Reliance-Disney: Game Of 4C’s – Cricket, Content, Consolidation, Cost

When unstoppable forces converge, the Reliance-Disney joint venture emerges as an unparalleled powerhouse. As per the agreement, RIL is slated to inject Rs 11,500 crore into the joint venture to facilitate its growth initiatives. The transaction assesses the JV at Rs 70,352 crore post-money, excluding synergies. Following the implementation of the specified measures, RIL will take charge of the JV with a 16.34 per cent stake, while Viacom18 and Disney will possess 46.82 per cent and 36.84 per cent, respectively.

BW Marketing World spoke to industry veterans about their thoughts on the Reliance-Disney tie-up and how the two giants are all set to rock the media and entertainment space with this JV.

Building on the Cricket Fervour

In a cricket-frenzy country like India, this deal is a lucrative one for Disney, which would help the US entertainment conglomerate draw in numbers.

Securing streaming rights for IPL and transitioning to a paid model in 2020 solidified Disney's position in cricket viewership. The recent twist came when Reliance's JioCinema acquired IPL rights from Disney for $2.6 billion in 2022, significantly impacting Disney+ Hotstar, witnessing a loss of 4.6 million subscribers in the first quarter of the previous year.

Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital emphasises that the amalgamation of entities is expected to bring about a surge in the advertising revenue potential derived from the Indian Premier League (IPL) as the merged entity now holds exclusive rights to IPL across both television and digital platforms. 

"This consolidation may result in bundled advertisement revenues, potentially mitigating the higher cost of IPL rights and reducing overall losses", expresses Taurani.

The Content Card

Ambi Parameswaran, Independent Brand Strategist & Founder, Brand-Building believes that the Reliance Disney deal is going to be a game changer in many ways. “It will be a player who will be able to offer a full bouquet of entertainment offerings. I am hopeful that they will use the wide reach offered by their channel to build a big library of programmes that can improve the skill levels of average Indians.”

Jio's democratisation of mobile internet is evident, impacting content dynamics for Disney's Hotstar and Reliance's JioCinema. The surge in digital content creation costs may benefit both platforms, despite current significant losses. With over 450 million smartphone users, Jio holds a formidable last-mile advantage. The development poses challenges for Bharti Airtel, pushing the need for substantial investments in content development or strategic partnerships with global OTT giants like Netflix and Amazon to strengthen its position in the content ecosystem.

“I am sure with the addition of Disney / Hotstar / Viacom18, they will be able to harness high order content creation capabilities. And these can be put to good use to develop relevant content for India. Beyond just Bollywood and cricket,” reveals Parmeswaran.

Harsha Razdan, CEO, South Asia, dentsu, adds, “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.”

Looking to Consolidate 

Lloyd Mathias, Business Strategist and Independent Director points out, “I think, one, this was in the pipeline for a while and that was because Disney was planning to exit the linear television business globally. Disney wants to focus on entertainment, theme park - their core businesses. So, they've kind of pulled out the onslaught from OTT channels. So, in a sense, Disney had kind of made it clear about the intention to leave this business and were looking for a suitable partner.

The second point is that clearly, Reliance, in a sense, became the obvious choice because in a very competitive media market, there was some consolidation. They already own a lot of the pipeline through Reliance Jio - they’re fusing all their media assets together under one roof. So, I think this was expected.”

Digging deep into the media and entertainment sector, Taurani asserts, “The merger of Viacom18 and Star India will have a big impact on the entire M&E ecosystem as the combined entity will command a huge market share. The merger will create a large media juggernaut with 108 plus channels (Star India has over 70 TV channels in 8 languages whereas Viacom has 38 TV channels in 8 languages), two large OTT apps (Jio Cinema and Hotstar) and two film studios (one each of Reliance and Disney India).”

According to Taurani, the consolidation may adversely affect other linear TV broadcasters like Sun TV and Zee Sony, limiting their ability to scale up market share. He highlights, “The merged entity's focus on maximizing market share through increased investments in content, synergies, and enhanced marketing power poses challenges for individual broadcasters to compete and grow.”

Ad Revenues to Surge

The potential for ad revenue from the IPL could see a substantial boost following the merger of the entities – Disney and Reliance - that now hold exclusive rights to broadcast IPL on both TV and digital platforms, respectively. Previously, the division of IPL rights between TV and digital platforms, with the digital platform offering free IPL content, negatively impacted ad revenues on TV. The merged entity is poised to provide relief by addressing this disparity.

Mathias goes on to say, “The two big demons in the media market today, evidently, number one is Google and number two is Meta. Given the amount of time people spend on digital - Google with its YouTube, Google search, is truly big. And then, of course, Meta, with the combined strength of WhatsApp, Instagram and Facebook, they are large. So today they kind of dominate the advertising landscape, which is the core funding for any media organisation.”

Razdan seconds Mathias stating, “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.”

Stronger Together

With Reliance and Disney joining hands, the duo is set to become stouter than any other TV network – and players like Sony, Zee are likely to have their fears.

Mathias brings out, “Looking at the scenario, you realise that the various TV networks struggle. So, there is Sony, there is Zee, there is Network18, there is Disney. And of course, there's a whole sequence of Indian channels - ABP Group, etc. So, I think some degree of consolidation was imminent. 

I think the year was quite a perfect opportunity. Network18 is predominantly news and business heavy. Disney Star is predominantly entertainment and sports heavy. So, I think it makes for a perfect combination, the right kind of valuation. And therefore, I would say this is a very good step in terms of consolidation.”

On the other hand, Razdan has his worries, “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.”

Playing on Price

Even though, the Reliance-Disney JV hasn’t come as a surprise, the concern many is that will this make things difficult for the viewer. 

The merger of Hotstar and JioCinema has the potential to bolster the JV’s subscription revenue by raising subscription prices and drawing in a broader base of subscribers. 

Nonetheless, Jio Prime could flourish, providing access to content at a cost-effective or potentially free rate through the utilisation of last-mile resources and 5G wireless connectivity.

Mathias emphasises, “Both these channels now almost have complete ownership of the entire cricket feed. If you look at Disney Star, ESPN Star. So, I think those issues need to be watched out for so that pricing does not become uncomfortable for a viewer. Predatory pricing is something that one should watch out for.” 

Razdan, too, realises, “This also heightens competition and enhances the negotiating power of the newly merged entity, enabling it to exert greater control over pricing and inventory.”

All-in-all, this JV is undeniably the kind to look forward to – considering how it could change the aspects of the media & entertainment business, in a lot of ways.