdoch. The company was formed as a joint venture between Lupa Systems, the family office of James Murdoch and Uday Shankar. In April, it was announced that James Murdoch and Uday Shankar-backed Bodhi Tree Systems, reduced its planned investment into Reliance’s broadcasting arm by almost 70%. Bodhi Tree Systems has invested Rs 4,306 crore into Viacom18, as part of the completion of the strategic partnership between Reliance, Bodhi Tree Systems and Paramount Global. However, at the time of announcing the fund-raise last year, Bodhi Tree Systems planned to infuse Rs 13,500 crore into Reliance’s broadcasting venture.
Zee and Sony Saga!
With the green signal from the Competition Commission of India (CCI) in place now, its a matter of time for both Sony and Zee to form the new company. As per ZEEL’s latest financials of Q1, FY24, the media company currently had a market share of 17%, which increased by nine percentage points to 17.9% in June 2023. When it comes to the broadcast business, the company in its earnings report stated that it will continue to invest in ZeeTV, Zee Marathi, Zee Tamil and Movies to further grow the market share besides further strengthening the market position in Bangla, Odiya, Telugu and Kannada. It also plans to strengthen new channels including Zee Punjabi, Biskope, Keralam, Chitramandir, Picchar and Thirai. “ Our June 2023 share was at a high point in the last five quarters. When the 15+ Urban viewership share is looked at, which gives a view of monetisable viewership, we have gained 90 bps viewership share comparing June-23 with Q4, FY22,” Rohit Gupta, CFO, ZEE Entertainment Enterprises, said during the analyst call.
The merger provides both the company a chance to upgrade its offerings. For ZEE it will bring access to Sony’s sports bouquet of channels, for Sony ZEE has an array of regional channels besides the movie production and music company. “I see Zee folding into Sony because Zee was fundamentally a promoter-controlled company and the promoter interest in that company dropped continuously. Zee is getting into the global Sony world because it can’t be the other way around. Sony TV is a much larger global network as compared to Zee even though Zee has broadcast networks in the other parts of the world but the big brother in the deal had always been Sony,” Paritosh Joshi, a senior media consultant, said.
The company is similar to Reliance as Siti Networks as its distribution company besides DishTV – as the direct-to-home under the umbrella of Essel Group.
Punit Goenka was reinstated as the MD and CEO of ZEEL on October 30, after SAT overturned SEBI’s ban order, as per a media report.
The OTT scene!
Disney+ Hotstar led premium video-on-demand (VOD) category viewership with a 38% share over the measured 2022-Q1 2023 period, driven by sports as well as the depth of its Hindi and regional entertainment, as per the latest report by Media Partners Asia . The combined Zee – Sony group had a 13% premium VOD category share in aggregate with their respective platforms, which are expected to operate separately for another year, benefiting from strong engagement across sports as well as regional, local and international content. The measurement period in this report ended Q1 2023 before the launch of IPL on Jio Cinema as a result, its share of the premium VOD category was limited to two percent. In April 2023, in spite of several tech glitches impacting user experience, the free live streaming of the men’s IPL cricket ensured that Jio Cinema consumption grew more than 20x in April 2023 to ensure that it dominated the premium VOD category, stated the report. “The next six-12 months will remain critical for the OTT sector as platforms strive to balance monetisation and profitability against content investment. Disney+ Hotstar retains a strong local entertainment platform, powered by Star’s Hindi and regional content depth. The platform’s SVOD layer should ideally consolidate and anchor its offering to remaining sports rights, led by ICC Men’s cricket, popular Marvel content, and Disney family content,” Mihir Shah, vice president, MPA India, said at the time of the release of the report.
Indeed it has been while Jio Cinema has managed to ink syndication deals with the likes of Home Box Office (HBO), Disney+ Hotstar still rules the roost thanks to cricket content. This is also one of the reasons by Reliance is considering the buy-out to give the much-needed boost to Jio Cinema. Meanwhile, in the case of Sony Liv and Zee 5, both the OTT brands continue to survive on its own, however, in the future one may expect a merger.
The bottlenecks
While it took a while for Sony and ZEE to finally get a nod from the Competition Commission of India (CCI), the story may be similar for the Walt Disney Company India and Reliance. Over the years, Reliance has acquired a slew of media companies. “The potential deal between Reliance and Disney would change the tide in India of the media and entertainment sector. The media and entertainment sector has changed worldwide and India has not been up to pace with the changes. The VoD (video-on-demand) market in India has not matured as compared to the matured markets and the rest of south-east Asian countries. Given Sony’s and Reliance’s current products, brands and services, I can promise you it will not happen with the current teams, they will need to rejig the entire piece,” Trigunayat, added.