Disney and Reliance in $8.5bn deal to merge TV and streaming media assets
The merger values the India business of the US entertainment giant at about $3bn, far lower than the valuation of roughly $15bn in 2019
28 February 2024 - 21:56
byAditya Kalra, Dawn Chmielewski and and Munsif Vengattil
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Reliance, led by Asia’s richest man Mukesh Ambani, will inject $1.4bn in the merged entity. Picture: REUTERS
New Delhi/Los Angeles — India’s top conglomerate Reliance Industries and Walt Disney have announced the merger of their India TV and streaming media assets, creating an $8.5bn entertainment juggernaut far ahead of rivals in the world’s most populous country.
Reliance, led by Asia’s richest man Mukesh Ambani, will inject $1.4bn in the merged entity, with the company and its affiliates holding a stake of more than 63% and Disney the rest, the companies said in a statement on Wednesday.
For Disney, the merger comes after its long struggle to arrest a user exodus from its bleeding India streaming business and financial strain caused by billions of dollars in Indian cricket rights payments. This is another example how foreign businesses can struggle to grow in India.
The merger values the India business of the US entertainment giant at about $3bn, far lower than the valuation of roughly $15bn when Disney acquired it as part of its Fox deal in 2019. A senior Disney source said the value of the company’s India assets was closer to $4.3bn, when accounting for synergies.
Together, the Reliance-Disney merged entity will have 120 TV channels and two streaming platforms, plus TV and streaming cricket rights for key tournaments in a country with a crazy following for the sport.
“The combined entity will create a sports behemoth in India,” said Jinesh Joshi, an analyst at India’s Prabhudas Lilladher.
“This merger will give Reliance great bargaining power when it comes to negotiating advertisement contracts ... For Disney, coming together with a bigger player, in terms of (financial) pockets, will give it a cash cushion,” he said.
The companies said the transaction valued the merged venture at about $8.5bn on a post-money basis. They did not elaborate.
The deal will help Ambani eclipse rivals such as Japan’s Sony, India’s Zee Entertainment and Netflix in the country’s $28bn media and entertainment sector.
Reliance said Ambani’s wife Nita would chair the board of the combined entity. Former top Disney executive Uday Shankar would be vice-chair.
The merged entity will have more than 750-million viewers in India and cater to India’s diaspora globally, said the companies.
“Reliance has a deep understanding of the Indian market and consumer,” Disney CEO Bog Iger said in the statement. The deal would allow “us to better serve consumers with a broad portfolio of digital services and entertainment and sports”.
An internal memo by Disney’s entertainment co-chairs Dana Walden and Alan Bergman, and ESPN’s Jimmy Pitaro, seen by Reuters, said India remained a key market for the company and one of the “strongest international growth markets of scale. We are committed to ensuring a robust presence there.”
India challenges
The deal also comes as Disney faces pressure globally to streamline its businesses. Iger returned to Disney in November 2022, less than a year after he retired, and has since restructured the company to make the business more cost effective.
Still, Disney is up against activist billionaire investor Nelson Peltz, who is pushing the home of Mickey Mouse to cut costs and create a profitable streaming business globally.
Iger said in November that the company would like to stay in India, but it was considering its options. Disney internally recognised that it misjudged the Indian market, company sources have told Reuters.
Disney acquired Indian streaming service Hotstar and Star TV channels, a household name in India, when it paid $71bn for some 21st Century Fox global assets in 2019.
With the streaming rights of the Indian Premier League (IPL), the world's richest cricket league, in the bag, Disney made cricket on Hotstar a paid service in 2020 and was confident it would reach up to 100-million users within years.
That did not happen. As Ambani snatched IPL rights away in a $2.9bn bid in 2022, and streamed the games free, Disney subscribers fled. Of 61.3-million Hotstar users in October 2022, abou t23-million had left by December.
Disney said it would take a noncash impairment charge of $1.8bn to $2.4bn, about half of which reflects a writedown of Star India assets, according to regulatory filings on Wednesday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Disney and Reliance in $8.5bn deal to merge TV and streaming media assets
The merger values the India business of the US entertainment giant at about $3bn, far lower than the valuation of roughly $15bn in 2019
New Delhi/Los Angeles — India’s top conglomerate Reliance Industries and Walt Disney have announced the merger of their India TV and streaming media assets, creating an $8.5bn entertainment juggernaut far ahead of rivals in the world’s most populous country.
Reliance, led by Asia’s richest man Mukesh Ambani, will inject $1.4bn in the merged entity, with the company and its affiliates holding a stake of more than 63% and Disney the rest, the companies said in a statement on Wednesday.
For Disney, the merger comes after its long struggle to arrest a user exodus from its bleeding India streaming business and financial strain caused by billions of dollars in Indian cricket rights payments. This is another example how foreign businesses can struggle to grow in India.
The merger values the India business of the US entertainment giant at about $3bn, far lower than the valuation of roughly $15bn when Disney acquired it as part of its Fox deal in 2019. A senior Disney source said the value of the company’s India assets was closer to $4.3bn, when accounting for synergies.
Together, the Reliance-Disney merged entity will have 120 TV channels and two streaming platforms, plus TV and streaming cricket rights for key tournaments in a country with a crazy following for the sport.
“The combined entity will create a sports behemoth in India,” said Jinesh Joshi, an analyst at India’s Prabhudas Lilladher.
“This merger will give Reliance great bargaining power when it comes to negotiating advertisement contracts ... For Disney, coming together with a bigger player, in terms of (financial) pockets, will give it a cash cushion,” he said.
The companies said the transaction valued the merged venture at about $8.5bn on a post-money basis. They did not elaborate.
The deal will help Ambani eclipse rivals such as Japan’s Sony, India’s Zee Entertainment and Netflix in the country’s $28bn media and entertainment sector.
Reliance said Ambani’s wife Nita would chair the board of the combined entity. Former top Disney executive Uday Shankar would be vice-chair.
The merged entity will have more than 750-million viewers in India and cater to India’s diaspora globally, said the companies.
“Reliance has a deep understanding of the Indian market and consumer,” Disney CEO Bog Iger said in the statement. The deal would allow “us to better serve consumers with a broad portfolio of digital services and entertainment and sports”.
An internal memo by Disney’s entertainment co-chairs Dana Walden and Alan Bergman, and ESPN’s Jimmy Pitaro, seen by Reuters, said India remained a key market for the company and one of the “strongest international growth markets of scale. We are committed to ensuring a robust presence there.”
India challenges
The deal also comes as Disney faces pressure globally to streamline its businesses. Iger returned to Disney in November 2022, less than a year after he retired, and has since restructured the company to make the business more cost effective.
Still, Disney is up against activist billionaire investor Nelson Peltz, who is pushing the home of Mickey Mouse to cut costs and create a profitable streaming business globally.
Iger said in November that the company would like to stay in India, but it was considering its options. Disney internally recognised that it misjudged the Indian market, company sources have told Reuters.
Disney acquired Indian streaming service Hotstar and Star TV channels, a household name in India, when it paid $71bn for some 21st Century Fox global assets in 2019.
With the streaming rights of the Indian Premier League (IPL), the world's richest cricket league, in the bag, Disney made cricket on Hotstar a paid service in 2020 and was confident it would reach up to 100-million users within years.
That did not happen. As Ambani snatched IPL rights away in a $2.9bn bid in 2022, and streamed the games free, Disney subscribers fled. Of 61.3-million Hotstar users in October 2022, abou t23-million had left by December.
Disney said it would take a noncash impairment charge of $1.8bn to $2.4bn, about half of which reflects a writedown of Star India assets, according to regulatory filings on Wednesday.
Reuters
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