Disney Agrees to Sell 60% of India Business to Reliance-backed Viacom18

The Walt Disney Company has agreed to sell 60% of its India business to Viacom18 for $3.9 billion (INR 33,000 crore), according to the Wall Street Journal. The deal is expected to close this month. Viacom18 is owned by Mukesh Ambani, chairman of Reliance Industries (RIL). Walt Disney and Reliance Industries have been in deep discussions to combine their Indian entertainment businesses since December 2023. The businesses, however, were unable to come to a consensus regarding structure or valuations.

Disney agrees to sell 60% India business for INR 33,000 crore

Following rumors of Reliance Industries’ interest, Viacom18, owned by Reliance, the largest tycoon in Asia by Mukesh Ambani, has now finalized the deal and signed a non-binding term sheet to combine their India operations last month. The deal’s value was previously estimated by reports to be $10 billion. The decline in value is partially attributable to a write-off of revenue from Disney’s sale of cricket TV rights to struggling Zee Entertainment Enterprises Ltd., which is currently anticipated to be unable to make the payment. But according to a report this week from Bloomberg, Disney’s business in India are only worth about $4.5 billion, not the $10 billion that the US entertainment giant had previously sought.

Disney facing difficulties in India

Disney’s difficulties with streaming in India were made worse when Viacom18 outbid the American corporation for the IPL rights, paying $2.6 billion to stream the competition through 2017. Disney’s quarterly earnings in August 2023 revealed a 12 million decrease in streaming subscribers in the subcontinent, which was primarily ascribed to Hotstar’s decision to discontinue IPL streaming.

Disney+ Hotstar in India is facing difficulties because of this deal. Subscriptions to the platform have steadily decreased, from 61.3 million in September 2022 to 37.6 million a year later. Contributing factors include the loss of important content like HBO and IPL shows as well as competition from Jio Cinema. Although the sale’s official motivations are still unknown, rumors suggest:

• Priority Shifts: Disney may be refocusing its resources on high-growth sectors like Disney+ and core markets.
• Content Challenges: It may have been challenging to navigate the intricate Indian media environment and obtain well-liked content.
• Financial considerations: Simplifying operations and increasing financial flexibility are two benefits of offloading a part of the company.

Read More: Viacom18 Scores BCCI TV-Media Rights to Broadcast ICT Matches

Increasing Opportunities for Viacom18

The media behemoth is now poised to take a leading role in the streaming wars. This is all thanks to its agreement with Reliance Industries’ Viacom18. Disney, on the other hand, will keep working with other companies. It will create and distribute content while holding a 40% share. Reliance holds a 51% stake, while Bodhi Tree Systems, a venture led by Uday Shankar, the former head of Disney India, and James Murdoch, holds a 9% stake. With this decision, both businesses enter a new chapter in the ever-changing Indian media landscape. The exact course of this strategic change remains to be seen, but the entertainment sector in the area will undoubtedly be greatly impacted.

Other Business Investment Plans 

Viacom18 plans to invest approximately $1.5 billion in cash and equity in the stake. Disney owns a portion of the Tata Sky, Hotstar streaming, and Star India networks. The deal, which is expected to close in February, highlights the difficulties in navigating India’s vast 1.4-billion-person market. Disney Star and Viacom18 were reportedly preparing to battle it out for the right to advertise in the upcoming IPL 2024 earlier this month. Disney Star, which will broadcast the IPL matches on its sports channels, is reportedly requesting INR 167 crore and 83 crore for associate and co-presenting sponsorships on standard definition (SD) channels, respectively, according to a report in the Economic Times.

The broadcaster is requesting INR 35 crore for associate sponsorship and INR 71 crore for co-presenting sponsorship for HD channels. In contrast, Viacom18 has maintained its advertising rates at the same level to attract more advertisers. Viacom18 will continue to stream IPL matches for free on JioCinema. For the 2023 Indian Premier League, the company reportedly signed over 500 advertisers.

Hotstar a few years back

For a few quarters, Hotstar ruled the Indian video streaming scene. However, since then, Viacom18, supported by Reliance, has gained traction by paying roughly $3 billion to secure the five-year rights to stream the IPL cricket matches. Disney paid $3 billion to broadcast the content on television for the same five-year rights.

Read More: Walt Disney and Reliance Industries Sign a Non-Binding Agreement