© Reuters. FILE PHOTO: Disney+ Hotstar emblem is seen on this illustration taken August 22, 2023. REUTERS/Dado Ruvic/Illustration/File Picture
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By Aditya Kalra, Munsif Vengattil and Arpan Chaturvedi
NEW DELHI (Reuters) – A merger of Walt Disney (NYSE:)’s India unit and billionaire Mukesh Ambani’s media enterprise would create an leisure powerhouse in India, however legal professionals say any deal would draw intense antitrust scrutiny and belongings would seemingly must be shed.
Disney and India’s Reliance, which every have a significant streaming service in addition to 120 TV channels between them, are merging into an entity during which Ambani’s group would seemingly have a majority stake, sources mentioned this week.
Specifically, a deal may benefit Disney whose Hotstar streaming app has been loss-making. CEO Bob Iger mentioned final month that whereas Disney’s TV channels had been doing properly in India, different elements of the enterprise had been struggling and it was searching for to “enhance the underside line.”
If a deal was struck, it could be the second to seismically reshape India’s TV and streaming panorama as Japan’s Sony (NYSE:) additionally plans to merge its India enterprise with India’s Zee Leisure.
The Zee-Sony plan cleared a evaluation by the Competitors Fee of India (CCI) final yr and will shut within the coming weeks. The 2 firms have mentioned they are going to divest three of Zee’s Hindi TV channels as a part of their settlement for regulatory acceptance.
Though Netflix (NASDAQ:) and Amazon (NASDAQ:) additionally compete in India’s $28 billion media and leisure market, the emergence of two behemoths would most likely create a duopoly wielding anti-competitive energy over advertisers, customers and content material creators, antitrust legal professionals mentioned.
“This deal could get nearer scrutiny due to the elevated focus of market energy publish the Zee-Sony merger. That makes their path to CCI approval more difficult,” mentioned Avimukt Dar, founding associate at India’s IndusLaw.
Disney declined to remark. Reliance, its broadcast unit Viacom18 and the CCI didn’t reply to Reuters queries.
One key space of regulatory scrutiny for a Disney-Reliance merger can be their streaming companies and their energy over promoting throughout cricket – a sport that instructions fanatical devotion in India.
Disney Hotstar, India’s greatest streaming app with 38 million customers, owns the rights for Worldwide Cricket Council’s matches in India till 2027, whereas Reliance’s rising JioCinema app has the rights for common cricket league IPL.
The CCI can be frightened that the “mixed entity, resulting from its robust market presence in streaming can command their very own charges and advertisers might be left with out bargaining energy,” mentioned Vaibhav Choukse, head of competitors legislation at Indian legislation agency JSA.
In TV too, there may be a lot which may displease regulators.
Viacom18’s 38 channels embody Comedy Central and Nickelodeon, whereas Disney, whose Star model has been a family identify for many years in India, has 80.
Elara Capital estimates Disney and Viacom18 collectively could have the largest share of the TV advertisements market at 43% whereas Zee-Sony would have 25%, making it tough for others to compete.
Estimates from the CCI doc approving the Zee-Sony merger additionally underscore the potential pricing energy of a Disney and Viacom18 mixture.
In Hindi leisure channels, for instance, as of final yr Disney and Viacom18 had a mixed share of 30% to 40%, in contrast with Zee-Sony’s 30-35%, the doc exhibits.
In native language Marathi channels, Disney had market share of 50-55% and when mixed with Viacom18 that may rise to between 65% and 75%. In Bengali language leisure channels, the 2 would command as a lot as 50% market share.
“If the market shares of the events exceed 40-50% in any market, CCI is more likely to conduct an in depth investigation,” mentioned Choukse.
Whereas divesting sure channels can be an choice to assuage CCI’s issues, the merged entity might additionally supply commitments to not increase advert charges for a sure interval, in accordance with Gautam Shahi of Dua Associates.
