Disney Sells Its Once Brite Star To Reliance

In a significant development that marks a reshaping of its strategic presence in one of the globe's most populous markets, Disney has announced a merger of its Indian operations with Reliance Industries, the conglomerate helmed by the billionaire Mukesh Ambani. This $8.5 billion arrangement is set to alleviate the financial burden Disney has faced with its hitherto unprofitable ventures in India.

Under the terms of this partnership, entities under the Reliance umbrella will inject $1.4 billion into the venture, securing a 63% majority stake. Disney will retain a 37% interest, valuing the combined entity at the aforementioned $8.5 billion, as disclosed by the corporations this past Wednesday.

This move comes four years after Disney's acquisition of Star India in 2019, a transaction that was part of the larger $71 billion purchase of Fox assets from Rupert Murdoch. Star India was initially perceived by Disney as a jewel in Murdoch's crown, offering vast potential within the Indian market.

Yet, the reality of operating in India has proven challenging for Disney, prompting Bob Iger, the firm's CEO, to reassess the company's strategy amidst internal deliberations and external pressures from activist investors. This reevaluation was partly driven by the underperformance of Disney's sports broadcasting segment in India, which is projected to remain unprofitable in the foreseeable future. This situation is compounded by the losses incurred by Disney's streaming services in the US and the gradual decline of traditional television viewership.

A pivotal moment of setback occurred last year when Disney failed to secure the streaming rights for the immensely popular Indian Premier League (IPL) cricket matches for the 2023-2027 period. These rights, sold at a record-setting $6.2 billion, are crucial in a market where a significant portion of the audience prefers watching content on mobile devices. Although Disney managed to retain the broadcast rights, the streaming rights were awarded to JioCinema, a joint venture between Reliance Industries and Viacom18, managed by James Murdoch and Uday Shankar, a former executive at Disney India.

The merger with Reliance is a testament to the complex nature of the Indian market, characterized by a fervent love for cinema but marred by low annual subscription revenues. This strategic move follows the dissolution of a proposed merger between Sony and Zee Entertainment, which would have established a $10 billion media titan poised to compete with the newly formed Disney-Reliance entity.

Bob Iger lauded Reliance for its profound insights into the Indian consumer market, expressing confidence that the partnership would culminate in the creation of one of India's premier media conglomerates. Notably, Nita Ambani, recently transitioning from Reliance's board to focus on philanthropic endeavors, has been appointed chair of the new venture, with Uday Shankar serving as vice-chair.

Shankar, who previously expressed his ambition to rival traditional television's reach with digital platforms in India, has been a pivotal figure in this transformative deal. According to Karan Taurani, a media analyst based in Mumbai with Elara Capital, the merger is poised to disrupt the market significantly. The combined entity is expected to command approximately 40% of the advertising market share across Indian television and streaming services, a dominance that verges on monopolistic.

By Brett Hurll