$8.5bn Walt Disney and Reliance merger gets approval

BENGALURU: Walt Disney Co and Reliance Industries received regulatory approval on Wednesday from India’s Competition Commission (CCI) for an $8.5 billion merger of their Indian media assets.

The approval, however, was granted with specific modifications aimed at alleviating the concerns raised by CCI regarding the potential monopolistic control over broadcasting rights for cricket, a sport that holds a significant place in the hearts of the Indian populace.

The merger not only symbolises the confluence of two corporate giants but also sets the stage for a transformative era in India’s entertainment industry.

Background of merger

Both Walt Disney Co and Reliance Industries have made substantial investments in the Indian media market, collectively spending approximately $9.5 billion on acquiring rights for lucrative sporting events, especially cricket.

The Indian Premier League (IPL), one of the world’s richest cricket tournaments, as well as international matches organised by the International Cricket Council (ICC), have been focal points of these investments.

The merger aims to create a formidable entity that will dominate the Indian media landscape, posing a significant competitive challenge to existing powerhouses such as Sony, Netflix, and Amazon.

The CCI had initially voiced apprehensions that the merger could lead to a monopolistic hold on cricket broadcasting rights for both television and streaming services in India.

Cricket not only draws massive viewership but also commands substantial advertising revenues, with the sport accounting for 87 per cent of the estimated $2 billion spent by companies in 2023 on sports-related sponsorships, endorsements, and media.

The merger’s implications for advertisers and the potential chilling effect on competition were concerns that needed to be addressed before receiving regulatory approval.

Regulatory concerns

In response to CCI’s concerns, Walt Disney and Reliance proposed several concessions aimed at ensuring a fair competitive environment in the media space. One prominent commitment involved refraining from raising advertising rates excessively for streamed cricket matches, an effort designed to protect advertisers from potential exploitation in a merged monopoly.

Moreover, the companies pledged not to bundle advertising slots for different cricket tournaments, thereby ensuring that advertisers could retain some degree of flexibility and choice in their marketing strategies.

These concessions were critical in securing the regulatory nod, as the CCI recognized the need for ongoing competition in the media sector to foster innovation and ensure equitable access for advertisers of all sizes.

In a statement, the CCI emphasised its approval of the merger while simultaneously underscoring the importance of maintaining a balance within the advertising market.

The merger between Walt Disney and Reliance is poised to create the largest entertainment entity in India, combining 120 TV channels with two streaming services.

The new media powerhouse has the potential to significantly alter viewer engagement patterns and reshape the competitive dynamics within the industry.

 As Reliance, led by Chairman Mukesh Ambani, becomes the majority stakeholder, the strategic vision for the company will likely prioritize aggressive content acquisition and the development of exclusive programming to attract and retain subscribers across various demographic segments.

With Nita Ambani set to serve as Chairperson and Uday Shankar taking on the role of Vice Chairperson, the leadership ranks are well positioned to leverage both strategic foresight and operational acumen to drive the newly formed venture.

The arrangement facilitates not just a focus on cricket but also offers an avenue to diversify content offerings, ranging from cinema to original series, thus appealing to a broader audience in one of the world’s fastest-growing media markets.

Competitive landscape

The merger inevitably raises the stakes for competitors like Sony, Netflix, and Amazon, all of whom have significant investments in the Indian media landscape.

The combined strength of Walt Disney and Reliance in terms of resources, content offerings, and distribution capabilities may compel these competitors to rethink their strategies, potentially leading to intensified competition marked by innovative programming and pricing strategies.

Such dynamics can benefit consumers, who may enjoy a wider array of content at competitive pricing due to the fierce rivalry that may ensue.

Furthermore, as the media landscape evolves, the emphasis on digital streaming platforms remains paramount. The engagement of cricket matches on these platforms has historically proven to attract large audiences, often intertwined with mega advertising campaigns.

By offering free match viewership, both companies have sought to entice users onto their platforms, aiming to convert these viewers into paying subscribers.