Dummies guide to the Reliance-Disney merger

The Rs 70,350-crore merger between Mukesh Ambani-led Reliance Industries and Walt Disney’s media assets in India has been making headlines for most part of 2024. As the time for their union nears, we are witnessing some signs of the merger's culmination.

The leadership of Disney Star is witnessing a shake up as reports emerge that K Madhavan, the country manager and president of Disney Star, along with Sajith Sivanandan, the head of Disney+ Hotstar, have resigned from their roles. 

The companies have voluntarily committed that post merger the combined entity will refrain from bundling TV and OTT ad slots for IPL, ICC, and BCCI cricketing rights until the current rights period ends. The parties will also divest seven television channels, including Hungama and Super Hungama. This is in compliance with the Competition Commission of India's (CCI) conditional permission for the merger of the two companies.

The commission had expressed concerns about the emergence of a dominant entity in the cricket broadcasting space, as the merger would consolidate key tentpole sporting properties, including media rights for the IPL and ICC matches, along with bilateral rights to the Indian, Australian, and South African cricket boards. However, it gave its approval for the mega merger subject to specific voluntary modifications on August 28.

Speaking to afaqs! earlier, Karan Taurani, SVP-research analyst (media, consumer discretionary and internet), Elara Capital, said that on the sports front, the merged entity is poised to monopolise the sports sector, with Disney and Jio together holding around 75-80% of the Indian sports market on both linear TV and digital platforms. 

“Their dominance in sports, primarily cricket, enables them to command a substantial share of the overall ad market, showcasing robust growth in an industry where sports is a key driver of viewership on both linear TV and digital platforms,” he said.

Raj Nayak, a media veteran and former COO, Viacom18, said that the merger will significantly enhance cost savings by enabling substantial operational efficiencies.

Rajesh Sethi, media advisor, said that this merger will significantly impact the sports broadcasting industry. "Other broadcasters and OTT platforms have a limited presence in this space, reinforcing the dominance of Reliance and Disney in fulfilling consumer demand for sports content," he said.

On August 30, the National Company Law Tribunal (NCLT) granted approval for the merger. The NCLT noted in a 22-page order that the scheme will take effect only after receiving approval from the CCI.

Last month, the Ministry of Information and Broadcasting (MIB) approved the transfer of licenses of television channels of Viacom 18 Media to Star India ahead of the merger with Disney. The approval was given for the transfer of licenses relating to non-news and current affairs television channels. 

In February, Reliance Industries entered into a binding agreement with Disney to consolidate their media operations in India. The ownership structure of the joint venture (JV) consists of 16.34% held by RIL, 46.82% by Viacom18, and 36.84% by Disney.  

The joint operation will unite two streaming platforms—JioCinema and Disney+ Hotstar—along with 120 television channels. Reliance Industries' annual report indicates that JioCinema achieved an average of 225 million monthly users, whereas Disney+ Hotstar reported 333 million monthly active users in Q4 2023. As of June, Disney+ Hotstar reported 35.5 million paid subscribers, whereas JioCinema exceeded 16 million paid subscribers by September.

However, multiple speculations abound regarding the future of the two streaming platforms. Some reports indicate that Disney+ Hotstar will emerge as the exclusive streaming platform after the merger, while others propose that it will be integrated into JioCinema. Another report suggested that they will operate as distinct platforms—one dedicated to sports and the other to entertainment. Yet another report indicates that Disney+ Hotstar will continue to be a premium platform, whereas JioCinema will adopt a freemium model.

Apart from cricket, the combined entity will possess valuable sports assets such as Wimbledon, the Pro Kabaddi League, MotoGP, and the English Premier League (EPL).

Star India has been facing financial setbacks in its sports business. The Walt Disney Co.'s earnings report indicates that in the June quarter, the figure rose to $314 million, compared to $216 million from the previous year. At the same time, its revenue from sports saw a modest increase of 1%, rising from $277 million to $279 million.

Last week, Reliance Industries announced in a regulatory filing that the merger is anticipated to be finalised by the end of the third quarter of this fiscal year. Reports indicate that the merger is expected to be finalised by early November.

Nita Ambani will serve as the chairperson of the joint venture, with Uday Shankar taking on the position of vice chairperson.