Mega Reliance-Disney merger gathers steam

With speedy nods from the Competition Commission of India (CCI) and the National Company Law Tribunal (NCLT), the mega merger between Reliance Industries-owned Viacom18 and The Walt Disney Company’s Star India, announced in February this year, is well under way. People within the two merging companies said that integration is gathering pace and the process is likely to conclude by the end of October, just before Diwali.
A lot has been said about the impact the combined networks may have on India’s entertainment industry given their market share and negotiating power over advertisers, content producers and distributors.
After it got the CCI approval last month, Harsha Razdan, CEO, South Asia of the ad agency Dentsu, said that the merged entity will command 40-45% of the TV market and 30-35% of the digital space.
Such scale brings with it the inevitable power to influence market dynamics, including pricing, he said. “The control over 80% of India’s cricket broadcasting alone speaks volumes. While some may worry about rising ad rates, this is an opportunity for smarter, more targeted ad spends and a unique chance to integrate marketing plans across TV and digital platforms,” he said.
When the deal was first announced in February, Razdan had called it a “watershed moment” that could reshape the Indian M&E industry as it would create a significantly dominant player wielding substantial influence over content creation, distribution, and consumption trends in the country. “I hope that in the coming years, the merger achieves a balanced outcome,” he had said then.
However, for the two networks, the immediate concern is job cuts. Currently, Disney-Star India has approximately 4,000 employees while Viacom18’s manpower stands at 2,500. Overlapping roles and departments will have to go, leading to an estimated 1200-1400 job cuts, said people familiar with the developments at the two companies.
Though rationalization of the workforce is a given, people HT spoke to on the condition they not be named, said that while the top leadership roles may see immediate layoffs, it will be a while before people down the line are affected. “It will take 8-10 months for a clearer picture on downsizing to emerge once the integration process is complete and people required for operations are accounted for,” said one of them.
For instance, it’s difficult to estimate the people needed in the streaming business simply because the final decision on whether the merged company will run one streaming platform or two is still pending.
Though several media reports earlier said that JioCinema and Disney+Hotstar will merge, insiders are now saying the discussion on the matter has not closed. Some said a merged streaming service is inevitable eventually and is likely to be branded JioHotstar or JioStar – depending on the brand name passing the auspicious numerology test.
Yet others insisted that the two OTTs will run independently for the time being. “There is discussion around retaining both JioCinema and Hotstar in the early stages. The chatter is on making Hotstar a fully paid service (subscription video-on-demand or SVoD) with premium content. JioCinema will remain free to watch along with ads (AVoD or advertising video on demand). This way, JioCinema will have a wider user base with people watching content on mobile which would drive both ad revenue and data consumption for Jio,” said a person in one of the two companies.
As far as the television business goes, the two sides will need to sell off some of their regional language channels (Marathi, Kannada and Bengali) to ease concerns of a monopolistic position. “In Kerala, Viacom has no presence so Star’s Asianet will continue,” said one of the executives at the two companies.
Even as clearance for the merger is awaited from the ministry of information and broadcasting (MIB), Viacom18 has applied for the transfer of licenses for all its entertainment channels to the combined entity under Star India. Reliance will control 63.16% of the entity which also includes Uday Shankar’s 7% stake, while Disney will hold the remaining 36.84%.
“The next year and a half will be chaotic not just for the two companies but also for the industry as it spells major consolidation. Such consolidation is not optimal for employment especially when the entertainment sector – both TV and streaming – is undergoing its own struggles to achieve profitable growth,” said another media executive who did not wish to be named either.