The next three weeks could determine Walt Disney’s future in the world’s most populated country.
The Star India network was one of the crown jewels Disney (DIS) acquired when it paid $71 billion to Rupert Murdoch for most of 21st Century Fox five years ago.
With that mega acquisition, the Magical Kingdom acquired Fox’s business in India, obtaining a new audience of over 700 million people in the South Asian country, which is one of the world’s most active media markets.
However, Disney has not had the happily ever after it hoped for. In a late-year results call, CEO Bob Iger admitted that “parts of that business [in India] are challenged for us.”
The House of Mouse was hit most hard in 2022, when it lost the internet rights to stream the immensely popular Indian Premier League (IPL) cricket matches to billionaire Mukesh Ambani’s company.
The US corporation is now attempting to save its India ambition.
Disney and Ambani’s Reliance Industries are discussing merging their Indian media operations to build an entertainment juggernaut in which the Indian tycoon would have the upper hand.
According to Reuters, the corporations have hired lawyers and begun antitrust investigations into the merger. The Economic Times claimed in December that Ambani’s energy-to-telecom company would own 51%, with Disney holding the remaining 49%, citing unnamed sources. According to the Indian publication, the merger will likely be completed by next month.
Disney did not respond to CNN’s request for comment, while Reliance declined to comment.
Disney’s search for a partner in the world’s fastest-expanding major economy came when the Burbank-based firm dealt with several internal issues.
The 100-year-old Hollywood staple, like its competitors, faces an uncertain environment in the United States, where people are progressively abandoning linear TV in favour of TikTok and YouTube. However, Disney has been particularly severely struck by movie office disappointments and corporate upheavals.
In November, Iger stated that the business is exploring opportunities in India but wants to remain there.
The lukewarm star
It’s easy to understand why. With its relatively free economy and large English-speaking population, India is a desirable destination for global entertainment enterprises.
Prime Minister Narendra Modi’s government expects the country to soon become the world’s third-largest media and entertainment market, up from fifth place today. Disney was handed that market on a silver platter after acquiring Fox.
Star India had established its massive viewership by spending billions of dollars on broadcast rights to several of India’s most popular sports, including cricket, the country’s national preoccupation. In 2017, it outbid Facebook (META) and Sony (SONY) to acquire the IPL, one of the world’s most valuable sporting properties, for $2.6 billion over five years.
The network’s other significant advantage was its local content. Star India provides over 70 TV stations in nine languages in a country with nearly two dozen languages spoken.
However, Disney has yet to seize the chance.
While its TV division is growing well in India, Iger admitted in November that the company was failing in other sectors. Its streaming app, Hotstar, has lost millions of customers since losing the IPL rights to Reliance nearly two years ago.
Hotstar took another hit in March 2023 when it ceased broadcasting HBO content. Weeks later, Warner Bros. Discovery (WBD), the parent company of HBO and CNN, shifted its content to Ambani’s JioCinema, bringing dedicated Indian viewers of hit shows like “Game of Thrones” and “Succession” with them.
Aside from Ambani’s losses, critics have questioned Disney’s India strategy, particularly its aggressive sports expenditure.
The brand’s “entertainment assets would be attractive to any acquirer or partner …[but] … Disney’s India sports business has faced challenges.” According to Mihir Shah, vice president of research firm Media Partners Asia.
While Disney lost the internet rights to IPL matches in 2022, it retained the TV rights until 2027 for more than $3 billion. It also retained the rights to broadcast the International Cricket Council’s events until 2027 for an additional “staggering $3 billion,” Shah stated.
Financial troubles for the company will persist in the coming years, “largely attributed to Disney’s aggressive bidding in renewing rights,” he added.
The media conglomerate has also failed to fully capitalize on its streaming service’s “technical prowess” due to the loss of the IPL and “limited investments in local entertainment content,” according to Shah.
From antagonism to partnerships
The American company’s failures come when competition in India is heating up — the potential Reliance-Disney merger isn’t the only one being considered.
Disney Is Trying To Salvage Its Indian Dreams
Sony and India’s Zee Entertainment have negotiated for over two years about merging their companies and forming a $10 billion conglomerate. The destiny of that transaction is unknown, but analysts believe such corporate marriages will be critical to gaining scale and competing with global streaming giants like Netflix (NFLX) and Amazon (AMZN), both of which have a significant presence in India.
“These potential deals are a sign that India’s entertainment industry is entering a phase of consolidation, where only a handful of players with deep pockets will be able to operate,” said Aliasgar Shakir, a Motilal Oswal Financial Services analyst.
In a November earnings call, Iger stated that Disney intends to maintain its presence in India while focusing on improving the bottom line.
Ambani, Asia’s second richest man, can help Disney accomplish more with his billions and media ambitions.
The combined business would be huge, with over 100 TV stations and two streaming services.
“It is too early to interpret this as Disney scaling back in India,” Shah said. “The contours of the deal are still unknown, but it is looking more like a partnership between Reliance Industries and Disney.”
It might also mark the beginning of a power couple that extends beyond the media, with industry insiders speculating on a joint push into amusement parks.
“We have to remember that both these companies have business interests beyond media and entertainment, and this partnership could be a start of something bigger,” Shah said.
SOURCE – CNN
