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
Walt Disney and Reliance Industries Sign a Non-Binding Agreement
A non-binding agreement has been signed by Walt Disney and Reliance Industries Limited (RIL) regarding the merger of their Indian media operations. Recently, the two businesses discussed the possibility of forming a joint venture (JV) in which RIL would hold the majority of the shares. Reliance hopes to complete the transaction by the end of January, but it may take until February to receive both commercial and regulatory ratifications.
RIL – Disney’s Non-Binding Agreement
Kevin Mayer, a former Disney executive and current advisor, and Manoj Modi, an Ambani confidante, were present at the meeting and had been negotiating the term sheet for months. The idea is to use a stock swap to merge Star India with a step-down subsidiary of RIL’s Viacom18. With a minimum of 51% ownership, Reliance is anticipated to be the biggest shareholder in the combined business, with Disney holding 49%. JioCinema will be included in the agreement as well. RIL is most likely to purchase the majority interest with cashReliance and Disney are anticipated to complete the major entertainment and media merger in India by February 2024, affecting the nation’s streaming and viewing landscape.
Capital Investment Contributed to the Non-Binding Term Sheet
Following last week’s signing, a valuation exercise will formally begin, and legal advisors will get to work on the specifics. A 45–to 60-day exclusivity period may be possible, and it may be renewed annually. Disney, whose Hotstar streaming app has been losing money, may benefit from the deal. The development comes close to the Zee-Sony merger, with Sony agreeing to discuss an extension of the deal’s deadline. Under the proposed agreement, Reliance’s Viacom18 would establish a unit that would acquire control of Star India through a stock exchange. Additionally, both companies are probably going to contribute cash as capital investments, which should total between $1 and 1.5 billion.
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Benefits for Disney Hotstar
Disney and Reliance are expected to have equal representation on the board. Uday Shanker-led Bodhi Tree, Viacom18’s second-largest shareholder after Reliance, is probably going to be granted a seat. In addition, at least two independent directors are under consideration. Disney’s India division was able to secure the broadcast TV rights for the 2023–2027 Indian Premier League. However, it lost its online rights. JioCinema was granted the right to stream videos online. In recent months, Hotstar, Disney’s streaming app, has seen a decrease in users as a result of this. Disney has been negotiating a sale or joint venture (JV) for its India business. Thias consists of numerous TV channels, since the beginning of this year.
Entering the competitive landscape
In the event of a merger, one of India’s largest entertainment conglomerates would be formed. It will be put up against streaming behemoths like Netflix and Amazon Prime as well as TV producers like Zee Entertainment and Sony. The announcement of the acquisition might come as soon as next month. Disney is expected to maintain a minority stake in the Indian company under the terms of the proposal. This will come after any cash and stock swap transaction is finished
Read More: Disney+ Introduces First-Party Audience Targeting, Programmatic Buying Via PMP
Reliance Industries to Acquire Disney India in a Cash and Stock Deal
Disney’s India division is about to be acquired by Reliance Industries in a cash and stock deal. Instead of splitting up the company, it has chosen to sell its interests in India to Reliance, its main rival. The success of Reliance Industries’ streaming service Jio Cinema has also had an impact on the U.S. company’s business, according to Reliance Industries owner Mukesh Ambani. Disney has been looking into opportunities for selling or partnering with its India-related properties. Additionally, it had discussions with billionaires Kalanithi Maran, owner of Sun TV Network, and Gautam Adani, as well as Blackstone, a private equity firm.
Disney – Reliance Cash and Stock Deal
Instead of the piecemeal transaction previously considered, the American entertainment behemoth may sell a controlling interest in the Disney Star company, which it values at about $10 billion. Reliance, meanwhile, values the assets at $7 billion to $8 billion. The possibilities that Disney was previously considering included the purchase of all of its assets, including sports rights and regional streaming service Disney+ Hotstar, alone or in combination. Some of Reliance’s media divisions might be combined into Disney Star as early as next month, following the announcement of the deal. Additionally, even after any cash and stock transfer deals are finished, Disney is expected to have a small ownership interest. Disney receives broadcast and streaming rights to the IPL competition, a plethora of multilingual TV channels, and an investment in a Bollywood film production firm as part of the transaction, which is essential to the corporation’s global streaming expansion.
Read More: Viacom18 Scores BCCI TV-Media Rights to Broadcast ICT Matches
Disney’s India operations
Star India and the Disney+ Hotstar streaming service make up Disney’s Indian operations. It had the highest user count last year on a global scale. Disney has attempted to turn around the fortunes of its streaming business in India. However, subscriber withdrawals are quickening. Disney is banking that the move will increase advertising revenue. Disney Star has battled with declining subscriber numbers, but the media company has continued to spend and hasn’t given up on the market. Other options for the company have been considered, such as a direct sale or the formation of a joint venture.
Disney subscribers shifting to Jio
Disney’s Hotstar is presently streaming the current cricket World Cup to mobile fans for free in an effort to regain members after losing approximately 20 million subscribers this year. Customers rushed to Jio Cinema since it was a free place to watch IPL games. Nevertheless, Disney has recaptured the world record for on-demand video streaming from Jio Cinema after drawing 35 million concurrent viewers to a cricket match using the Disney streamer app.
Jio Cinema’s rise to popularity
Disney’s streaming activities in India are under increased pressure from Jio Cinema. The negotiations serve as an example of Ambani’s disruption of India’s entertainment sector. It comes after he paid $2.7 billion in 2022 for the streaming rights to the IPL. The cricket event was earlier this year televised for free on the billionaire’s Jio Cinema platform. Then, Reliance achieved another victory when it obtained a multi-year deal to stream HBO programming produced by Warner Bros. Discovery in India. Any potential agreement with Reliance will benefit Viacom18, a joint venture with Paramount Global. Sports has been one of Viacom18’s primary focus areas, and it has developed a strong portfolio there that includes a number of extremely well-liked titles.
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