Disney CEO Bob Iger says India merger deal with Reliance is ‘best of both worlds’

RIL and its group companies will own a controlling stake in the entity and invest Rs 11,500 crore ($1.4 billion) for its growth strategy. The merged entity will have a valuation of Rs 70,352 crore ($8.5 billion) on a post-money basis.

Once the deal is completed, two of India’s largest streaming platforms - Disney+ Hotstar, which currently leads the country’s subscription-based video streaming market with 38.3 million subscribers, and JioCinema, a prominent player in the ad-supported video streaming market - will have a single owner.

Read: Reliance’s video streaming ambitions to get a boost with Hotstar-JioCinema combine

The combined entity will capture about 85 percent of India’s video-streaming audience, according to analysts at brokerage firm Bernstein.

Iger said the transaction would allow the US entertainment giant to own a part of a bigger media company in India, one of the world’s fastest-growing media and entertainment markets.

“It’s kind of the best of both worlds. We stay in the market at a significant level. We have a very good partner in Reliance, and we get to have a chance of growing a business and lowering the risk of doing so,” he said.

Over the past year, Walt Disney-owned streaming platform Disney+ Hotstar has struggled to stop the exodus of paid subscribers after losing access to key content offerings that were instrumental in driving its initial growth in India: IPL streaming rights and premium HBO content, which Viacom18’s JioCinema now holds the rights to.

After four straight quarters of subscriber decline that saw the streaming service’s subscriber base drop from 61.3 million in October 2022 to 37.6 million in October 2023, Disney+ Hotstar added 0.7 million paid subscribers in the latest reported quarter ended December 30, 2023, benefiting from increased usage during the ICC Cricket World Cup 2023.

Push for profitability

These developments came amid the Walt Disney chief’s push to make the firm’s combined streaming businesses profitable by the end of the financial year 2024.

Iger, who returned to Walt Disney in November 2022, said he discovered right away that it was a “company in need of a lot of fixing”. The company’s streaming unit was chasing global subscribers over profits, thereby necessitating a robust path to profitability, he said.

Last year, Walt Disney restructured its business to put creativity at the centre of the company and announced a range of cost-cutting measures to achieve roughly $7.5 billion in cost reductions by the end of fiscal 2024. Disney follows an October to September financial year.

Iger said the company is now developing technology that can cut customer acquisition and retention costs on its streaming platforms.

“When we launched Disney+ in 2019, our goal was to have robust video experiences at scale, and we needed that because we signed up 10 million subs in the first 24 hours, and we got to 100 million very fast. What we didn’t have was the technology that we needed to lower customer acquisition and retention costs, to increase engagement, and grow our margins by reducing marketing expenses,” he said.

Iger said they need to improve their technology capabilities to reach the same level as rival Netflix, which he called the “gold standard”.

“One of the reasons why their margins are so much more significant than ours is because they have that technology. So, our marketing expenses are significantly higher, and our churn rates are higher than they need to be,” he said.

Disney’s Epic Universe

In February 2024, Disney announced plans to invest $1.5 billion in Fortnite maker Epic Games to build a new games and entertainment universe.

“When I looked into the future, I realized we’re under-represented in games. We’ve had a decent licensing business...I thought we could do more,” Iger said.

As part of this agreement, Epic Games will build a Disney universe that will enable consumers to engage with all of Disney’s brands, such as Marvel, Pixar, and Star Wars, in a few years.

This universe will comprise games created by Epic Games based on Disney’s intellectual properties, games created by Disney itself, short and long-form video content, and consumers’ ability to buy digital goods.

Iger said this universe will live side-by-side with Fortnite, the popular game by Epic Games that already features several integrations to Disney’s content. However, there will be an interoperability between them. “If you buy digital goods in one, you can put it into the other and so on,” he said.

“This will be a rich, fully immersive, engaging experience for consumers and I think not only does it speak to how young consumers are spending their time, but it speaks to basically how much more we can leverage our IP in a completely different medium,” Iger said.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.