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Without doubt, the blockbuster $8.5-billion Reliance-Disney deal has shaken the media and entertainment industry (M&E) in more ways than one. It's not only the eye-popping size of the deal, but also the impact of it on competitors and other stakeholders such as advertisers and integrated telecom service providers, which will be enormous.
However, markets had an inkling of the mega deal a few months ago when media reports suggested that the two giants were in talks. In fact, Disney’s Star India lost big time as home-grown Reliance’s Jio bagged the digital rights to the Indian Premium League. In addition, Disney Hotstar was facing growth challenges in India’s entertainment market and was struggling to salvage its India dreams.
For the Ambani-owned Reliance group, size does matter. Time and again and across businesses from energy to telecom to entertainment, it has aimed at the numero uno leadership position. The Reliance group will own majority equity stake through various group companies, offering viewers over 100 channels and two live streaming platforms (read here for details). In revenue terms, the JV will have Rs 25,000 crore of revenue, with others such as Zee Entertainment, Times, Sony and Sun TV way below in comparison, with revenues ranging from Rs 7,000-8,000 crore.
In viewership, the JV with over 750 million viewers across India, will also expand its base in other countries to cater to the Indian diaspora. Certainly, challenging times for Netflix and Amazon!
Indeed, such a consolidation between two giants is expected to adversely impact or be a moment of reckoning for other entertainment platforms and companies such as Sun TV and Zee Entertainment. Some such as Sun have a proven stronghold in the southern market although the need to keep its market share and invest in comparable content development may entail higher costs. So far, some regional players such as Sun have been able to focus on profitability, along with decent growth in revenue.
But note, this RIL-Disney deal also comes at a time when the world is demanding quality content on the digital medium. The House of Mouse (Disney’s) technological expertise on OTT platforms combined with Reliance’s money muscle are expected to enhance the user experience on Jio Cinema.
Another pertinent point is that while it opens up huge prospects for advertisers, the new entity, analysts feel, could have better bargaining power.
Will the leader take it all? Only time will tell. The process of regulatory approvals is anyway a long haul of several months. For now, analysts are busy poring over the deal contours, with some forecasting accretion to Reliance Industries' sum of parts earnings and valuation.
Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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