The Reliance dominance: Experts explain what’s in store for media ent biz

The Competition Commission of India (CCI), on August 28, granted approval for Reliance Industries' Rs 70,350-crore merger with Disney's Indian media assets, contingent upon specific voluntary modifications. This sets the stage for the creation of a media powerhouse.

“Commission approves the proposed combination involving Reliance Industries Ltd, Viacom18 Media Pvt Ltd, Digital18 Media Ltd, Star India Pvt Ltd and Star Television Productions Ltd, subject to the compliance of voluntary modifications," the competition watchdog posted on X.

According to media reports, the commission’s likely concern was about the formation of a dominant player in the cricket broadcasting space. The merger 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. Apart from cricket, the combined entity will have lucrative sports properties like Wimbledon and Pro Kabaddi League.

Karan Taurani, SVP- research analyst (Media, Consumer Discretionary and Internet), Elara Capital, says that on the sports front, the merged entity is set to become monopolistic, with Disney and Jio collectively controlling approximately 75-80% of the Indian sports market across both linear TV and digital platforms. In CY22, sports adex (TV+Digital) in India stood at Rs 71 billion (according to GroupM) out of which Disney India had a share of 80%. 

“This dominance in sports, primarily cricket, positions them to command a substantial share of the overall ad market, showcasing strong growth in an industry where sports is a key driver of viewership on both linear TV and digital platforms. The monopoly in sports properties may lead to higher ad revenues,” he says.

Ashish Bhasin, founder, The Bhasin Consulting Group, has raised concerns about potential monopolies. However, he believes that India's regulatory framework provides adequate checks and balances to prevent power from being concentrated in a single entity. “There are lots of local players in the market,” he says.

While dismissing the concern about monopoly, Raj Nayak, a media veteran and former COO, Viacom18, says that it will definitely help the merged entity to grab a larger share of the revenue wallet, both on the distribution and ad revenue front.

“It will also have a huge upside on cost savings as they will be able to bring in huge operational efficiencies,” he says.

Rajesh Sethi, media advisor, says this merger is set to significantly impact the sports broadcasting industry, as Reliance and Disney together control the majority of sports content. "Other broadcasters and OTT platforms have minimal presence in this space, solidifying Reliance and Disney's dominance in meeting consumer demand for sports content," he says.

The merger is expected to transform the media landscape in India as it is set to create India’s largest television and digital streaming platforms. With 120 TV channels and two streaming services, it will reach over 750 million viewers in India and cater to the Indian diaspora worldwide.

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.

Bhasin says the merger will give India a great opportunity to make a mark on the global stage. “So far we have been importing content, but we have great talent in India and, with this, we will be able to create content that can make a mark internationally,” he says.

Mihir Shah, vice president, Media Partners Asia, says, the JV is set to form a formidable entity, capitalising on scale and synergies in TV and streaming, with ambitions to redefine the media market landscape and compete more effectively with global digital juggernauts.

However, under a new market framework, the industry must tackle past challenges, “including the under-indexing of advertising spend relative to GDP and escalating content costs in streaming. Strategic investments in talent development and technological advancements will be crucial for future growth." 

Nayak states that with a market share of between 35% and 40%, the company will be in a pole position and become a dominant player. “It will give them an edge and an upside on operational efficiencies and be able to leverage the strength of the joint entity both on costs and revenue,” he adds.

Sethi says with JioCinema introducing price disruptions like Rs 29 per month offering, it will be interesting to see how they handle the OTT brands—whether they'll merge JioCinema and Hotstar into a single brand or maintain both.

"Additionally, with connected TV on the rise, the combined offering of JioCinema, Disney Hotstar, and Disney's linear channels could drive increased penetration in this segment," he says.

Taurani foresees the merger of JioCinema and Disney+ Hotstar, the streaming platforms of the two companies, as a challenge for global OTT platforms, as 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 to raise Average Revenue Per User (ARPU),” he says.

In the digital sector, content cost inflation has been more pronounced due to heavy fragmentation in the OTT market and the entry of global giants with deep pockets. Taurani notes that, with the merger, content costs in digital may experience slower growth, which could improve the unit economics for the OTT business and potentially lead to lower EBITDA losses for JioCinema and Hotstar.

“Considering the critical role of technological advancements in the success of OTT platforms, the integration of Disney's technological expertise is expected to enhance the user experience on JioCinema. This improvement may subsequently drive higher subscriber numbers and revenue growth,” he adds.

As with every merger, there are bound to be synergies in this case as well. Bhasin emphasises that the key is to minimise overlaps. “These synergies don’t happen overnight; they can take six months to three years. It is crucial that the chemistry between the two sides is well established and that their cultures are aligned. These factors play out over time. Given that these are experienced players, they would have considered all these aspects,” he says.

Nayak, who has worked in both the organisations, does not foresee cultural integration as a major hurdle, “as both organisations have strong professional cultures.” 

“There could be subtle differences in how each company operates—such as decision-making processes, leadership styles, and workplace dynamics—that may take time to align. Moreover, with the drive for operational efficiencies, restructuring, and addressing role duplications could have an impact on manpower,” he adds.

Taurani notes that the CCI is typically a major roadblock for such mergers. He anticipates that approval from the National Company Law Tribunal (NCLT) will be granted within three to six months, followed by approvals from shareholders and the Ministry of Information and Broadcasting (MIB). “But those are not time-consuming. Thus, the CCI approval has paved the way for the merger, which should close by January 2025,” he says.