RIL-Disney combine doing a Jio on the Indian streaming landscape

After having disrupted the telecom services market in India, the Reliance group seems in the mood to disrupt the streaming market. The OTT business seems to be headed for intense competition, declining profitability and margins.

In 2010, Mukesh Ambani re-entered the telecom space by acquiring Infotel Broadband Services Limited, renaming it Reliance Jio Infocomm Limited. This move was a game-changer, setting the stage for a telecom revolution. Before Jio’s entry, the Indian telecom market was highly fragmented. Airtel was the leader, followed by Vodafone and Idea. Jio built the world’s largest 4G and LTE-only network and reached 50 million subscribers in just 83 days after launch. Jio’s entry led to a wave of mergers and bankruptcies, reducing the number of major players from eight to four. Jio emerged as the market leader, fundamentally altering the telecom landscape.

The USD 8.5 billion merger between Reliance and Disney is set to drive consolidation in India’s streaming landscape as smaller, regional-language platforms explore merger and acquisition opportunities to avoid getting crushed by a much larger entity that will potentially dominate the OTT ecosystem. Escalating content costs, securing distribution partnerships, and negotiating competitive advertising rates are only adding to the woes. The crux of the issue is that while these niche players are not profitable, they do not want to exit without a significant valuation.

Looming large is the expectation that once the entertainment powerhouse gets going, it will manage to create an advertising monopoly, thereby upsetting the advertising ecosystem cart.

Subscriber tariffs, as in the case of Jio, are also expected to crumble. The merged entity would have more leverage in negotiating pricing, thereby impacting consumer costs for accessing content.

The combined digital entity could impact Google’s video-on-demand platform, YouTube.

What does the new conglomerate look like
The media undertaking of Viacom18 will be merged into Star India through a court-approved scheme of arrangement. Nita M Ambani would chair the board of the combined entity, and ex-president, The Walt Disney Company Asia Pacific, and ex-chairman, Star India and The Walt Disney Company India. Uday Shankar would serve as vice chairman.

The Reliance group will hold a 63.16 percent stake (16.34% by RIL, 46.82% by Viacom18) and 36.84 percent by Disney. Reliance has announced to invest ₹11,500 crore into the joint venture to grow the OTT business.

The establishment of the joint venture is subject to receiving regulatory, shareholder, and other customary approvals and is expected to be completed by the first quarter of 2025.

The behemoth with over 120 channels in several languages, two leading OTT platforms, and a viewer base of 750 million across the country, would result in a market share in OTT space of ~31 percent outstripping competitors like Zee 5 (~10%), and Sony Liv (4%) and Netflix. The combined FY23 revenue is estimated at Rs 25,000 crore. The OTT segment is currently growing at a rate of 28 percent.

Viacom18 has 40 television channels, including Comedy Central, Nickelodeon and MTV. Disney Star has about 80 channels and the brand is known for Hindi family dramas as well as Hollywood movies. Both companies’ channels span general entertainment, sports, children’s TV, documentaries, and lifestyle programs. They also cover several regional language programs. Viacom18 has the TV rights for domestic and international cricket matches run by the Board of Control for Cricket in India. Disney has TV rights for the popular Indian Premier League (IPL) until 2027.

Reliance’s JioCinema and Disney’s Hotstar would have a combined library of 200,000 plus hours of content that includes television dramas, movies, and sport events. Hotstar was the second-most downloaded video streaming app in India in 2022 after MX Player, according to a report by the Federation of Indian Chambers of Commerce and Industry and EY. Disney’s streaming content includes global blockbusters, movies from the Marvel universe as well as National Geographic documentaries. JioCinema last year struck deals with The Pokemon Company to stream content and signed a deal with Warner Bros to bring more Hollywood and international content on its platform.

SPNI-ZEEL’s loss is RIL-Disney’s gain!