In-depth: How M&E industry will benefit from Reliance-Disney merger

The combination of Viacom18 and Star India will give birth to a media giant offering advertisers an extensive array of channels to connect with consumers. However, this merger could potentially diminish advertisers' leverage in negotiating advertising prices, according to industry observers.

On February 28, 2024, The Walt Disney Company sold its India business to Mukesh Ambani’s Reliance Industries at a $3.5 billion valuation, which it bought from Rupert Murdoch for $14 billion seven years ago.

Effectively, RIL paid USD 2.2 billion (about Rs 18,000 crore) for a 63% stake in the JV.

If regulators and shareholders approve, it will create a Rs 70,000 crore-behemoth.

Shashank Srivastava

Shashank Srivastava, Senior Executive Officer, Marketing and Sales, Maruti Suzuki, said, “Such tie ups will have the advantage of a larger bouquet of media channels but maybe lesser price negotiating strength.”

A senior media agency leader said that while it may hurt advertisers as they might not be able to negotiate in terms of ad rates, this move will benefit the M&E industry in the longer-run.

The leader said, "Currently, the ad rates on TV are very low compared to Western countries, given the huge population in India. But with this consolidation, Viacom 18-Disney Star will be able to control higher ad rates, earn profits, and invest in the market, eventually benefiting the whole M&E industry.” 

The JV will attempt to correct the TV ad rates first, which is a tough task because of earlier benchmarking.

“Look at the JioCinema rates recently announced for IPL. They are not playing along with the set market rules where one pitches lucrative ad rates in the beginning and then increases year on year. JioCinema set the base high when it comes to FCT rates for mobile and CTV, and anything above that will benefit them. You only reported how they pitched digital at an effective rate of 3X that of TV. But they know what they are sitting on. It’s a digital audience, a large part of which doesn’t go on TV and remains exclusive,” the agency leader added.

The merger will give rise to a giant media powerhouse boasting over 108 channels. With Star India contributing 70+ TV channels across 8 languages and Viacom adding 38 TV channels in the same number of languages, alongside two prominent OTT apps (Jio Cinema and Hotstar) and two film studios (one under Reliance and the other under Disney India), the combined entity will wield significant influence in the media landscape.

Karan Taurani

As per Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, the combined entity will command a share of 40% in the overall TV advertisement market (as of FY23).

Viacom18-Disney Star channels’ TV viewership share in the top 10 channels (according to BARC) is approximately 40% as of CY23, according to Elara Capital.

The combined entity will have more than 750 million viewers across India. 

Monopoly in sports properties may lead to higher ad revenues

Disney Star India earlier had a monopoly over sports broadcasting. With Viacom18 bagging the digital rights to IPL and BCCI media rights, there came a duopoly for a brief period, which will again be a monopoly after the JV.

Advertisers park their substantial amount of ad budget in sports, especially cricket in general.

The unified entity will boast a portfolio of highly sought-after sports properties, including the Indian Premier League (broadcast both on TV and digital platforms), ICC cricket tournaments (featured on both TV and digital platforms), Wimbledon, Pro Kabaddi League, and BCCI domestic cricket, among others, presenting a compelling proposition for advertisers.

“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,” said Taurani.

In sports media advertising, TV’s contribution stood at Rs 5,506 crore and digital at Rs 2,045 crore in 2022, according to a GroupM ESP Sporting Nation report.

In total, sports media spending grew by 26% (YoY), reaching Rs 7,553 crore ($Mn 956) in 2022.

The merged entity to command a larger share in the digital adex

When BestMediaInfo.com asked last year if it was time to pitch JioCinema vs. YouTube, advertisers said they could consider JioCinema and Hotstar together as an alternative to YouTube.

“Jio Cinema alone cannot get YouTube in India, but if I need to look for an alternative for YouTube, then JioCinema and Hotstar together in plans can achieve what brands intend to achieve on YouTube. However, there is a clear demarcation when it comes to the kind of objectives,” Rammohan Sundaram, President, Integrated Media, DDB Mudra Group, told BestMediaInfo.com in October 2023.

According to Elara Capital estimates, the merged entity had a digital OTT market share of approximately 34% in calendar Calendar Year 23.

Srivastava is eager to see how this partnership pans out in the digital media space, “because much of his media investment dollars are being parked there".

Taurani added that Reliance may drive the entire business through Jio Platforms, with a significant influx of ad revenues in digital advertising. “The digital advertising market, being a winner-take-all business, heavily relies on scale,” he said.

Info@BestMediaInfo.com