Media empire takes shape, with Reliance-Disney at helm

The joint venture formed by merging the businesses of Viacom18 and Star India will have about 100 channels as well as rights to major sports events, including IPL, (Reuters)
The joint venture formed by merging the businesses of Viacom18 and Star India will have about 100 channels as well as rights to major sports events, including IPL, (Reuters)

Summary

Reliance will control the JV with a majority stake. While Viacom 18, majority-owned by RIL, will hold 46.82% in the JV, RIL on its own will hold 16.42%, while Disney will own 36.84%.

MUMBAI , NEW DELHI : Reliance Industries Ltd and The Walt Disney Co. have joined forces to create a media behemoth with enough muscle to take on streaming giants Netflix and Amazon in one of the world’s fastest-expanding media and entertainment markets.

A new joint venture will combine the businesses of Reliance’s associate company Viacom18 Media Pvt. Ltd and Disney’s Star India. RIL will also invest 11,500 crore into the JV, valuing the combined entity at 70,352 crore on a post-money basis, excluding synergies.

Mukesh Ambani’s Reliance will control the JV with a majority stake. While Viacom 18, majority-owned by RIL, will hold 46.82% in the JV, RIL on its own will hold 16.42%, while Disney will own 36.84%. Viacom 18 is owned by RIL with 74%, and Paramount Pictures and Bodhi Tree Systems with 13% each. Bodhi Tree is a joint venture between former top Disney executive Uday Shankar and James Murdoch’s Lupa Systems.

Nita M. Ambani will head the Reliance-Disney JV as its chairperson, while Shankar will be vice-chairperson.

The JV will bring together media assets across entertainment (TV channels such as Colors, Star Plus, Star Gold) and sports (Star Sports and Sports18), besides content streaming on over-the-top video platforms JioCinema and Hotstar, reaching more than 750 million viewers across India. It will also get exclusive rights to distribute Disney films and productions in India, with a licence to use more than 30,000 Disney content assets.

 

The combined Reliance-Disney streaming entity will also be three-four times bigger in terms of total hours of programming than the likes of Netflix, and may even look at acquiring smaller, niche language-specific entities that are struggling to survive, according to industry experts.

“This is a landmark agreement that heralds a new era in the Indian entertainment industry," Mukesh Ambani, chairman and managing director of Reliance Industries, said in a statement.

Disney’s assets are valued at 25,806 crore, a significant markdown due to potential losses from missing out cricket rights, said a person with knowledge of the deal terms. Viacom18, including JioCinema, is valued at 33,046 crore in the deal.

Paramount, which owns a 13% stake in Viacom18, is likely to exit post the merger, this person said.

The transaction is subject to regulatory, shareholder and other customary approvals and is expected to be completed in the final quarter of this year or in early 2025.

Disney may also contribute certain additional media assets to the JV, subject to regulatory and third-party approvals, the companies said.

“Reliance has a deep understanding of the Indian market and consumer, and together we will create one of the country’s leading media companies…," said Bob Iger, CEO of The Walt Disney Co.

To be sure, the combined might of Reliance and Disney could set competition up at a disadvantage as far as bargaining power for TV ad rates goes, given that the new entity would have the biggest pie of the market at 40-45%.

“The merged entity will have approximately 100 TV channels, of which 70 will be Disney and the rest Viacom. The combined resources and content libraries of Disney and Reliance could impact traditional TV networks, especially if the deal leads to shifts in advertising revenue and viewer preferences," Deleise Ross, associate vice-president at media agency Mudra Max, had said in a recentMintinterview.

“Smaller media companies may find it challenging to compete with the scale and resources of a merged Disney-Reliance entity. They might need to explore strategic partnerships or focus on niche markets to maintain their positions," she had said.

The deal will give Reliance access to Disney’s massive libraries across the English language, including its Marvel catalogue. Reliance already has content from HBO, and is bullish on regional languages, including the four South Indian languages, as well as Marathi and Bengali.

Sports will continue to be a priority for the entity, leaving little for others to do on that front.

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