Reliance-Disney merger: The disruption beyond metrics

New Delhi: Tuesday is expected to mark a turning point in the history of Indian media and industry with the completion of the merger of the media businesses of Reliance Industries with the India business of The Walt Disney Co. (TWDC) in a record one-year period.

While the murmurs began last year in October, a non-binding agreement was signed in December. The deal was formally announced earlier this year on February 28.

To be precise, it took exactly 6 months for both parties to successfully convince the competition watchdog and secure a green signal from CCI on August 28, albeit with a few riders.

Nine months after the announcement of the deal, the new joint entity, likely to be called ‘Jio Star,’ is not only set to be born but will also shake up the entire media landscape.

On one hand, the industry veterans term this mega-merger a masterstroke by Mukesh Ambani-led Reliance Industries (RIL) which will prove to be a game-changer for the Indian M&E landscape.

“You cannot ignore the deal-making prowess of RIL. Not only it completed the merger in a record time but it also reduced Star India's valuation to one-third. RIL entered the media business officially with the takeover of Network18 from Raghav Bahl just a decade ago. Who knows what the next decade will look like,” said one of the industry veterans.

Seven years after Rupert Murdoch sold Star India to The Walt Disney Company at a valuation of USD 14 billion, Disney sold the same India business to Mukesh Ambani’s Reliance Industries Limited at a valuation of USD 3.5 billion.

After Disney expressed its intent to exit India's business, media reports said it was seeking a valuation of USD 10 billion. However, sources told BestMediaInfo.com that it was USD 5.6 billion.

“Reliance’s aggressive bidding for IPL was the real turning point. It intended to buy entire IPL media rights but Disney Star did not blink over TV rights and coughed up around Rs 25,000 crore, a price that proved to be an unsustainable benchmark for a conservative player like Disney. What Reliance missed in the IPL auction, it got via acquisition or merger of the whole Disney Star India and that too at an almost similar price to what it could have paid for the television rights of IPL,” the media veteran added.

However, another media veteran who also did not want to be named saw the merger as the only way forward for RIL to ensure success in the media business.

“Reliance is known for playing at a scale which Network18 and Viacom18 failed to deliver in a decade. Even as Ambanis shifted focus towards the communication business and achieved success in their telecom endeavour, leading the media landscape remained an unfulfilled ambition. They found a reliable partner in former Disney executive Uday Shankar to achieve that goal,” the media veteran said.

On the other hand, a few media observers BestMediaInfo.com spoke to were apprehensive about how this merger will disrupt the Indian M&E sector in the long run.

“What both parties assured CCI to secure the deal is there in the public domain. But there are unsaid rules of the advertising ecosystem. Today, almost all the broadcasters are sceptical about their businesses in the long run,” said a former CEO of a large broadcasting network.

Explaining how the advertising market works for entities at a large scale, the former CEO said, “If you have a large network with a substantial viewership share, very few advertisers will afford to miss you. If you become larger, you can influence the advertiser to remain within your network.”

When asked how it will pan out for the entire industry in the long run, the former CEO added, “Take IPL for example. If you combine the reach promised by both parties, it adds to over one billion. That’s the kind of scale the joint entity will have. If it can build on this scale, it can convince advertisers that looking at other media opportunities will either be a waste or will only provide incremental reach and frequencies. That’s where the fear of other players is coming from. And global tech giants such as YouTube and Meta would also face the heat.”