Reliance-Disney mega-merger: The blueprint for the dawn of a new media era for India

• The consolidation of Reliance's Viacom18 and Disney's Star India creates India's largest television and digital streaming platforms

• The Rs 70,352 crore merger is set to revolutionise India's media landscape

• With substantial resources and extensive networks, the merged entity aims to dominate key markets, especially in sports and regional genres

• The merger is expected to command a significant share of the TV advertisement and digital OTT markets

The merger of Reliance’s subsidiary Viacom18 and Star India, Disney’s Indian unit, is set to create India’s largest television and digital streaming platforms. In FY23, the consolidated revenue of Star and Viacom18 amounted to Rs 24,411 crore, surpassing the combined revenue of Zee Entertainment Enterprises, Sony Pictures Networks India, and Sun TV Network, which stood at Rs 18,543 crore. The Rs 70,352 crore merger is expected to transform the media landscape in India. 

RIL, Viacom18 and Walt Disney announced the signing of definitive agreements to form a JV by merging Viacom18's media operations into Star India on February 28. RIL, Viacom18, and Disney will own 16.34%, 46.82%, and 36.84% of the venture, respectively, with RIL controlling the JV. 

Regional and global outcomes

Ashish Bhasin, founder, The Bhasin Consulting Group, says this marks a positive development for the Indian industry, signalling our arrival on the global stage. It is especially a pivotal step in media and advertising consolidation, showcasing India's potential in entertainment and television markets. 

"This landmark event signifies a new era with unprecedented scale and global distribution capabilities. With this, the Indian media is knocking on the doors of the global industry announcing our arrival. The consolidation positions the merged entity to surpass its three main competitors combined. It marks a pivotal step, not only in India but also on the global stage," he says.

Harsha Razdan, CEO, South Asia, dentsu, says, “The merger signifies a watershed moment that can inherently reshape and revolutionise the landscape of the Indian media and entertainment industry in the next two years. Once it has cleared all industry-specific regulation protocols, the combination should create a significantly dominant player in the market, wielding substantial influence over content creation, distribution, and consumption trends in the country."

Bhasin says if the merger is successful, it will strategically position Star and Viacom on four fronts. 

• Their extensive network, especially in regional markets, poses a threat to competitors, weakening their positions. 

• In sports, the merger provides a strong foothold in global sporting events. 

• With Disney's content prowess, they have a robust content creation capability, both domestically and internationally. 

• This consolidation enhances their distribution clout, crucial in television, and strengthens their negotiating power throughout the network.

"Overall, it pressures competitors and bolsters their competitive stance," he adds.

The merger creates a vast consolidated entity spanning television, digital, and sports, backed by Reliance's substantial resources and Jio's extensive reach in mobile and data services. It will bring together 117 TV channels across content genres. According to a media release jointly issued by the two companies, the JV is set to reach over 750 million viewers in India and cater to the Indian diaspora worldwide.

The merged entity will operate two streaming platforms, Disney+ Hotstar and JioCinema. Furthermore, it will consolidate key tentpole sporting properties with media rights to the IPL and ICC matches, as well as bilateral rights to the Indian, Australian, and South African cricket boards. Additionally, the entity stands to gain from Disney's extensive global content offerings, further enriching its content portfolio.

Market share and industry impact

According to Karan Taurani, SVP- research analyst (Media, Consumer Discretionary and Internet), Elara Capital, after the merger, the combined entity will command a TV advertisement market share of 40%. The merged entity is expected to command a digital OTT market share of ~34% in CY23, while the TV viewership share in the top 10 channels (according to BARC) is ~40% as of CY23.

Krishnarao Buddha, senior category head, Parle Products, says a consolidation is imminent in the digital sphere as well. “A potential merger of Jio and Hotstar could be on the horizon, especially considering the strength of Hotstar's brand equity. This consolidation would not only strengthen the content library of the combined entity but also potentially attract increased revenue from the market due to the enhanced content offerings,” he says.

However, this is expected to pose a challenge for global OTT platforms in India to raise the Average Revenue Per User (ARPU). “India's market values bundling and is price sensitive. The combined entity can offer a comprehensive package including web series, movies, sports, originals, and a global catalogue. This bundled premium plan, possibly in collaboration with Jio's large subscriber base, may hinder the ability of global OTT platforms,” Taurani adds.

There will inevitably be some areas of overlap, but Bhasin says the potential synergies between Star India and Viacom are substantial. The amalgamation leverages their extensive experience, content libraries, and a global distribution network, offering significant synergistic opportunities and paving the way for tremendous synergistic opportunities. 

"Reliance's significant presence in data and telecommunications, particularly through Jio, coupled with the vast content resources of the merged entity, could apply pressure on competitors like Vi and Airtel. Furthermore, leveraging Star's robust regional network with Viacom18's assets presents additional synergistic potential. While overlaps are expected, experienced leadership typically navigates these challenges to maximise synergies over time," he adds.

Mihir Shah, vice president, Media Partners Asia, says the merger will create a powerful entity poised to enhance scale, profitability, and competitiveness in a converged TV and streaming video landscape.

Impact for rivals

Boasting a sizable customer base spanning diverse genres, including regional and urban General Entertainment Channels (GEC), the merged entity strives for market dominance in key regions. Taurani says this can potentially lead to market share loss and challenges for other players, including the possibility of smaller channels shutting down. 

“The consolidation could have a negative impact on other linear TV broadcasters as they may not be able to scale up on market share. The merged entity's focus on maximising market share through increased investments in content, synergies, and enhanced marketing power poses challenges for individual broadcasters to compete and grow. 

Impact for advertisers

From an advertising perspective, the current landscape presents clear advantages and disadvantages. Buddha mentions that consolidation within networks will offer efficiency gains. For instance, the amalgamation of channels like Colors, Star, Rishtey and others under one umbrella will streamline operations. “In regional markets such as Maharashtra, the dominance of players like Star Pravah and Colors Marathi could further enhance efficiency through combined efforts,” he explains.

"For the advertising and marketing sector, this presents a dual prospect of opportunities and challenges. On the positive side, it unlocks fresh possibilities for crafting and deploying innovative and compelling campaigns across an extensive and diverse portfolio of channels and platforms, providing us with extensive reach. However, it also heightens competition and enhances the negotiating power of the newly merged entity, enabling it to exert greater control over pricing and inventory. I hope that in the coming years, the merger achieves a balanced outcome. It's crucial to maintain two or three major players in the market to foster a healthy and competitive environment, which ultimately should serve the end consumer," Razdan adds.

However, this consolidation may adversely impact competitors like Zee and Sony which could lose business opportunities. “In markets where Star and Viacom operate jointly, increased efficiency is anticipated. For instance, in the Hindi GEC segment, a partnership between Star and Colors could outshine competitors like Zee and Sony. Consequently, media planning strategies may shift towards bundled advertising packages, favouring conglomerates like Viacom and Disney over individual channels like Zee or Sony,” he says.

“The market dynamics are poised to favour consolidated networks, potentially reshaping advertising strategies and market share distribution,” he adds.

The merger can also enable the company to command a premium in advertising rates due to their dominant position in the market. This can potentially lead to upward pressure on pricing, as competition typically ensures fair pricing. 

“Conversely, competitors like Zee and Sony may be forced to reduce their pricing to stay competitive, especially if they begin losing market share to dominant networks. The dynamic pricing landscape could have implications for both advertisers and networks alike,” he says.

However, Bhasin says it will also offer advertisers better content and wider reach across television and digital platforms, nationally and regionally. 

"Despite potential pricing pressures, the value provided through synergies can be significant, resulting in a win-win situation. India's advertising market, despite its vast potential viewership, currently has some of the lowest spot rates globally. This consolidation presents an opportunity to rectify this and stimulate market growth by establishing more rational pricing structures," he says.

IPL strategy

With regard to the IPL, where Star Sports holds TV rights and JioCinema holds digital rights, a consolidation strategy is likely. Currently, the ad inventory is sold separately, but there's a possibility of bundling them together in future. Buddha says this approach would enable a unified selling of the entire property across both television and online platforms, strengthening their negotiating position with agencies and advertisers. 

“This consolidation could provide them with enhanced leverage in the market. Additionally, due to the prohibitive cost, some advertisers may opt to divert their funds to other networks. This could result in a scenario where only advertisers with sufficient budgets remain, while others move away, potentially impacting both sides adversely,” he says.