The likely coming together of Reliance Industries Chairman Mukesh Ambani’s Viacom18 with Walt Disney’s India operations, and clarity over the long-drawn Zee-Sony merger deal could reshape the country’s entertainment ecosystem in 2024, helping revive investments held up due to the prevailing uncertainties.
The three groups—assuming the Viacom18 and Walt Disney deal goes through, and Sony and Zee go their separate ways—would command 65-70% of the TV market and around 40% of the OTT market. However, only one (Viacom-Disney combined) could have the necessary heft to drive innovation in content that the linear medium has lacked these past few years.
Surely, the combined might of Reliance and Disney could set competition up at a disadvantage as far as bargaining power for ad rates goes, and OTT industry rivals might be forced to introduce more free models to remain relevant to consumers. Further, new players could crop up to explore niche language markets or demographics, distinguishing themselves from the big boys.
“Mergers and deals can lead to the creation of larger entities with enhanced resources and capabilities. This increased scale can intensify competition within the Indian media and entertainment (M&E) industry, as these entities may have more negotiating power, larger content libraries, and diversified revenue streams,” Deleise Ross, associate vice-president at media agency Mudra Max said.
“This could be one of the threats for rivals,” Ross said.
She added that the failure of the merger, though, could present opportunities for other media companies to explore strategic partnerships, acquisitions or investments to strengthen their position in the market. The lack of consolidation could ensure a more balanced competitive environment, preventing a single entity from dominating the market.
A senior media industry executive said the impact of the two potential mergers would be massive from a distribution point of view, with other broadcasters squeezed for carriage fees and operators forced to keep the bigger entities happy. “Sports rights too could come down since there would be fewer players competing now,” the person added.
Japan’s Sony group is reportedly planning to scrap the agreement to merge its India business with Zee Entertainment Enterprises over stalemate on who would lead the $10-billion merged entity. It reportedly no longer wants Zee’s current CEO Punit Goenka to helm the merged entity.
Whether the Zee-Sony deal goes through or not, it would directly impact rivals Reliance and Disney, whose merger, meanwhile, would ensure they have the biggest pie of the TV ad market at 40-45%. “The merged entity will have approximately 100 TV channels, of which 70 will be Disney and the rest Viacom. The combined resources and content libraries of Disney and Reliance could impact traditional TV networks, especially if the deal leads to shifts in advertising revenue and viewer preferences. Smaller media companies may find it challenging to compete with the scale and resources of a merged Disney-Reliance entity. They might need to explore strategic partnerships or focus on niche markets to maintain their positions,” Ross pointed out.
Harit Nagpal, chief executive and managing director, Tata Play, said consolidation of the big four broadcasters will make the businesses healthy while retaining competitiveness. “The process has taken longer than it should, and should now settle so that the broadcasters can start looking at the customer instead of each other. It’s been a while since any new format or a large soap was launched. Recent times have seen blockbuster movies being released on TV with little fanfare. This can’t be good for the industry if it goes on any longer,” Nagpal added.
To be sure, while the OTT market in India is far from making profits as content costs escalate, there is some scope for stabilization with these mergers, even as smaller fringe players would be forced to strengthen their AVoD (advertising-based video on demand) play, which in turn, could impact average revenue per user (ARPU).
“The entry of global tech giants such as YouTube, Meta, Netflix, and Amazon have played a pivotal role in expanding India’s video market, now estimated at $13 billion. It is noteworthy that the combined market share from the two potential mergers will be less than 40% of the total video market. Nevertheless, it is imperative for traditional and domestic companies to join forces and leverage their local IPs to thrive in the new age of streaming,” said Mihir Shah, vice-president, Media Partners Asia (MPA), an independent provider of research, advisory and consulting services across the media and telecoms sectors in Asia Pacific.
Linear television in India continues to hold significant value, not only due to its profitability but also because the low-cost local IPs featuring recurring episodic content has now found a strong resting place on streaming, Shah added.
