Reliance-Disney merger: Nita Ambani made chairperson, RIL to invest Rs11,500 cr

The merged entity will be controlled by RIL and owned 16.34 percent by RIL, 46.82 percent by Viacom18 and 36.84 percent by Disney; Image: Shutterstock

After close to four months of reported talks, Reliance Industries Limited (RIL), Viacom 18 Media Private Limited and The Walt Disney Company have announced the signing of binding definitive agreements to form a joint venture that will combine the businesses of Viacom18 and Star India.

Reliance has agreed to invest about Rs 11,500 crore into the joint venture for its growth strategy. This transaction values the joint venture at Rs 70,352 crore on a post-money basis, excluding synergies. Post completion of the above steps, the merged entity will be controlled by RIL and owned 16.34 percent by RIL, 46.82 percent by Viacom18 and 36.84 percent by Disney. Currently, James Murdoch and Uday Shankar-backed Bodhi Tree owns 15.97 percent of Viacom18, while Paramount holds 13 percent.

Disney is also expected to contribute certain media assets to the JV, subject to regulatory third-party approvals. RIL’s Nita Ambani will be the chairperson and former Disney executive Uday Shankar, the vice chairperson of the merged entity.

“This is a landmark agreement that heralds a new era in the Indian entertainment industry,” stated Mukesh Ambani, chairman and managing director of Reliance Industries. “We have always respected Disney as the best media group globally and are very excited at forming this strategic joint venture that will help us pool our extensive resources, creative prowess, and market insights to deliver unparalleled content at affordable prices to audiences across the nation.”

This newly formed media giant will be one of the leading TV and digital streaming platform for entertainment and sports content in India—with media assets across entertainment (including Colors, StarPlus, StarGOLD) and sports (Star Sports and Sports18) available across television, as well as on OTT platforms such as JioCinema and Hotstar.

The press release claims that the entity will have over 750 million viewers across India and will also cater to the Indian diaspora across the world. The JV will also be granted exclusive rights to distribute Disney films and productions in India, with a license to more than 30,000 Disney content assets, providing a full suite of entertainment options for the Indian consumer.

“We are privileged to be enhancing our relationship with Reliance to now also include Disney, a global leader in media & entertainment. All of us are committed to delivering exceptional value to our audiences, advertisers and partners,” said Shankar, co-founder of Bodhi Tree Systems.

This merger is clearly expected to have a massive impact on the entire media and entertainment (M&E) ecosystem. They will now have a very large market share across linear TV and the digital space.

Also read: Explained: What does the Reliance-Disney binding agreement mean for the M&E industry?

“This merger could lead on the path to profitability, since currently both of them are making heavy losses, due to high content costs and no paid subscribers, especially for JioCinema which is entirely AVOD-led,” says Karan Taurani, senior vice president, Elara Capital. While this will be massively disruptive for the industry, it will definitely put a lot of pressure on other players in the market.

Commenting on the JV, Bob Iger, CEO of The Walt Disney Company, said: “India is the world’s most populous market, and we are excited for the opportunities that this joint venture will provide to create long-term value for the company. Reliance has a deep understanding of the Indian market and consumer, and together we will create one of the country’s leading media companies, allowing us to better serve consumers with a broad portfolio of digital services and entertainment and sports content.”

This development comes only weeks after the proposed merger between Sony Group and Zee Entertainment collapsed, over disagreement of who would lead the joint entity. This will definitely add further pressure for Sony Group and Zee Entertainment, among other such players.

Also read: Sony terminates merger talks with Zee, Zee considers legal action

“Since Viacom18 and Star India will now have better synergies and bargaining power, things will be favourable for them and even in terms of growth because of a large customer base across genres,” adds Taurani.

It will also add negative impact on the larger OTT giants—including the likes of Netflix and Amazon Prime Video. On sports as a genre, these two combined almost have a monopoly in India, especially when it comes to marquee cricket tournaments, controlling about 75-80 percent of the market—both on linear TV and OTT.

“Sports also happens to be the only market that is seeing strong growth, as opposed to general entertainment content. This could help them achieve better growth as compared to the industry average,” adds Taurani.

Disclaimer: Reliance Industries is the owner of Network 18, the publisher of Forbes India