Over the last few quarters, Reliance had dealt blow after blow to Disney Hotstar, systematically taking away its prized streaming properties. It appears that the two sides are now preparing to join forces — and not just for the streaming business.
Reliance and Walt Disney Company are finalizing details of a non-binding term sheet to merge their India operations, ET reports. Under the terms of the agreement, a newly-formed unit of Reliance’s Viacom18 will absorb Disney’s Star India through a share swap deal. Reliance is likely to pay cash for a 51% stake in the proposed Viacom18 unit, while Disney will own 49%. The unit’s board is expected to have equal representation from both parties.
The two companies are also negotiating a business plan to inject cash as immediate capital investment, expected to be $1-1.5 billion. The final shareholding structure of the entity will get finalizesd and its value established based on the cash infusion from each of the parties.
The merger, if it does go through, will create India’s largest media and entertainment business. The entity will run 115 linear TV channels, of which Star India will contribute 77, and Viacom18 will contribute 38. The entity will have two massive streaming platforms in JioCinema and Disney+Hotstar. The entity will be a true media juggernaut — Star India’s revenues last year were Rs. 19,857 crore, while Viacom18 had revenues of Rs. 4,554 crore. In addition, Disney+Hotstar’s brought in revenue worth Rs. 4,341 crore.
Not long ago, Reliance had been at loggerheads with Disney+Hotstar through its own digital play in JioCinema. Last year, Reliance had removed Hotstar from Jio’s telecom plans, which caused Hostar to lose millions of subscribers. Reliance had followed this up by outbidding Hotstar for the IPL rights, and wrested away Hotstar’s prized possession. But Reliance hadn’t stopped there — it had then taken away Hotstar’s HBO portfolio comprising of hit shows including Succession, Game of Thrones and Curb your enthusiasm, and even its F1 streaming rights.
And the impact had immediately shown on Hotstar’s subscriber base. At the end of December 2022, Hotstar had 5.75 crore subscribers, but had lost 46 lakh subscribers to end up with 5.29 crore subscribers in April 2023. The decline has then precipitated, and Hotstar was just left with 4.04 crore subscribers in July. Hotstar had 5.84 crore subscribers in July 2022, so it had lost 30% of its user-base over the last year.
It appears that because of these a aggressive moves, Reliance could emerge as a majority stake in the combined entity, in spite of being a much smaller business — Star India’s revenue are nearly 5 times as high as Viacom18’s, and Disney+Hotstar also makes significantly more money than JioCinema. But Disney is struggling in its home market of the US, and doesn’t seem to have the stomach for a protracted fight with Reliance in India — Star roughly breaks even on its TV business, while Hotstar loses money. As such, Disney could be content to join forces with Reliance, which would ensure that it would continue to have a footprint in the Indian market in the foreseeable future.
But the deal could also end up being a bit of a coup for Reliance, which could end up being a majority shareholder in India’s largest media company. JioCinema had appeared to hemorrhage money as it took on Hotstar — it had outbid Star for the IPL and HBO rights, and also broadcast the IPL for free on JioCinema. But it appears these moves were mere posturing to show its intent in the Indian market. And if Disney capitulates and ends up merging with Reliance’s Viacom18, Reliance might’ve got more than a fair return on its JioCinema investment over the last few quarters.