The merger of Reliance Industries and Disney's TV and streaming assets in India is expected to shake up the entire industry, creating a whopping $8.5 billion in assets and giving some an edge over competitors. There is even a possibility that many small and medium-sized enterprises will be forced out of business. analysts say.
Reliance, run by India's richest man Mukesh Ambani, is expanding beyond its traditional business after Disney missed out on valuable cricket rights and lost millions of subscribers to its streaming platform. The deal between the two companies has been in the works for a long time. Expand the oil business into areas such as communications and entertainment.
The deal, announced last week, could be game-changing for the industry and could force other companies to consolidate to have a chance of competing with the alliance's new powerhouse, said a strategy consultant. Former manager Balnik Maitra said: Partner at consulting firm Arthur D. Little and McKinsey & Co.
“The newly combined organization will be a digital behemoth that will drive streaming in India forward,” Maitra said.
“No matter how small [streaming] There will be significant consolidation, as players will either die outright or be acquired by someone else. ”
The joint venture between Disney and Reliance, which is expected to close by the end of this year or early next year, subject to regulatory approvals, will give both companies a competitive advantage with “strong synergies when purchasing content and selling advertising.” Inventory,” he says.
Disney's Hotstar streaming platform has 38 million paying users. Reliance has not disclosed the numbers for its streaming platform JioCinema.
The deal is “a collection of all the content that's worth paying for, especially today when all the other players are struggling individually, making it difficult for other players to top OTT. ,” said Utkarsh Sinha, Managing Director. Bexley Advisors is a small investment bank.
“We're going to see a strong wave of consolidation in the pipeline that will continue for the next two to three years,” he said.
“We can confidently predict that there will be more mergers in this space as smaller companies are swallowed up by new large consolidators,” Sinha said.
Reliance was already investing aggressively to secure content to enhance its presence in the market. In 2022, the company surpassed Disney to acquire digital streaming rights to the glamorous and hugely popular cricket tournament, the Indian Premier League, from 2023 to 2027 for 237.58 billion rupees ($2.87 billion). did. Streaming platform Disney Hotstar previously held the rights to stream the match.
Last May, in a major coup, JioCinema took over the rights to HBO's content in India. These include hit series such as: House of the Dragon, The Last of Us, Succession and game of thrones.
Previously, HBO content was shown on Disney Hotstar until Disney decided to terminate the contract on March 31st.
“but, [JioCinema] The company still lacks a large content library and has therefore not been able to build a sizable subscriber base,” said Pulkit Chawla, research analyst at MK Global Financial Services.
“Disney Hotstar, on the other hand, has been the market leader in terms of the number of paid members, but it has been unable to acquire some leading properties and has seen a sharp decline in recent quarters.
“This merger will also enable JioCinema to leverage the superior technology of Disney Hotstar.”
Reliance, which will lead the combined company, said it plans to inject $1.4 billion into the combined company. Disney owns 37% and Reliance and its affiliates own 63%.
The streaming market in India, the world's most populous country with more than 1.4 billion people, is rapidly expanding as incomes rise and more people have access to the internet.
India's streaming and video-on-demand sector, also known as the over-the-top (OTT) market, will more than double from $2.35 billion in 2022 to $5.3 billion by 2027, according to a Global report. It is predicted to grow to US$. Consulting firm Deloitte.
According to the report's data, India has over 50 OTT companies, including Netflix and Amazon Prime.
The two main domestic competitors are Zee Entertainment and Sony. There were also plans to merge Sony's India operations with Gee, which would have created a $10 billion media giant, but Sony has now officially pulled out of the deal.
“Gee, which has already been struggling since its merger with Sony fell through, should be adversely affected by the creation of a larger entity,” Chawla said.
“Both content creators and advertisers are likely to be attracted to Reliance Disney.”
“Now that Sony is off the block, it wouldn't be surprising if Reliance throws its hat in the ring as well as Zee's suitors,” Sinha says.
But when it comes to monetization and profitability, there are some common industry challenges that Reliance and Disney's ventures will also face.
Maitra said this includes investing in content to retain viewers and how to monetize this.
Similarly, “a big challenge is managing the return on investment for the rights to an expensive sport like cricket in India,” he says.
“The prices for these rights are rising, and advertising revenues are guaranteed to keep pace with price increases.”
“The third challenge in India is to get Indian consumers to pay for OTT content so that the OTT business has viable unit economics. It is a problem that no one has yet solved in India. I think.”
But industry consolidation could help this process, he says, because it means there are fewer platforms competing for viewers.
Maitra does not believe that entering international markets is a priority for Reliance, but said, “This partnership will allow Reliance to expand its existing content and sports to diaspora audiences around the world, especially in the US.” “This will give us the possibility to monetize the rights.”
Updated: March 4, 2024, 4:00 AM