Can Reliance-Disney deal break status quo on Indian adex to GDP ratio?

New Delhi: The proposed Disney Star-Viacom18 merger securing CCI approval in time is tipped to be a major turning point for the Indian media and entertainment industry.

While the industry veterans keeping a close eye on the development are perplexed with the deal-making prowess of Reliance at speed and scale, the discussion has moved to the impending impact of the merger on the industry often termed as the sunrise sector.

Barring a handful of top leadership at both entities, no one really knows what went behind CCI approval but there was more than enough guesswork on the conditions put by the competition watchdog for its nod.

Shutting down a few sports channels and regional channels in the Kannada and Marathi markets is one of those conjectures. 

A two-year freeze on ad rates came as the weirdest conjecture leaving the industry wondering why CCI was interested in safeguarding advertisers’ interests. Besides, there is a certain cap on the bundling of inventories.

The competition watchdog is also learned to have suggested merging JioCinema and Hotstar in order to create a level playing field.

Both Reliance and Disney Star turned down this suggestion, sources told BestMediaInfo.com. 

“There are possibilities that JioCinema will host all sports content and let Hotstar compete with the likes of Netflix and Prime Video with entertainment content,” said one of the sources.

All eyes on the advertising market

Indian adex to GDP ratio continues to be among the lowest at 0.3% over the past decade and the mega consolidation of two of the largest media conglomerates is set to challenge the status quo.

If Reliance proves its prowess and succeeds in its endeavour to price its content in the tunes of investment, India would have a huge opportunity to break this status quo on the adex to GDP ratio.

Commenting on the reported ad freeze clause, an industry veteran on the condition of anonymity said, “We have no clarity if it implies there would not be a hike in IPL ad rates in 2025 and 2026 or if the Competition Commission has put a cap on the percentage of hike. While the advertising rate hike is the only option for the merged entity to justify its investment in high-ticket cricketing tournaments, it will prove to be an enabler for the growth of the broadcast industry. Even the competitors of the merged entity would reap the tangible benefits in the long run. Such clause would help advertisers instead.”

Sports rights reset

The consolidation of broadcast rights of major cricketing tournaments coming under the CCI scanner was much talked about in the last few days.

As put aptly by both entities, the rights are open for acquisition through competitive auctions and if anyone is set to lose big it is BCCI.

Media observers suggest that a ‘big’ reset in the pricing of media rights for major tournaments including IPL is on the cards as the remaining competition is less likely to bid beyond business sense.

“Which single entity would spend Rs 50,000 crore on IPL? It would not be surprising if the pricing of IPL media rights comes down to 50 per cent of the last auction,” said an industry veteran.

Reliance’s game plan

Under the leadership of Bodhi Tree Systems co-founder and Viacom18 director Udhay Shankar, Reliance is ramping up its digital game plan eyeing to make it a force to reckon with. 

This was reflected in the speech delivered by Reliance Industries chairman at the Annual General Meeting (AGM) on Thursday.

Ambani indicated that digital streaming would become the key growth driver for his media and entertainment business, primarily in the wake of the Disney Star-Viacom18 merger.

“The merger marks the beginning of a new era in India's entertainment industry. We are combining content creation with a digital-first approach to deliver unparalleled content at affordable prices,” Ambani stated.