Reliance-Disney merger may negatively affect other linear TV broadcasters: Karan Taurani

According to Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, the merged entity's emphasis on boosting market share through increased content investments, synergies and enhanced marketing capabilities presents challenges for individual broadcasters in terms of competition and growth

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Reliance-Disney merger may negatively affect other linear TV broadcasters: Karan Taurani

Karan Taurani

The merger of Viacom18 and Star India will have a big impact on the entire media and entertainment ecosystem as  the combined entity will command a huge market share, Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, said. 

However, the consolidation in the TV sector might negatively affect other linear TV broadcasters like Sun TV, Zee, Sony, and others, Taurani said while adding that this could hinder their ability to increase market share.

He also mentioned that the merged entity's emphasis on boosting market share through increased content investments, synergies and enhanced marketing capabilities presents challenges for individual broadcasters in terms of competition and growth.

Reliance Industries Limited, Viacom 18 Media Private Limited and The Walt Disney Company Wednesday announced the signing of binding definitive agreements to form a joint venture (“JV”) that will combine the businesses of Viacom18 and Star India.

As part of the transaction, the media undertaking of Viacom18 will be merged into Star India Private Limited (“SIPL”) through a court approved scheme of arrangement.

Deeper inroads into the Indian M&E ecosystem

The merger will create a large media juggernaut with 108+ channels (Star India has 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).

Post the merger, the combined entity will command a TV advertisement/TV subscription (excluding distributors/DTH/MSO revenue)/Total TV market share of 40%/44%/42% (as of FY23) respectively. The merged entity is expected to command a digital OTT market share of 34% in CY23, while the TV viewership share in top 10 channels (according to BARC) is 40% as of CY23 , Taurani said.

“The consolidation between RIL and Disney on the TV side could have a negative impact on other linear TV broadcasters, such as Sun TV, Zee, Sony, and others, 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,” he added.

Furthermore, he mentioned that with a large customer base across various genres, including regional genres and urban GEC, the combined entity aims to dominate key markets, potentially leading to market share loss and challenges for other players, including the possibility of smaller channels shutting down.

Synergy prospects

The ad revenue potential from IPL is expected to increase significantly with the merged entity having exclusive rights (TV+Digital) to IPL. This consolidation may result in bundled advertisement revenues, potentially mitigating the higher cost of IPL rights and reducing overall losses, according to Taurani.

Due to IPL rights being split between TV and digital between two different platforms and digital platforms offering IPL free, there was a big dent in the IPL revenues on TV, which could see some respite.

“The merger is anticipated to bring about restructuring in employee costs, reduced production expenses, and lower advertisement costs for TV. These potential cost synergies could contribute to improved margins for the merged entity. On the sports side too, content costs may pare sharply for TVand digital over the medium to long term, given that fewer platforms may bid aggressively for expensive properties,” Taurani said.

In digital, content cost inflation (content cost for web series 3-5x higher than for TV non-fiction shows, per episode) has been sharper due to heavy fragmentation in the OTT market and entry of global giants with deep pockets. With the merger, content cost in digital may see much lower growth, which may improve the unit economics for the OTT business, potentially resulting in 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, Taurani added.


According to Taurani, since the merged entity will be the biggest player in the Indian TV industry, the merger will require CCI (Competition Commission of India) approval which may take some time or lead to shut down of channels in case of a big overlap (more within the GEC genre). Post CCI approval, NCLT (National Company Law Tribunal) approval may take another 8 to 12 months.

“A below par customer experience on the video apps despite a wide variety of content may not augur well in subscribers paying for the same. Global OTT giants like Netflix have a very superior experience to command a premium ARPU,” Taurani said.

Continuance of hefty losses of the merged entity over the near to medium term due to high costs of sports properties (IPL, ICC tournaments and BCCI bilateral rights) could negatively impact valuation prospects for the merged entity, he stated.

JioCinema and Disney Hotstar merger - potential negative for global OTT giants

The merger of JioCinema and Hotstar poses 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), as per Taurani.

Better prospects of profitability in the medium to long term

“The merger may result in improved profitability for the combined entity as there may be a reduction in employee cost, production cost and marketing costs on the TV side and content costs, particularly on the OTT side, which could contribute to a more sustainable path to profitability over the medium to long term,” Taurani said.

Currently, both platforms are facing heavy losses due to high content costs, and JioCinema relies solely on AVOD without significant paid subscriber revenue. With the combination of Hotstar and JioCinema, the merged entity can enhance its subscription revenue by increasing subscription prices and attracting a larger subscriber base.

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-takes-all business, heavily relies on scale. They may also have a pay-based mechanism via JioCinema/Hotstar at a larger scale which will propel healthy subscription revenue over the medium term, he added.

Monopoly in sports properties may lead to higher ad revenues

Taurani highlighted 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. 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.

In CY22, sports adex (TV+Digital) in India stood at Rs 71 billion (according to GroupM) out of which Disney India had a contribution of 80%. The combined entity will have lucrative sports properties like Indian Premier League (both TV and digital), ICC cricket tournaments (both TV and digital), Wimbledon, Pro Kabaddi League, BCCI domestic cricket etc.

Telco customer retention and bundling

Taurani emphasised that telecom companies have used OTT as a value-add to retain/gain subscribers and OTT companies piggyback on telecom plays to scale up their subscriber base – TSPs (telecom service providers) have larger access to a wide variety of customers. With the vast content library of Jio and Disney, the merged entity's content, spanning international movies, web series, sports content and catch-up TV content, could prove advantageous for Jio subscribers and make it a one-stop content hub.

“There might be initiatives such as a Jio Prime offering, providing subscribers access to content at an affordable or even free price through last mile resource and 5G wireless access. The company will have a big advantage in the last mile with Jio having a subscriber base of more than 450 million smartphone users,” he said.

This will hit Bharti Airtel as it has tried to tie up with OTT players in the content ecosystem to offer value-add. Thus, Bharti Airtel may have to invest heavily in its own content or shape partnerships with global OTT giants such as Netflix and Amazon or other OTT platforms to generate clout in the content ecosystem, he added.

Shareholding pattern of the merged entity

Taurani explained that after the merger, the ownership structure of the combined entity will be as follows: Reliance holding 16.34%, Viacom18 owning 46.82%, and Disney possessing 36.84%. Considering Reliance's stakes in Viacom18 (60%) and TV18 (38.4%), it will effectively hold around 46.8%.

TV18, Paramount Global, and Bodhi Tree, each with a 13.3% stake in Viacom18, will own 3.8% (excluding Reliance stake), 6.2%, and 6.2%, respectively, in the merged entity.


The joint entity, including cash infusion, is valued at Rs 704 billion. This valuation comprises Rs 115 billion in cash, Rs 330 billion for Viacom18, and the remaining Rs 260 billion ($ 3.2 billion) is the combined valuation of Star India and Hotstar.

“This valuation of Star India and Hotstar is much lower compared to pre-covid valuation of $14 billion to $15 billion which may be due to loss of IPL digital rights leading to 50% ad revenue decline and 40% subscription revenue decline for Hotstar, TV ad revenue remaining flat over FY19-23 and sports content incurring notable losses due to slower revenue growth,” Taurani said.

“From a valuation standpoint, the impact on TV18 (which owns 13% in Viacom18) is minimal to negative, as the combined entity is expected to generate substantial losses in the near term. Additionally, TV18's stake in the merged entity is valued at Rs 44 billion, implying a hefty premium for its news business at Rs 66 billion (considering TV18's overall market cap of Rs 110 billion),” he added.

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