Following the ₹70,532-crore merger, the Reliance and Disney-Star joint venture has undoubtedly become the big daddy of the Indian media industry, with a 60% market share. Does that mean the likes of Sony Entertainment Television (SET) and ZEE Entertainment will become mere fringe players and eventually fade out?

Not necessarily.

With prized cricket properties such as IPL, BCCI and ICC in its kitty, Reliance-Disney will surely have an upper hand, but its battle for eyeballs on the back of high-quality original content will continue. Ask any Gen-Z consumer or, for that matter, any average TV or OTT watcher about the merger, it would hardly matter to them. They will continue to go to SET to watch KBC, to Netflix for The Kapil Sharma Show and to JioStar for IPL. In fact, at a time when appointment viewing is passe, consumers don’t mind waiting for a few days to watch their favourite OTT or TV show for free.

For the ₹2.3-lakh-crore Indian media and entertainment industry, content will continue to be king. Whosoever gets their content strategy right would emerge winners, say media and entertainment industry stalwarts. The much-talked-about merger has come at a time when not only ad dollars in linear television have been plateauing, OTT platforms have also been focusing on driving profitability over subscriber growth. Content acquisition prices are known to have dropped 15-20% and broadcasters and OTT platforms are seen chasing only high-quality marquee content. This makes the analyst community wonder if the Reliance-Disney merger will drastically move the needle unless they focus on a major content revamp.

“Reliance-Disney do have an advantage, but how much they are able to turn the needle would depend on how they innovate, bring in fresh content and how much they are able to compete with the likes of Facebook and YouTube,” points out a leading media industry executive.

Though Star Plus and Colors have content which appeals to the masses, Disney+Hotstar was over-dependent on sports, especially cricket. “The moment they lost the cricket rights, the game was over for them. They did experiment with original content, but were unable to compete with Amazon Prime and Netflix,” points out the former head of a venture capital firm which has considerable investments in the media and entertainment space.

In fact, Uday Shankar, vice chairman, Reliance-Disney, in post-merger media interviews, has admitted that the need of the hour is a differentiated content offering. In parallel, the likes of SET and ZEE are already pulling up their socks. While SET has got on board former Disney-Star content head Gaurav Banerjee as MD, ZEE CEO Punit Goenka has been talking about offering consumers not-so-expensive, high-quality content.

The Merger

The Reliance-Disney merged entity, valued at ₹70,532 crore, formally came into being on November 14, making it the largest media and entertainment powerhouse in India. A major chunk of Disney India comprises the once mighty Star Network which was part of Rupert Murdoch’s 21st Century Fox, which he sold to the Walt Disney Company in 2019. Star Network at that point was valued at $15 billion. “Reliance paid peanuts for Disney Star and now has complete monopoly not just in content, but also distribution,” points out a senior media and entertainment executive.

Uday Shankar and James Murdoch, too, have an indirect stake in the JV through Bodhi Tree Systems, an investment platform jointly controlled by them. After RIL bought out Paramount Global’s entire 13.01% stake in Viacom18 for ₹4,286 crore, Viacom18 is now owned 70.49% by RIL, 13.54% by Network18 Media & Investments Ltd. and 15.97% by Bodhi Tree Systems, on a fully-diluted basis.Reliance-Disney

The merged media behemoth (now rechristened JioStar), which owns 120 channels and two streaming platforms, will control 60% of the Indian media and entertainment market. Reliance already has control over the linear distribution pipe by owning Hathway and Den Networks. The foreseeable impact on the industry would be the dominance of the merged entity in both linear TV as well as the digital market. “Broadcasters have to fight to scale up distribution of content both on linear and digital; they have to invest more on content. Their overall profitability will get impacted,” says Karan Taurani, senior vice president, Elara Capital. “Reliance will try to marginalise the smaller broadcasters. For digital ad revenue, they are going to compete with Google, YouTube and Facebook. They will offer more free content and compete to get the digital revenue pipe,” adds the senior media industry executive.

Though the Competition Commission of India (CCI) has asked Reliance-Disney to give an undertaking that they would not increase advertising rates to an unreasonable level on their streaming platform and TV channels for IPL, BCCI and ICC matches, the industry expects a fair bit of arm twisting. “They will coax marketing executives of companies to spend all their money on them. They will have an upper hand in negotiating ad revenue, and will try to corner the market since they have a platter to offer,” says a senior media industry executive.

Elara’s Taurani doesn’t agree. “The pricing advantage will not come now. It will come in the medium- to long term after we see fringe players fading away or larger players losing market share. Pricing will not be an advantage on the sports side as well, the CCI ruling says they can’t take hikes beyond a point as far as pricing is concerned. So, overall pricing is not a play now; the play is about scaling up market share, strategic advantages and looking at business synergies.”

The jury is divided on whether this merger would give Reliance-Disney disproportionate advantage. According to former Nimbus (which owned Neo Sports) chairman Harish Thawani, advertisers will have no choice but to go to Reliance-Disney to advertise on cricket. After all, they will have two-thirds of the reach.

“However, nothing will stop advertisers from being selective. If you have a new brand launch, IPL is an important asset for you to be able to put out because of its continuity, higher reach, engagement etc. But if you are just doing a sustenance campaign it makes no difference, you don’t have to be on IPL,” explains Thawani. “The inventory fills in the last 1-2 years have been lower. Earlier it used to be 100%, now it’s 80% on TV and even less on digital. By getting together, your inventory fill won’t go up, you will not be able to have a brutal hold in the marketplace,” he further adds.

“No advertiser will go out of the way just because of this merger. They will not pay extra money,” agrees a leading media entrepreneur, requesting anonymity. “Uday (Shankar) has been talking about democratising content; it’s not only about that, it’s about coming up with differentiated content which is going to make them look different from what they were earlier. Reliance-Disney has to come out with a different proposition, they have to get consumers to pay extra for their content,” he adds.

Star India posted a loss of ₹12,718 crore in FY24, while operating revenue declined 6% to ₹18,632 crore. Viacom 18 on the other hand, recorded a net loss of ₹252 crore though its revenue surged 75% to ₹8,032 crore.

The news of the Reliance-Disney merger came around the time when Sony Entertainment Television called off its deal with ZEE Entertainment.

Entertainment industry experts don’t rule out the possibility of a revival of talks between the two estranged parties, provided the ZEE family (Founder Subhash Chandra and CEO Punit Goenka own 4% stake in the business) lets go of their stake. Will the media and entertainment story in India be one of equals or one of David and Goliath?

If Sony and ZEE get their act together on their content strategy, one could expect the unfolding of a new dimension.