How Jio beat Hotstar Disnep and became king of India's Entertainment Market....

Posted - 05 Apr 2024

"Disney Steps Back From India in Mega-Deal worth $8.5 billion with Reliance Industries" ~ The Biggest Media Merger of the decade.

With this merger, Disney’s decades-long dream to gain a solo foothold in the Indian market ends.

And,

With Disney's exit,  Reliance Industries, will go on to become the King in the media landscape in India.

"As per EY, India’s media landscape would be worth $30 billion this year and $100 billion by 2030."

How This Merger Will Make Reliance the King of Media Market?

As estimated, Post merger, the Combined entity will command over -

• Viewership - The combined entity would have access to a vast audience of 750 million viewers across India.

• TV Channels - The merger would result in a conglomerate with over 108+ channels. This includes Star India's 70+ TV channels in 8 languages and Viacom's 38 TV channels in 8 languages.

• OTT Apps - The combined entity would own two large OTT (Over-the-Top) apps, namely Jio Cinema and Hotstar.

• Film Studios - There would be two film studios under the combined entity, one each from Reliance and Disney India.

• Market Share - 

  • TV Advertisement - The combined entity would command a market share of 40%.

  • TV Subscription - Excluding distributors/DTH/MSO revenue, the market share would be 44%.

  • Total TV Market - The combined entity's market share would be 42%.

  • Digital OTT - The market share for digital OTT would be approximately 35%.

• Content Assets - Disney India would bring in around 30,000 content assets to the merger.

• TV Viewership - The combined entity would hold a significant 40% share of TV viewership in the top 10 channels according to BARC (Broadcast Audience Research Council) as of CY23.

The Disney's Fall

To understand Disney's fall, we need to understand, firstly need to understand, how Disney evolved in India, and at what stage it was, when this downfall started.🤔

So, lets begin! 👀

A Brief Overview of Disney's business in India (1993 - 2021)

• In 1993, Disney entered into India, a nation boasting a population of 1.4 billion potential media consumers, by partnering with a distributor to broadcast its content.

• In 1994, Disney formed a strategic partnership with the leading Indian media conglomerate, Star India, to launch additional television channels in India.

• In 2001, Disney acquired a significant stake in UTV Software Communications Ltd., an Indian media and entertainment company, marking its entry into the Indian film production industry. And went to buy full stake in UTV, by 2006

• In 2008, Disney Channel was launched in India, which became one of India's leading children's entertainment channels in the country.

• In 2012, Disney launched its first Disney-branded theme store in India, offering a wide range of merchandise featuring popular Disney characters and franchises.

• In 2015,  Marvel Studios was reorganized under the Walt Disney Studios.

• In 2017, Disney acquired the Indian streaming platform, Hotstar, through its acquisition of 21st Century Fox from the Murdoch family’s News Corp. 

  • • • Hotstar becomes a key asset for Disney's digital media strategy in India.

      • Among Fox’s assets, Disney won TV and streaming rights to the Indian Premier League cricket matches, from 2017 to 2023.

• In 2018, Disney+ Hotstar had 50 million paid subscribers and became India’s largest streaming platform

• In 2019, Disney officially rebranded its Indian streaming platform as "Disney+ Hotstar" to leverage the global appeal of its Disney+ brand. 

  • • • Disney’s adventures in India were at their highest point at this time. 

      • At its Pandemic-fueled peak, Disney+ had 162 million subscribers in India.

Now, the question is, 

If Disney was growing and had huge subscriber base, then, What happened in last 2 years, that Disney had to merge with ViaCom 🤔

Challenges for Disney backed by Ambani-controlled Viacom18

Despite amassing substantial subscriber numbers, Disney found itself incurring significant losses. 📉

The pursuit of viewership came at a hefty price, with Disney losing nearly $500 million 📉 worldwide. 

By the summer of 2022, the company's global operations had suffered losses exceeding $11 billion, a result of the acquisition of Fox and the launch of Disney+.

That is when Disney ran into trouble. 

Nevertheless, the company managed to offset this loss to some extent by gaining 800,000 new subscribers from other parts of the world.

And, that said, there, began the holy trail of Disney's fall.

Mukesh Ambani's Genius Strategy to beat 100 yr old Giant Disney in the Indian Market

Well, This merger, might look like just a business deal, the point to note here is, Mukesh Ambani broke Disney's business step by step

The Ist Snack 🍔 (Revolutionary Move by Mukesh Ambani)

Mukesh Ambani-backed Viacom18 had won the digital streaming rights for IPL from 2023 to 2027, for Rs 23,758 crore ($2.89 billion), which Disney previously held.

Even though disney still retained, the Television rights for Streaming IPL, It still came out as a big blow to Disney

The 2nd Snack 🍔

From, May 2023, Jio Cinema started streaming HBO, Max Original, Warner Bros content, which had previously been carried on the Disney-owned Star TV platform, as Star's contract ended up in March 2023.

The 3rd Snack 🍔

In May 2023, JioCinema also inked multi-year deal with NBCU, to bolster its premium content library. The deal was valued at $15-20 million per year. 

"As per Bloomberg report, estimated value of Disney’s India unit sank to $4.5 billion from $10 billion by 2023" ~ Undervaluation of Disney

Rise of Reliance Industries 

The point to note is, this one deal didn't make Reliance the KING, Truth is Jio was laying foundations to dominate Indian Media market since 2016. 

2016 - Mukesh Ambani launched Jio's 4G services, along with Jio Cinema, Jio Music, Jio TV and other digital services.

Jul, 2017 - RIL bought 25% stake in Balaji Telefilms for Rs 413 crore ($58 million). This gives JioTV and JioCinema access to Balaji Telefilm's content.

Feb, 2018 - RIL buys a 5% stake in NYSE-listed Eros International for $48.75 million.

Mar, 2018 - RIL announced a strategic merger of its digital music service JioMusic with OTT

music platform Saavn.

Jul, 2018 - JioGigaFiber services (high-speed wired broadband) were announced.

Oct, 2018 - In a bid to strengthen its GigaFiber, Jio invested in two cable broadband companies-Hathway and Den Networks.

2022 - CCI approves merger of Jio Cinema OTT platform with Viacom18

And with this, RIL had made a huge base in Media Industry

2023 - Reliance Industries snatched away the IPL streaming rights in 2023 for nearly $3 billion

What's ahead for RIL and other players?

"Remember what happened with other players like Airtel, Aircel,Vodafone, Idea etc, once Jio entered the network market."

A similar scenario could unfold in this case too.

Impact on other linear TV broadcasters

• Other linear TV broadcasters, such as Sun TV, ZEEL, Sony, and others, will have huge impact on them, as they may not be able to scale up on market share. 

• The merged entity’s focus on maximising market share through increased investments in content, synergies, and enhanced marketing power poses challenges for individual broadcasters to compete and grow. 

RIL's - Monopoly in the Sports Streaming

• On the sports front, the merged entity is set to become monopolistic, with Disney and Jio collectively controlling approximately ~75-80% of the Indian sports market across both linear TV and digital platforms. (Primarily cricket)

IPL Advertising Control

• As, now, RIL will own, both the Digital channer and advertiser, this can create a monopoly and they can increase the prices, as they want.

• Any advertiser will have to negotiate the prices with RIL only as there is no other option. There is a possibility that this results in ad rates for cricket reaching a point where only the biggest advertisers could afford it.

Jio - The Ultimate Content Destination

• Telecom companies have been using OTT as a value-add to gain subscribers. 

• And OTT companies leverage on telecom plays to scale up their subscriber base.

• With the vast content library of Jio and Disney, the merged entity’s content, spanning

• • • International movies

    • Web series

    • Sports content

    • And, Catch-up TV content

this, could prove advantageous for Jio subscribers and make Jio a ultimate content destination

Possible Impact on Bharti Airtel 

• Jio might start offering Prime services, providing subscribers access to content at an affordable or even free price through last mile resource and 5G wireless access. 

• RIL will have a big advantage of last mile with Jio having a subscriber base of more than 450 million smartphone users. 

• This route, if taken by RIL,will hit Bharti Airtel substantially, as Airtel has always tried to tie up with OTT players like Amazon Prime.

• Thus, Bharti Airtel may have to invest heavily in own content or shape partnerships with global OTT giants such as Netflix and Amazon Prime or other OTT platforms to generate the lead in the content ecosystem.

BUSINESS LESSONS 

• 1. Reliance first scaled Jio & then moved to another domains.

  2. Unless you build barriers to entry, which cannot be replicated with money, any big player with deep pockets can just dismantle your company.

  3. A Business Ecosystem is more powerful than standalone system.