Reliance-Disney Deal: Intense Competition for the Indian OTT Market?
The Reliance-Disney deal could beckon a new wave of competition in the Indian OTT market. Mukesh Ambani-led company Reliance is nearing completion on a deal to buy Disney's Indian OTT streaming operations. This is a bold move by Reliance Industries in the Digital Entertainment market, as it will acquire a majority position in the Disney Hotstar’s Indian streaming services.
This also commands a second change in ownership of a popular franchise in four years since its arrival to India. Rupert Murdoch was the first to experience it and now it is Bob Iger’s turn.
Disney’s Struggling Business in India
Disney Star has struggled with a decline in subscribers, but the media company hasn't given up. They have persisted in making investments in the company and have looked into a number of alternatives, such as a possible outright sale or joint ventures. Disney Star has struggled with a decline in subscribers, but the media company hasn't given up. They have persisted in making investments in the company and have looked into a number of alternatives, such as a possible outright sale or joint ventures.
Change in Ownership
2019 saw Murdoch as the seller and Iger as the buyer. Disney acquired the Star India company as part of a $71 billion worldwide acquisition of the entertainment assets owned by 21st Century Fox Inc. Even that particular transaction involved India heavily.
For a while, Hotstar ruled the Indian video streaming market. Nonetheless, Viacom18, supported by Reliance, has become more well-known, especially after paying a substantial $3 billion over five years to acquire the rights to webcast IPL cricket events. Disney also spent the same sum to have the IPL matches televised on TV.
Rivalry from Facebook
When an upstart, Facebook Inc., showed up at an Indian cricket league auction in 2017 with a $600 million bid for streaming rights, Murdoch got a warning shot. Star settled the issue by agreeing to pay $2.55 billion for five years of television and web service, but it was becoming clear that sports programming, the pinnacle of appointment viewing, would soon be available online. Three months later, the media tycoon made an agreement with Iger.
This time Mukesh Ambani is the opponent, not Mark Zuckerberg.
Reliance Enters Entertainment Industry
Reliance has a track record of regularly assessing properties for possible purchases. This action is in line with the company's plan to increase its market share in the digital and entertainment sectors in addition to its current business endeavors in the oil, telecom, and other sectors.
Sparking a Digital Revolution in the Indian Telecom Sector
With free phone calls and inexpensive internet, the Indian tycoon's new 4G telco was just beginning to upend the wireless market in 2017. It is clear that Reliance has a history of upending established businesses. With their Jio network, which provides inexpensive data and phone services, they have revolutionized the Indian telecom industry and sparked a digital revolution. Their larger plan to profit from India's expanding digital economy includes this foray into the OTT market.
The nation's digital economy has grown rapidly, but it has also essentially contracted into a duopoly. With the way things have changed, legacy TV is not going to last very long.
Ashish Chandra, CEO & MD, Bharti Airtel Sri Lanka, “The telecommunication industry is one of the pioneers of digitizing manual processes. Right from onboarding customers to providing lifetime services, everything is paperless today. A few clicks in the app save a lot of time and hassles for customers. It enables customers to access telecom services whenever and wherever they want while also improving the turnaround time significantly”.
Emergence of Duopoly
Hotstar's user base has decreased as a result of Reliance's strong entry into the streaming space. Hotstar's user base has been impacted by the approximately 20 million people who have switched to JioCinema to watch IPL matches. In an effort to buck the trend, Hotstar is presently offering free mobile streaming of the ongoing cricket World Cup in an effort to win back users. During a cricket match, it recently shattered the record for the most concurrent watchers of on-demand videos globally with 35 million viewers. The concurrent viewership topped 43 million during an India vs. New Zealand game, breaking its own record.
Disney Decided to Sell its Indian Operations
For this reason, in his second term as CEO of Disney, Iger is selling off the company. Star India, or Disney Star as it is currently known, is valued by him at $10 billion. According to Bloomberg News, Ambani believes the assets are worth between $7 billion and $8 billion. If the deal goes through, it will be proof of Iger's pledge to bring the juggernaut closer to its main products, which include ESPN, Hulu and Disney+, and theme parks.
The upcoming Reliance Industries acquisition of Disney Star is expected to significantly alter the landscape of the Indian OTT market. They could pose a threat to the major players due to their huge resources and calculated strategy. This action supports Mukesh Ambani's goal of creating a digital India and might strengthen Reliance's standing as a major participant in the nation's changing media and entertainment sector.
Reliance Emerging as a Gamechanger in the Indian OTT Market
Ambani will probably hold a larger portion of the money that consumers and advertising spend. This is due to the fact that a partnership with Iger will contribute to the legitimacy of Ambani's three proposals: digital, retail, and consumer financing. The momentum has shifted towards Ambani's JioCinema, even if the Disney+ Hotstar platform in India is now riding the wave of record World Cup Cricket viewership. Brands hoping to reach a national audience will not be successful unless they work with Ambani, both in distribution and media.
Jio and other Indian carriers are also pleading with the telecom regulator to allow them to impose a network usage fee on big internet traffic generators like Netflix Inc. Ambani's hegemony over numerous interconnected markets will disfavor pure-play content providers due to that contentious charge.
Two Networks Could Dominate the Market
If the merger closes, industry insiders estimate that the Reliance-owned company will become the biggest in the Indian broadcasting sector. At the moment, Reliance's broadcast division Viacom18 controls 38 TV stations in eight languages, a digital streaming platform (Jio Cinema), and Viacom18 Studios. In contrast, Disney Star owns over 70 TV channels in eight languages, a streaming platform (Disney+ Hotstar), and a film studio.
Due to the ongoing merger of Zee and Sony as well as the recent Disney-Reliance agreement, some predict that there will only be two major networks operating in India instead of four.
While this is going on, experts note that while the Reliance-Disney agreement seems like a good fit, there will be overlap between the two networks in specific geographies and genres, which could lead to the cancellation of particular channels or brands.