Dheeraj Budaraju
Imagine a situation where one media giant controls our consumer habits. The Disney-Reliance merger can make this a reality because it drastically alters the Indian media sector. Several concerns about this proposed merger, particularly in cricket broadcasting, which is considered one of the most prominent pastimes in India, have been put before the CCI. The merger would significantly impact the global media business and change India’s media environment. Combining Disney’s vast content library and international reach with Reliance’s potent presence in India would create a formidable force in the global media industry. However, the combination raises severe concerns about market concentration and affects customer choice. However, It’s essential to remember that the combination may also result in synergies and—more importantly—more funding for content production, ensuring that audiences will continue to be captivated by excellent media in the future.
How It All Began
Disney purchased Star India in 2019 as part of its biggest acquisition of 21st Century that costed it around $71 billion. Since then, the Burbank-based entertainment company has had numerous difficulties with its business in India, especially after Reliance won the rights to stream the Indian Premier League (IPL) in 2022. Then Disney even began looking into selling its India-based assets in July of last year after this setback, which was a turning moment in the company’s history. Following rumours of talks with Mukesh Ambani’s Reliance, the Bloomberg story disclosed that Disney was in early discussions with notable Indian billionaires, such as Gautam Adani and Kalanithi Maran.[1]
Disney and Ambani’s Reliance Industries talked about merging their companies to create a massive entertainment conglomerate where the Indian billionaire Ambani would hold a dominant position. The corporations have begun their antitrust due diligence on the transaction and have recruited legal firms like Khaitan, AZB Partners, etc.
According to a statement from Disney, the agreement unites Viacom18, owned by Reliance, with Star India, a division of Disney. It will include at least 98 channels on both streaming services and grant access to over 30,000 Disney content assets. According to the statement, Ambani’s Reliance, India’s biggest private sector company, contributed $1.4 billion to the transaction. Disney will own 37% of the combined company after the Mumbai-based conglomerate controls the joint media venture, holding roughly 16% of the company. Viacom18, another Reliance venture, will have 46% of the combined company. Nita Ambani, Mukesh Ambani’s wife, will act as chairperson. The merger is anticipated to be finalised by the end of 2024 or the beginning of 2025.[2]
Facing the Regulators
The Competition Commission of India (CCI) is investigating the Reliance-Disney merger. Several concerns have been expressed by the CCI regarding the potential effects of the merger on competition in the market for cricket broadcasting rights. According to the CCI, the combined company might have undue dominance over this market, which would raise costs and limit consumer options. Other regulatory agencies may also examine the Reliance-Disney merger besides the Competition Commission of India (CCI).
The Ministry of Information and Broadcasting oversees India’s media and broadcasting sector and has also been involved in the merger assessment procedure. The ministry might be concerned about the merger’s possible effects on foreign investment that flows into India, the diversity of content available for the Public, and the general well-being of the Indian media landscape.
If the Competition Commission of India (CCI) approves the merger, the CCI may impose restrictions or take other action to lessen any possible anti-competitive impacts. It is yet unclear how the regulatory review will turn out. Although Disney and Reliance might be able to calm the CCI’s worries and get clearance, the procedure will probably take a while and require extensive discussions. It is noteworthy that the regulatory environment is subject to swift changes. Fresh facts or developments could impact the CCI’s evaluation of the merger. This emphasis on regulatory scrutiny can reassure the audience about the industry’s oversight and control.
Voices from the Experts
The possible effects of the Reliance-Disney merger have drawn differing perspectives from experts in the media sector, antitrust law, and economics. One of the world’s top full-service investment banking and capital markets companies, Jefferies, has revealed that the Disney-Reliance joint venture will control 40% of the TV and streaming ad industry.
In India, the most populous country in the world (1.4 billion people), cricket has a devoted fan base, and advertisers actively look for out matches.
Sponsorship, endorsement, and media associated with the sports business are expected to spend close to $2 billion in 2023, according to media agency GroupM. 87% of those expenses went toward cricket. Confident analysts caution that the combination would establish a monopoly in the industry, resulting in increased costs and diminished rivalry. The former head of mergers at the CCI, K.K Sharma, has said the merger could lead to “almost an absolute control over cricket.” [3]
The Main Concerns: What’s at Stake?
The Competition Commission of India’s antitrust body has reached an initial assessment that the $8.5 billion India merger of Reliance and Walt Disney media assets harms competition due to their power over cricket broadcast rights.[4]
One of the significant issues underlined by the merger is its probable anti-competitive behaviour in the cricket broadcasting market. Given Reliance’s strong presence in this sector, the merged entity could have considerable influence over the distribution and pricing of cricket rights in the media sector. This increases market concentration, raising concerns about reduced competition, fewer consumer choices, and potentially higher brand advertising costs. The merged company, majority-owned by Mukesh Ambani’s Reliance, would hold valuable rights worth billions of dollars, increasing worries about its pricing power and control over advertisers. Additionally, with 120 TV channels and two streaming services, this merger would become India’s most prominent entertainment player, positioned to compete directly with giants like Sony, Zee Entertainment, Netflix, and Amazon or even surpass them.
The merger could also seriously affect content diversity and consumer choice. With control over a vast array of media platforms, including television channels, streaming services, and production houses in India, the newly formed entity might prioritise profit maximisation over offering a diverse range of content to the public. This shift could decrease the variety of shows, movies, and other content available to consumers, limiting their choices and restricting their exposure to different perspectives and cultures. It can also hinder innovation and lessen the variety of content options available. Furthermore, the combination might make it harder for smaller companies to enter the market.[5]
The Silver Lining: Benefits of the Disney-Reliance Merger
Even though there are a lot of worries about the merger, it can also have some potential advantages, such as Disney’s enormous content library and global reach paired with Reliance’s in-depth knowledge of the Indian market and consumer behaviour, which could lead to the creation of an influential media company. The organisation will be granted permission to use over 30,000 of Disney’s multimedia assets, offering the public various entertainment choices. Viacom18 provides 40 channels in eight languages, and Disney offers roughly 80 TV channels in nine languages. This would result in the company having two digital streaming platforms and 120 TV stations.
Disney and Reliance said the combined company will reach 750 million Indian subscribers. By combining Reliance’s distribution network with Disney’s content development and creation experience, the merged firm might get a larger audience for Disney’s material. Furthermore, economies of scale from the merger may result in lower costs, freeing up more funds for innovation and content creation for the merged company. [6]
The combination may also result in more money invested in innovation and content production. The combination of Reliance and Disney may result in higher spending on innovation and content production. The combined company would be in a solid financial position to invest in new ventures, create original content, and investigate cutting-edge technology because of both businesses’ combined resources and strengths. Expanding the selection of excellent material available to customers and stimulating innovation in the media sector might be advantageous. Following the merger of its India operations, Bob Iger, CEO of Walt Disney, stated that a joint venture with Reliance Industries would increase profits for the corporation and derisk its operations in the Indian market.[7]
In conclusion, the planned merger between Reliance Industries and Disney would have many advantages and disadvantages for the Indian media landscape. Positively, this merger may increase funding for innovation, infrastructure, and content production, and it helps provide viewers with better viewing options and higher-quality content overall. It may also increase its competitiveness worldwide, motivate its competitors to improve their quality, and broaden its global reach.
However, essential issues must be addressed, especially those related to diversity in content and competition. Anti-competitive behaviour is possible, particularly in the cricket broadcasting market, which might result in higher costs and fewer customer options. Furthermore, the merger might create entry barriers for smaller competitors to enter the market. It might also discourage innovation and reduce competitors’ content range.
Ultimately, the Consequences of this merger will depend on how regulators in India handle these problems and how successfully the merged entity handles the challenges of combining two major companies. Henceforth, it is essential to be educated and aware of these things since the result of this merger is expected to impact the future of the Indian media business significantly.
[1] R, S.P. and Singh, P. (2023) Disney said to be in talks with Adani, Sun to sell India assets, Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2023-10-06/disney-said-to-be-in-talks-with-adani-sun-to-sell-india-assets?srnd=premium-asia&leadSource=reddit_wall (Accessed: 23 August 2024).
[2] Cailey Gleeson, What We Know About The $8.5 Billion Disney Merger With Reliance In India, (Feb. 28, 2024), https://www.forbes.com/sites/caileygleeson/2024/02/28/what-we-know-about-the-85-billion-disney-merger-with-reliance-in-india/.
[3] https://www.business-standard.com/companies/news/cci-warns-disney-reliance-media-merger-could-harm-competition-report-124082000698_1.html.
[4] Reliance, Disney Merger Will Hurt Rivals, Warns Antitrust Body: Report, https://www.ndtv.com/india-news/reliance-disney-merger-will-hurt-rivals-warns-antitrust-body-report-6378538.
[5] Msn, https://www.msn.com/en-in/news/other/reliance-disney-merger-cci-raises-concern-over-cricket-broadcast-rights/ar-AA1p9jbS?ocid=BingNewsVerp.
[6] https://www.financialexpress.com/market/cafeinvest-the-big-picture-behind-the-reliance-and-disney-merger-3426369/.
[7] Merger with Reliance would boost company’s profits and reduce risk in India: Disney CEO, The Hindu (Mar. 10, 2024), https://www.thehindu.com/business/Industry/merger-with-reliance-would-boost-companys-profits-and-reduce-risk-in-india-disney-ceo/article67934978.ece.
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(Author Dheeraj Budaraju is a a 5th-year student pursuing a BBA LLB at Christ (Deemed to be University), Pune Lavasa Campus.)
