Reliance killed and then saved Disney

In a surprising move, two giants of the entertainment world, Reliance Industries and Walt Disney, have joined forces in India. 

They are merging their television and streaming assets and creating a new entity which would be valued at a staggering $8.5 billion. 

Reliance, led by Mukesh Ambani, Asia's wealthiest tycoon, is investing $1.4 billion in the merged entity and would get a controlling 63% stake, while Disney will hold the remainder. 

The merger valued Disney's Indian business at around $3 billion, which is significantly less than its $15 billion valuation in 2019 when Disney acquired it as part of the Fox deal. 

Disney argues that factoring in synergies makes it worth closer to $4.3 billion.The new entity, a combination of Reliance and Disney, will encompass 120 TV channels, two streaming platforms, and coveted cricket rights in a nation where cricket is nearly a religion.

Jinesh Joshi, an analyst at Prabhudas Lilladher, highlights, "This merger will give Reliance great bargaining power in negotiating advertisement contracts. For Disney, aligning with a bigger player in terms of financial strength will provide a much-needed cash cushion."

The merged venture, valued at $8.5 billion post-transaction, establishes a dominant player in the Indian media and entertainment sector. Nita Ambani is set to chair the board, with former Disney executive Uday Shankar as vice-chair. Together, they aim to reach an extensive audience of 750 million viewers across India and the global Indian diaspora.

The question arises – why would someone sell the largest OTT business in India? Disney+Hotstar, despite having more subscribers than its counterparts, was not as valuable as it appeared. Losing the IPL rights last year was a significant setback, leading to a loss of over 12.5 million paid subscribers in the following quarter and a further decline to 37.6 million by September.

Last year, Disney+Hotstar chose not to renew its content deal with HBO in India, due to which it had let go of its famous shows like Game of Thrones . 

JioCinema, not only targeted Disney+Hotstar's streaming users but also attracted TV customers. They offered IPL for free online, and its total downloads surpassed Disney+Hotstar.

Disney's CEO, Bog Iger, acknowledges Reliance's deep understanding of the Indian market and sees this deal as empowering both companies to offer a broader portfolio of digital services, entertainment, and sports.

This mega-merger is not just about entertainment; it's a strategic move in the $28 billion Indian media sector, outpacing competitors like Japan's Sony. It's not just about numbers but lessons learned. Disney faced challenges in India, misjudging the market and losing subscribers, especially after Reliance secured the IPL streaming rights in 2022.

Mukesh D Ambani, Chairman & Managing Director of Reliance Industries said ‘landmark agreement that heralds a new era in Indian entertainment industry.'

‘’We have always respected Disney as the best media group globally and are very excited at forming this strategic joint venture that will help us pool our extensive resources, creative prowess, and market insights to deliver unparalleled content at affordable prices to audiences across the nation. We welcome Disney as a key partner of Reliance group,'' said Ambani.

Bob Iger, CEO of The Walt Disney Company, said, "India is the world's most populous market, and we are excited for the opportunities that this joint venture will provide to create long term value for the company. 

As Disney deals with global pressures to streamline its businesses, this merger could be the boost it needs. Despite hurdles, the company recognizes India as a "key market" and one of the "strongest international growth markets of scale." With Reliance on its side, Disney aims to redefine the narrative in the Indian entertainment landscape and find a winning formula in this dynamic market.

The acquisition of Hotstar and Star TV channels in 2019, part of the $71 billion deal with 21st Century Fox, seemed like a game-changer. But the gamble to make cricket on Hotstar a paid service backfired when Ambani's big IPL bid led to an exodus of 23 million subscribers by December 2022.

Now, with Reliance by its side, Disney is looking to rewrite the script in the Indian entertainment saga, aiming for a winning formula in this dynamic market.