© Reuters. FILE PHOTO: Disney+ Hotstar emblem is seen on this illustration taken August 22, 2023. REUTERS/Dado Ruvic/Illustration/File Photograph
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By Aditya Kalra, Munsif Vengattil and Arpan Chaturvedi
NEW DELHI (Reuters) – A merger of Walt Disney (NYSE:)’s India unit and billionaire Mukesh Ambani’s media enterprise would create an leisure powerhouse in India, however legal professionals say any deal would draw intense antitrust scrutiny and property would possible have to be shed.
Disney and India’s Reliance, which every have a serious streaming service in addition to 120 TV channels between them, are taking a look at merging into an entity through which Ambani’s group would possible have a majority stake, sources stated this week.
Particularly, a deal may benefit Disney whose Hotstar streaming app has been loss-making. CEO Bob Iger stated final month that whereas Disney’s TV channels have been doing properly in India, different elements of the enterprise have been struggling and it was searching for to “improve the bottom line.”
If a deal was struck, it could be the second to seismically reshape India’s TV and streaming panorama as Japan’s Sony (NYSE:) additionally plans to merge its India enterprise with India’s Zee Leisure.
The Zee-Sony plan cleared a evaluate by the Competitors Fee of India (CCI) final yr and will shut within the coming weeks. The 2 firms have stated they are going to divest three of Zee’s Hindi TV channels as a part of their settlement for regulatory acceptance.
Though Netflix (NASDAQ:) and Amazon (NASDAQ:) additionally compete in India’s $28 billion media and leisure market, the emergence of two behemoths would in all probability create a duopoly wielding anti-competitive energy over advertisers, customers and content material creators, antitrust legal professionals stated.
“This deal may get closer scrutiny because of the increased concentration of market power post the Zee-Sony merger. That makes their path to CCI approval more challenging,” stated Avimukt Dar, founding companion at India’s IndusLaw.
Disney declined to remark. Reliance, its broadcast unit Viacom18 and the CCI didn’t reply to Reuters queries.
One key space of regulatory scrutiny for a Disney-Reliance merger can be their streaming companies and their energy over promoting throughout cricket – a sport that instructions fanatical devotion in India.
Disney Hotstar, India’s largest streaming app with 38 million customers, owns the rights for Worldwide Cricket Council’s matches in India till 2027, whereas Reliance’s rising JioCinema app has the rights for widespread cricket league IPL.
The CCI can be fearful that the “combined entity, due to its strong market presence in streaming can command their own rates and advertisers will be left without bargaining power,” stated Vaibhav Choukse, head of competitors legislation at Indian legislation agency JSA.
In TV too, there may be a lot which may displease regulators.
Viacom18’s 38 channels embody Comedy Central and Nickelodeon, whereas Disney, whose Star model has been a family title for many years in India, has 80.
Elara Capital estimates Disney and Viacom18 collectively can have the largest share of the TV adverts market at 43% whereas Zee-Sony would have 25%, making it troublesome for others to compete.
Estimates from the CCI doc approving the Zee-Sony merger additionally underscore the potential pricing energy of a Disney and Viacom18 mixture.
In Hindi leisure channels, for instance, as of final yr Disney and Viacom18 had a mixed share of 30% to 40%, in contrast with Zee-Sony’s 30-35%, the doc exhibits.
In native language Marathi channels, Disney had market share of 50-55% and when mixed with Viacom18 that might rise to between 65% and 75%. In Bengali language leisure channels, the 2 would command as a lot as 50% market share.
“If the market shares of the parties exceed 40-50% in any market, CCI is likely to conduct a detailed investigation,” stated Choukse.
Whereas divesting sure channels can be an choice to assuage CCI’s considerations, the merged entity might additionally supply commitments to not increase advert charges for a sure interval, in line with Gautam Shahi of Dua Associates.