Screen Wars. The making of a media goliath

In June 2022, when Mukesh Ambani-backed Viacom 18 outbid Disney Star to bag the digital rights to stream Indian Premier League, everyone knew that India’s broadcasting sector was set for a major shake up. Until then, Disney Star was the undisputed leader in this space with others like Sony and Zee trying to catch up. The ₹23,758 crore bid by Viacom 18 catapulted its streaming app Jio Cinema into the living rooms of millions of viewers. Just like he disrupted the telecom market with free data plans, Ambani broke Disney Star’s subscription-based model by streaming IPL matches for free. As a result, Star India’s consolidated net profit for FY23 dropped 31 per cent year-on-year to ₹1,272 crore.

Around the same time Ambani initiated talks with former Walt Disney and Star India boss Uday Shankar and James Murdoch’s investment vehicle, Lupa Systems. The fact he was in talks with Rupert Murdoch’s son and Shankar, who had a formidable reputation, showed clear intent on Ambani’s part to take his media business to the same soaring heights achieved by his telecom business.

What has followed is a two year long play, in which Reliance blew its competition in its signature fashion using its deep pockets, ultimately culminating in India’s largest media merger creating a $8.5 billion media behemoth, the Disney-Reliance joint venture.

Size and Scale

The joint entity will command 50 per cent of India’s streaming market, reaching 243.5 million internet users in India. The platform has ICC cricket broadcast and digital rights till 2027, digital rights for IPL till 2027 and media rights for BCCI domestic and international matches till 2027. It also owns rights for EPL and the Olympics. “The Jio Cinema app, Viacom18’s 40 linear TV channels along with Disney’s 70 linear TV channels make it the most prolific player in India’s media space,” said analysts at broking firm Jefferies.

The resultant JV will be a dominant player in the ecosystem, with an estimated 40 per cent viewership share in linear TV, and over 50 per cent share in digital. RIL, in its announcement, stated that the JV would reach 750 million viewers across India. This will allow the combined entity to consolidate the ad inventory across all cricketing events and monetise better with lower competition. It is also looking at better monetisation via customised ads on its Fibre To The Home + Fixed Wireless Access broadband platform wherein it is bundling content and internet access at a Rs 100/month premium to what competitors are charging for internet access only.

The merger, which is set to complete in the next 12 months, has made the operating environment even more difficult for the number 3 and number 4 players, namely Zee (16-17 per cent viewership share) and Sony (8-10 per cent share). To counter the Disney-Reliance effect, Zee and Sony tried to merge their businesses but failed. “Both these firms are established players in their own rights, but will need a partner of some sort. Sony which has committed to long-term growth in India will need to find a strategic partner, either amongst smaller streaming firms, or regional linear channels. Zee will need a financial partner to run day to day operations as well as content production,” said Karan Taurani, Senior VP- Research Analyst, Elara Capital.

A big concern for financially weak players such as Zee is that production costs continue to rise. At Zee, which was once a powerhouse of original content, targeted at the Indian masses, the management is scaling down expectations on titles in the next fiscal year. Zee’s Managing Director Punit Goenka recently said he was adopting a frugal approach. This includes cutting spends, tightening of manpower, reducing the number of new content properties, and a complete re-evaluation of its sports portfolio.

Newer rivals

Global streaming firms such as Netflix and Amazon boast deeper purses, and could be the bigger threat for the Star-Disney combine. In a recent interview with businessline, Netflix content head Monika Shergill said the streaming company has learnt its lessons in the Indian market and is ready with quality content aimed at reaching a wider audience. India has emerged as the fastest growing market for Netflix with a 30 per cent growth rate in view hours, 25 per cent revenue growth year-on-year, and the highest paid net additions for any country globally.

Analysts reckon that Reliance-Disney cannot write off competition just yet.

“At $12 billion, India’s video market showcases scale and remains one-of the fastest growing in the world. Thus, despite the Zee-Sony merger falling through, both companies are committed to investing and charting their own paths for expanding operations. Netflix and Prime Video have upped their ante on content investments, especially as their local originals are increasingly finding an audience outside India,” said Mihir Shah, Vice President, Media Partners Asia

In addition to the size and scale of the merged entity, another factor that bodes well for the Disney-Reliance combine is that it has roped in Uday Shankar as the vice chairman of the joint venture. Shankar who is credited for Disney’s rise in the Indian media market, is now commandeering an even bigger ship. He has a clear vision. “We still have a lot of work to do on technology personalisation, to decentralise the content funnel and change the revenue models,” he said in a media interview.

Ad and content changes

A Reliance-Disney merged entity becomes attractive for advertisers, says Ajimon Francis, Managing Director at Brand Finance India. He says, “Expect advertising revenues of Reliance to grow by threefold for IPL. In the last edition of the league, JioCinema pulled regional advertisers that wanted granular advertising experience provided by JioCinema’s strong digital presence. Disney continued to commandeer the national advertisers such as SBI because they prefer a stronger linear presence. Disney and Reliance joining forces makes them the go to destination for advertisers.”

Francis feels ad rates may not go up for non cricket content. However, others note that ad rates could go up by 20-24 per cent after the merger.

A report by UBS, post the merger, predicted that ad rates would rise by 20-25 per cent across the board. “Bargaining power of the broadcasters (now fewer and larger) would increase at the cost of the advertisers. There would also likely be some rationalisation in content costs as well, leading to industry-level margin improvement,” analysts at UBS said.

The good news for consumers of digital content is that they can expect lower prices, but reduced number of content titles as well, with preference given to productions of mass appeal.

“We are at a time when production is becoming more expensive, but consumer appetite for entertainment is not reducing. This has lent itself to another scenario which is more advertising-bundled. I see a growth in the AVOD space, which will mean that streaming firms will make such calls while commissioning content. Perhaps keeping less budget for SVOD (subscription video on demand) or subscriber-oriented premium shows and using most of their budget to push out high-volume advertiser-friendly shows that are cheaper to produce,” says Saeed Akhtar, Founder of IdeaRack, a film production company in Mumbai.

According to Media Partner’s Shah, the competitive intensity will increase, but more importantly, as India’s pay-TV market transitions to connected TV, all players will have to recalibrate their content strategy. “Content creators serving these platforms will need to move away from edgy concepts and explore new formats that are more conducive to advertising. For instance, formats such as tele novela shows with 60-70 episodes offer versatility for streaming online as well as creating new programme bands for television channels,” he says.

Get set for a change in your screen experience.

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