Forward of the inauguration of the primary Disney leisure park in Anaheim (California) in 1954, the corporate’s illustrious founder Walt Disney is believed to have mentioned “…it began with a mouse”. Many continents away in India, the saying within the media and leisure trade for the previous 20 years may properly be that it began with cricket.
And so did the story of the Reliance-Disney merger. Whereas the blueprint for the mega deal was being drawn up by prime executives at Reliance Industries (RIL) and Uday Shankar, former Disney India boss and a board member at Reliance-controlled Viacom18 Media; caught between two Bobs—Bob Iger and Bob Chapek—and a author’s strike in Hollywood, Mickey Mouse didn’t know the place the rollercoaster journey would finish.
Months earlier than Iger was introduced again from retirement to exchange Chapek as the top of Disney in November 2022, its India operations let go of the digital rights to the Indian Premier League (IPL). Purchased by Viacom18 at a whopping $3 billion, the shock was not on the bid worth however on the free screening of the matches on JioCinema, a streaming service owned by Viacom18.
Shankar knew it was the tip of Disney’s management of Hotstar in India.
“Jio has been disrupting the digital area aggressively over the previous two years with their OTT providing JioCinema. They acquired the FIFA World Cup 2022 rights and streamed it free of charge. They did the identical with the IPL in 2023. Via this undercutting technique, they have been broadening the variety of advertisers and making it tough for the TV rights holders,” says Lloyd Mathias, a Delhi-based enterprise strategist and unbiased director.
As soon as Viacom18 began streaming the IPL free of charge on its platform, Disney+ Hotstar witnessed an exodus of its hard-earned digital subscriber base. Not solely did it damage Disney Star’s valuations, however it additionally skewed the streaming trade in direction of an ad-driven income mannequin. That is on the crux of RIL’s technique to make use of its scale and dominate India’s $28-billion media and leisure (M&E) trade.
The Ambani camp, led by Shankar, had been plotting the acquisition of Disney’s India belongings for a while. Preliminary speculations made method for the deal to be lastly introduced in late February this 12 months. And with that, almost one-third of India’s TV viewing viewers, half of the over-the-top (OTT) streaming viewership and virtually the entire cricket broadcast area will fall into the palms of the Reliance-Disney mix.
The consequence might be an M&E big the likes of which the Indian market has by no means seen earlier than. With an efficient 63% stake within the $8.5 billion price new entity, RIL and its chairman Mukesh Ambani are all set to change into the principle movers of India’s media sector within the coming years. All of the essential segments within the media trade, from content material manufacturing to distribution channels, will witness the overwhelming presence of RIL.
In hindsight, the consolidation playbook employed by the RIL chairman is definitely paying homage to the one utilized by his father Dhirubhai Ambani in constructing RIL’s petrochemicals enterprise.
However whereas his father’s technique of integration was gradual and backwards, Mukesh Ambani determined to shake issues up a bit. Within the fast-changing media trade that sees common churn as a consequence of technological disruptions, Mukesh went about forging new partnerships and buying established gamers in a seemingly haphazard method.
Consequently, the size and breadth of his new empire shouldn’t be simply outlined, and its boundaries the place it meets different companies in his conglomerate are sometimes blurry. However these gray areas additionally maintain the important thing to varied synergies that may pose challenges to all its rivals, even the operations of Large Tech firms (learn Google and Meta) in India.
Opening Up the Digital Recreation
Previously hundred years, two vital shifts are evident within the media trade in India. First is the alternative of regional print media barons with pan-national TV moghuls. The Rupert Murdochs of the world emerged with this shift. The second is the rejigging of advert revenues with Large Tech firms overtaking TV broadcasters.
Now, in India, we see the rise of a brand new mannequin.
By tying collectively telecom, linear TV, digital content material supply platforms, ecommerce and lots of extra consumer-facing segments with its in-house commercial know-how system, Ambani’s RIL can now mix the would possibly of conventional media with the potential of massive knowledge. As soon as once more, Ambani stands the possibility to pioneer new companies in a fast-changing world.
In Could 2014, when RIL introduced its takeover of Network18 Media and Investments, it appeared as if it was yet one more case of a company intervention in media. There have been varied theories on Ambani’s supposed makes an attempt at curbing press freedom and defending his companies from the prying eyes of media. By infusing Rs 4,000 crore into Network18, the billionaire was orchestrating the most important media takeover within the nation’s historical past. He was additionally coming into a line of enterprise that his father had earlier denied being taken with.
However for Ambani, it was only one side of a mega dream he has been harbouring for some time. As he mentioned within the 2014 RIL annual normal assembly, “[the acquisition will] differentiate and strengthen our 4G enterprise on the distinctive intersects of telecom, internet and digital commerce, and the media via a collection of premier digital properties”. For RIL, it was not only a media asset to manage, it was the place to begin of a imaginative and prescient daring sufficient to focus on all of India’s burgeoning inhabitants.
Over the following few years, RIL roiled the telecom sector by waging an aggressive value battle and killing a lot of the competitors. With India’s telecom companies tariff remaining the bottom on the planet, Reliance’s Jio heralded an period of low cost high-speed web and elevated smartphone utilization. Whereas this has had an opposed impression on the return on capital employed (RoCE) by Jio, and its important competitor Bharti Airtel, it additionally set the stage for an unlimited on-line market that RIL now seeks to overcome from a number of fronts.
In addition to increasing its telecom and broadband attain, RIL and its subsidiaries additionally scooped up dominant stakes in quite a lot of merchandise starting from audio streaming platforms to cable distribution. Nevertheless it was RIL’s resolution to extend its management over Viacom18, which was earlier half-owned by world media main ViacomCBS (now Paramount World), that gave the primary clear indication of its mega media ambitions.
Between 2018 and now, RIL and its subsidiary networks elevated their holding in Viacom18 from 50% to virtually 84% in a sequence of transactions. The most recent of those transactions was introduced in March this 12 months when Paramount World determined to promote its 13% fairness stake to RIL. The remaining stake is held by Bodhi Tree Programs, backed by Uday Shankar and media tycoon James Murdoch, with the previous now being named the vice chairperson of the mixed RIL-Disney entity.
So, Shankar returns to the thirty seventh flooring of Urmi Property in lower than 4 years of leaving that constructing because the chairperson of Star and Disney India. In most of those intervening years, he and people on the helm of Viacom18 have been vital to RIL’s plan of constructing Disney’s India operations a cost-effective acquisition. In keeping with trade estimates, Disney Star India’s valuation got here down from $10 billion to roughly $4 billion in a matter of lower than 5 years. In these intervening years, RIL used its JioCinema streaming app, housed below Viacom18, to severely undercut the OTT market. That’s the place Disney’s common streaming app Disney+ Hotstar, the then market chief, fumbled.
Eyes on the Advert Cash
The world over, cord-cutting is a rising phenomenon whereby media shoppers transfer away from conventional cable TV and go for on-line streaming companies. Outstanding OTT companies like Netflix and Amazon Prime largely observe the subscription-video-on-demand (SVoD) mannequin which relies on customers’ willingness to pay a subscription price. Given the distinctive dynamics of the Indian viewers, international OTT operators have to this point discovered it tough to crack this streaming market.
“SVoD companies are significantly cheaper in India than in different elements of the world. The ARPU [average revenue per user] for SVoD in India is $0.5 per 30 days. As compared, it’s $10.7 within the US, $8.5 within the UK and $2.3 in different massive growing markets reminiscent of China,” says Orina Zhao, a senior analyst at Ampere Evaluation, a UK-based knowledge and analytics agency centered on the media sector. In keeping with Zhao, the low ARPUs of SVoDs are reflective of Indian shoppers’ reluctance to pay and the trade’s deal with subscription acquisition over profitability.
In truth, to retain a few of its viewers that was fleeing in direction of JioCinema’s free-to-watch cricket choices, Disney Star additionally gave in to the free-streaming mannequin. Consequently, Disney Star’s sports activities enterprise suffered an working lack of $315 million for the quarter ended December 2023 after streaming the ICC Males’s Cricket World Cup 2023 free of charge.
As for Viacom18, its free streaming mannequin helped its place with respect to advertisers. “Now with Disney and Reliance coming collectively, you immediately have virtually 50% of each digital eyeball between each their platforms. You now have this big that has the privilege of controlling and commanding the promoting charges. In a scattered market, advertisers had the sting. Now, they don’t have any selection however to get to this automobile to have the ability to attain the folks they’ve to achieve,” says an trade supply requesting anonymity.
Pushing up the subscription price is one thing that foreign-owned OTT gamers have struggled with in India. “Netflix has focused India for a few years however has solely managed to build up round 8 million subscriptions by 2023 after consecutively lowering costs and introducing cheaper mobile-only and mobile-plus plans,” factors out Zhao.
Though RIL can now afford to make a push for subscription income, the trade supply, quoted earlier, suspects the conglomerate would chorus from it for some time. “From a Reliance perspective, they’ll wish to kill the competitors first. So, they’ll hold the costs inexpensive or free wherever required till all people else is useless,” he says.
On April 25, JioCinema launched an ad-free viewing expertise beginning at simply Rs 29 per 30 days, persevering with the RIL technique of low cost pricing for its digital companies.
RIL’s resolution to go forward with a digital-first mannequin that’s depending on advert income is smart due to how the advert market has modified. In keeping with Pitch Madison Promoting Report 2024, TV’s share of total advert expenditure fell from 42% in 2020 to 33% in 2023. Whereas that is anticipated to lower additional within the coming years, digital will steadily purchase a lot of the pie, in step with world traits.
Apart from shopper attain and advert income maximisation, the merger may additionally see the mixed entity benefiting on the content material acquisition aspect of the enterprise. Competing OTT gamers like Netflix, Amazon Prime, SonyLIV and ZEE5 would positively really feel the pinch.
“For anybody looking for eyeballs, Jio+Hotstar might be a must-get, which is able to give them vital pricing strain benefit in relation to content material acquisition. Whereas that is good in a method—as content material acquisition costs had gone into the stratosphere with the glut of cash being spent by Prime and Netflix—it may additionally result in a squeeze within the different course which may doubtlessly have an effect on content material high quality,” says Utkarsh Sinha, managing director of Bexley Advisors, a boutique funding financial institution centered on the tech and media sectors.
Given its urge for food to digest short-term working losses, RIL will really feel fairly snug about the place its media empire is headed. With the Disney Star operations in its kitty, the brand new entity boasts of a mixed income of Rs 25,000 crore for 2022–23. Not solely is it far forward of its friends within the linear TV and OTT segments however it’s going to additionally emerge as a key participant within the promoting area. This brings Ambani’s media empire nose to nose with Google and Meta, the 2 California-based know-how firms which get pleasure from a digital duopoly within the world and Indian advert market.
First of its Form
In 2022–23, Google’s gross advert income from its India operations was Rs 28,040 crore whereas that of Meta stood at Rs 18,308 crore. Whereas its proprietary search engine and video big YouTube drives adverts for the previous, it’s the social media community of Fb and Instagram that does the trick for the latter. The seemingly unstoppable rise of the tech duo has been a reason for headache for conventional media world over.
If the disruption of the advert market by Google and Meta over the previous decade or so must be narrowed all the way down to a single issue, it will be ‘high-intent publicity’. Serps and social media networks present advertisers with the power to establish customers who’ve a excessive intention to buy one thing and goal them with particular adverts. This was not attainable in a newspaper or a TV channel as a result of personalised consumer knowledge was not accessible. That is the place conventional media misplaced to Large Tech.
However RIL now stands the possibility to vary that. With knowledge factors on 467 million telecom subscribers, Reliance Jio is already at an enviable place in relation to accessing first-party consumer knowledge. Google Chrome’s ongoing phasing out of third-party cookies makes this knowledge extra worthwhile on the planet of digital advertising and marketing and promoting. The presence of an in-house promoting tech platform—Jio Advertisements—provides extra color to this.
Jio Advertisements, identical to the conglomerate’s telecom operations, is housed below Jio Platforms (JPL), which analysts anticipate to make a public itemizing subsequent 12 months. On its LinkedIn profile, the corporate states that it might assist companies join with a whole bunch of tens of millions of Indian shoppers. The merger with Disney Star India will now give a multifold enhance to its digital shopper attain.
RIL’s personal adtech platform can develop into large energy for the conglomerate, says the trade watcher who has 20 years of expertise within the subject. He says, “They are going to change into just like the promoting giants of the nation as a result of telecom itself offers them a lot knowledge, and now they’ve the media consumption knowledge as properly. So, their whole understanding of the shopper persona may be extraordinarily excessive.”
JPL declined to touch upon the story.
However greater than shopper knowledge, of which Jio had already amassed rather a lot, it’s the content material catalogue from Disney that makes RIL flex its muscle tissue within the advert market. “Almost all telecom firms world wide try to determine methods to get into the promoting area, however they haven’t been capable of do it as a result of though that they had knowledge, they may not use it as a consequence of lack of engaging stock,” says Neeraj Sharma, managing director, development markets media lead at Accenture, a consultancy. Reliance Jio’s stock concern now will get a monumental repair within the type of Disney’s acclaimed properties reminiscent of Marvel Leisure and Pixar Animation Studios, together with Star India’s home content material.
On the subject of sports activities content material particularly, the Reliance-Disney entity can change into a digital monopoly, given its maintain over essentially the most prolific cricket tournaments in addition to different sports activities properties like Indian Tremendous League and Professional Kabaddi League. “I feel that can give them negotiation energy. That is likely to be detrimental to advertisers as a result of it will likely be extra of a take-it-or-leave-it state of affairs with two of the most-watched OTT or sports activities channel conglomerates having come collectively. They’ll dictate phrases, and we must see how that works,” says Prashant Puri, chief govt and co-founder of AdLift, a media-buying company.
Viacom18 didn’t reply to an in depth questionnaire despatched by Outlook Enterprise.
RIL additionally has an intensive bodily and on-line retail presence that gives one other dimension to its endpoint reference to the nation’s buyer base. In keeping with a report from Bernstein, a brokerage, RIL’s retail enterprise is in an excellent place to change into ecommerce market chief as properly. That is essential as a result of in relation to world advert markets, ecommerce giants like Amazon typically find yourself the third most most well-liked platform for advertisers after Google and Meta. In India, even that tendency would solely find yourself in favour of the Ambani conglomerate.
“In keeping with the newest Indus Valley report by Blume Ventures [a venture capital firm], out of Rs 78,320 crore of digital media, 18% goes to retail media. So, at round Rs 14,000 crore, retail media is nearly as massive as Google’s search enterprise and equal to the print enterprise,” says Anil Pandit, govt vp at Publicis Media, a multinational promoting firm.
For advertisers, this mixture of retail and traditional digital media presents a singular possibility of efficiency measurement and attribution. RIL’s presence in various sectors creates synergies slicing throughout enterprise strains, says Mathias, the enterprise strategist. “For making a purchase order on retail, I must have some extent of media stimulation. I may need to see some adverts. That’s the place Reliance will play to its benefit. Jio Advertisements then turns into a pan-Reliance platform that may be stretched throughout Reliance’s shops—each on-line and offline, throughout its media and leisure channels, with telecom [Jio] at its core,” he explains.
You will need to observe right here that RIL’s try at a cross-sectoral play of telecom, media and retail is unprecedented on the world stage. Whereas the likes of American multinational Comcast and Japanese conglomerates Sony and Rakuten have concerned themselves in a number of sectors adjoining to media, RIL’s play throughout retail, telecom and media has no parallels.
“The second you promote on a multi-platform mannequin, particularly in case you are a big advertiser, your return on advert spend begins going up,” says Accenture’s Sharma. From a consumerist perspective, this could additionally result in higher activation charges, i.e. for adverts to transform into gross sales. “Since you see the advert at a number of touchpoints, the conversion ratio additionally turns into higher. This phygital [physical plus digital] side goes to be crucial. This is a chance that pure-play digital platforms would not have,” he provides.
This phygital side additionally differentiates RIL from Large Tech operators like Meta and Google. Notably, each Meta and Google are buyers in JPL and collectively account for 18% of the agency’s fairness. Speaking about this strategic funding, Puri says, “So, you already turned associates with those who can throw a spanner at your head. That a lot is evident.”
RIL’s media behemoth can’t be seen as a simple competitor to Large Tech pursuits. As a substitute, it takes strategic backing from the likes of Meta and Google and adapts it to the Indian market that it is aware of behind its palms. “When you have a look at Jio Advertisements’ interface, it’s just like different platforms like Meta and Google. I feel what they bring about to the desk can be high quality. They’ll work on how finest to get via to the non-English talking, Tier-II, Tier-III circles,” says Puri. Consequently, it creates a novel tech-media entity that may latch on to any new alternatives that the market throws up.
An Ever-Evolving Market
Whereas Jio has embedded itself into most factors within the web carrier-to-content pipeline, there are nonetheless some lacking spots which might be more likely to be on the conglomerate’s radar. Regardless of its huge catalogue of content material, starting from sports activities and normal leisure to marquee properties like Warner Bros Discovery and NBCUniversal, RIL is not like Google and Meta in relation to entry to user-generated content material. In an age the place influencer economic system runs into billions in income, the Large Tech duo is correct on prime of the sport with YouTube and Instagram. Can RIL ever break into this section?
“Creator economic system is an enormous alternative now. Reliance-Disney shouldn’t be there now however when you have eyeballs of 400–600 million folks, all this cash and all this recreation is about hyper personalisation in digital platforms. That’s the place the longer term is,” says the trade supply. He reckons that any entry into user-generated content material would require RIL to work with a national blockchain community that can guarantee knowledge safety and permit individuals to realize some personalised enterprise. “It’s a no brainer that for RIL to get into that area, they must evolve a few of these fashions for the following leap of development,” he provides.
For some years now, Mukesh Ambani has been speaking concerning the organising of a pan-India blockchain community that might be complemented by the conglomerate’s presence in knowledge centres and computing energy.
It doesn’t matter what new avenues RIL opens up within the coming years, the conglomerate has two strengths that the majority of its rivals can’t entry: knowledge sourcing and pricing energy. The previous will be certain that none of its companies have any dearth of shopper knowledge, and the latter offers it the power to undercut any promote it seeks to dominate.
However the focus of content material, distribution and advert market energy in a single entity could have vital spillover results on the broader market dynamics. There have been consolidation efforts at play even earlier than the Reliance-Disney merger was introduced. A merger between Zee Leisure and Culver Max Leisure (Sony) was referred to as off earlier in january this 12 months after a merger deal was signed in December 2021.
Such a consolidatory wave would require foreign-owned SVoD operators like Amazon Prime and Netflix to “consolidate, purchase or ally” with different gamers within the ecosystem to stay at a competing stage as properly. “Media in India goes to be a really vital flagship market. However the one factor is that folks need to take a 10-year view on media to outlive. It’s essential to management the eyeballs at scale on this nation. From a possibility standpoint, it must be a significant share of this 1.4 billion if you wish to make one thing out of it,” says the trade supply quoted earlier.
From the place we stand now, RIL’s media empire appears to have far more than a 10-year view. It’s arming itself on so many fronts that those that worry the monopolisation of the media sector could have a tricky time maintaining with all the probabilities that RIL can conjure within the coming years.
A Display Take a look at for Tomorrow
With the Indian M&E trade largely relying on advert income over subscription costs, RIL’s energy lies in its massive array of advert monestisation instruments. Nonetheless, removed from the Urmi Property places of work of RIL and Viacom18, a small group of bureaucrats and legal professionals in New Delhi may need an issue with this. At its workplace within the capital, the Competitors Fee of India (CCI) is tasked with scrutinising the mega merger deal.
Inside RIL and Viacom18, sources say that there’s palpable nervousness round how generously the competitors watchdog will view their merger ambitions. In spite of everything, when it comes to anti-competitive danger, this deal is sort of not like another merger and acquisition RIL has made within the media sector. “Since this JV [joint venture] will garner excessive shares in a number of media markets—viz. broadcast viewers, broadcast channels, broadcast promoting and on-line VoD—this time spherical, CCI must up its recreation, and convey nuance to their examination,” says Vibodh Parthasarathi, an affiliate professor on the Centre for Tradition, Media and Governance, Jamia Millia Islamia, Delhi.
From RIL’s perspective, its legal professionals must argue that its dominance of sure markets is not going to simply translate into attainable abuse of dominance.
One key side that deserves tight scrutiny is the maintain that Reliance-Disney could have over advert charges, particularly given their close to monopoly in cricket content material. “Within the occasion that they [RIL-Disney] usually are not capable of make out a case of their favour, then there must be some kind of a limitation imposed by the CCI. Like, CCI will say that they’ll revisit this query one or two years into the merger working,” says Abhishek Malhotra, managing accomplice at TMT Legislation Apply.
It will likely be fascinating to see whether or not any of RIL’s rivals within the broadcast, telecom or commercial companies can be keen to argue towards the Ambani-owned conglomerate’s potential anti-competition capabilities within the advert market.
“The abuse of dominance within the promoting market is usually exhausting to reveal since transactions between advertisers, businesses and broadcasters are within the non-public area. Consequently, the JV’s overwhelming dominance within the TV advert market is unlikely to come back to the CCI. Except, in fact, the individuals in these markets discuss concerning the constraints they face—as a few of them have carried out in mild of Google’s overwhelming dominance of the web information market,” Parthasarathi factors out.
The ultimate resolution on the RIL-Disney merger might be a landmark judgement, on condition that the mixed entity could have unparalleled scale. It’s, in a method, Mukesh Ambani’s audition tape for the position of a cross-sectoral digital emperor. Whether or not he will get the position or not will resolve the longer term contours of the Indian mediascape.
Regardless of India’s financial development and the scale of its M&E trade, a number of international behemoths have failed to achieve the subcontinent. The Ambani edge? As Uday Shankar typically says, it takes an Indian to know Indians.
