The merger of Reliance Industries’ and Disney’s TV and streaming property in India is anticipated to shake up the entire sector and will even power some smaller corporations out of enterprise, because it creates an $8.5 billion juggernaut that may give it a bonus over its rivals, analysts say.

The deal between the 2 corporations had lengthy been within the works – after Disney missed out on priceless cricket rights and misplaced thousands and thousands of subscribers to its streaming platform, and as Reliance, controlled by India’s richest man, Mukesh Ambani, has been increasing past its conventional oil enterprise into sectors together with telecoms and leisure.

The settlement, introduced final week, may remodel the panorama of the trade, forcing different corporations to consolidate if they’re to face an opportunity of competing with the powerhouse that may emerge from the tie-up, says Barnik Maitra, technique advisor and former managing associate at consultancies Arthur D Little and McKinsey.

“The new merged entity is going to be the digital behemoth, which will drive Indian streaming forward,” says Mr Maitra.

“Any small [streaming] player will either completely die or get acquired by someone, so there’ll be significant consolidation.”

The three way partnership between Disney and Reliance, anticipated to be accomplished on the finish of this 12 months or early subsequent 12 months following approvals from regulators, will give them the aggressive fringe of “strong synergies when they’re buying content or when they’re selling ad inventory”, he says.

Disney’s Hotstar has 38 million paid customers on its streaming platform. Reliance has not disclosed numbers for its JioCinema streaming platform.

The deal “creates an OTT behemoth that the others will find hard to upstage, as it brings together all the content that’s worth paying for, especially as all the other players are individually having their own struggles today”, says Utkarsh Sinha, managing director at Bexley Advisors, a boutique funding financial institution.

He foresees “a strong consolidatory wave coming down the pipeline which should be active for the next two to three years”.

“One can confidently expect more mergers in the space with smaller players being gobbled up by the larger consolidators that get created,” says Mr Sinha.

Reliance had already aggressively invested to secure content to boost its presence in the market. In 2022, it outbid Disney and won the digital streaming rights for the glitzy and enormously popular Indian Premier League cricket tournament for 2023 to 2027 for 237.58 billion rupees ($2.87 billion). The streaming platform Disney Hotstar had previously held the rights to stream the matches.

Last May, in a major coup, JioCinema took over the rights to HBO’s content in India, which includes hit series such as House of The Dragon, The Last of Us, Succession and Game of Thrones.

Previously HBO’s content had been screened on Disney Hotstar until Disney decided to end that deal on March 31.

“However, [JioCinema] still lacks a big content library, which has prevented it from building up a sizeable subscriber base,” says Pulkit Chawla, analysis analyst, Emkay Global Financial Services.

“Disney Hotstar, on the other hand, has been a market leader in terms of paid subscribers – though it has seen a sharp decline over the last few quarters after it lost out on a few marquee properties.

“With this merger, JioCinema can also take advantage of Disney Hotstar’s superior technology.”

Reliance, which is able to lead the merged agency, has stated it plans to inject $1.4 billion into it. Disney will maintain 37 per cent, whereas Reliance and its associates will personal 63 per cent.

The streaming market in India, the world’s most populous nation with greater than 1.4 billion folks, is increasing quickly, as incomes rise and increasingly more residents are having access to the web.

The Indian streaming and video-on-demand sector, also referred to as the over-the-top (OTT) market, is forecast to greater than double to $5.3 billion by 2027, up from $2.35 billion in 2022, in accordance with a report by international consultancy Deloitte.

There are greater than 50 OTT corporations in India, together with Netflix and Amazon Prime, the report’s information reveals.

Two main home rivals are Zee Entertainment and Sony. While there have been additionally plans to merge Sony’s India operations with Zee, in what would have created a $10 billion media large, Sony has now formally withdrawn from the settlement.

“Zee, which has already been struggling since its merger breakdown with Sony, should be negatively impacted by the creation of a larger entity,” says Mr Chawla.

“Both content producers and advertisers are likely to gravitate towards the Reliance-Disney entity.”

Mr Sinha says that it could “not be surprising if Reliance throws its hat in the ring as well as a suitor for Zee, now that Sony is off the block”.

But there are a number of challenges with monetisation and profitability which might be widespread to the trade that the Reliance-Disney enterprise may also face.

These embrace investing in content material to take care of viewers, and the right way to monetise this, Mr Maitra says.

Similarly, a “big challenge is managing return on investment on expensive sports rights such as Indian cricket”, he says.

“The price of these rights is getting expensive and ensuring that advertisement revenues keep pace with price rises”.

“The third challenge in India is to get the Indian consumer to pay for OTT content and ensure the OTT business has viable unit economics. I think it’s not something which anyone has yet solved in India.”

Consolidation within the trade, nevertheless, may assist on this course of as a result of it is going to imply that there are fewer platforms competing for viewers, he says.

Although Mr Maitra doesn’t see breaking into worldwide markets as a precedence for Reliance, he says that the “alliance will give Reliance a potential to monetise existing content and sports rights to Indian diaspora audiences globally, notably in the US”.

Updated: March 04, 2024, 4:00 AM