How consolidation is the way ahead in visual media

Corporate money is fuelling it


In a recent advertisement, Sachin Tendulkar urges the audience to watch the Indian Premier League “only on” JioCinema. Clearly, when the ad was commissioned, the brief was to draw the audience away from Star Sports, which also will telecast the IPL starting on March 22. After the new turn of events, however, it seems neither Tendulkar nor JioCinema would mind people watching on either platform.

The merger comes at a time when streaming platforms are seriously thinking about tweaking their subscription-based model in favour of advertising supported video on demand.

When the Board of Control for Cricket in India (BCCI) sold the IPL broadcasting rights for the 2023-27 cycle, the rights for digital platforms and television were split into two packages. Star Sports, controlled by Disney, retained the television rights paying Rs23,575 crore and Viacom18 (JioCinema’s parent, owned by Reliance Industries Ltd) bagged the digital rights for Rs20,500 crore. And the two engaged in an advertising war. JioCinema got cricketers M.S. Dhoni and Suryakumar Yadav encouraging fans to watch the matches live from anywhere. Star Sports roped in Virat Kohli to emphasise the experience of watching it on television screens. JioCinema stumped everyone by streaming IPL for free.

The rivalry, however, has become a thing of the past, as Viacom18 and Disney are joining hands to create a 070,000-crore media giant. The media undertaking of Viacom18 will be merged into Star India Private Limited through a court-approved scheme of arrangement. Reliance will invest Rs11,500 crore in the joint venture in which Viacom18 will hold 46.82 per cent, Disney 36.84 per cent and Reliance 16.34 per cent.

The JV will be unparalleled in size and scale on the Indian visual media landscape. The new entity will become the largest broadcaster in the country with 110 television channels in multiple languages, two leading OTT streaming platforms (JioCinema and Disney+ Hotstar) and a viewer base of 750 million across the country. It is estimated that the it will have around 40 per cent market share in advertising and subscription. It will have in its kitty top satellite channels such as Star Plus, Colors, Star Gold, Star Sports and Sports18, and content from the vast library of Walt Disney. JioCinema also has the rights to stream the popular HBO shows.

But the prize catch will be cricket. “BCCI rights (television and digital) are with Viacom18, whereas International Cricket Council (ICC) rights are with Disney-Star. Further, digital rights of IPL are with Viacom18, while television rights are with Disney-Star. In effect, post-merger, the JV will emerge as a cricketing rights powerhouse,” said Jinesh Joshi, analyst at Prabhudas Lilladher.

It will have a significant presence in football broadcast as well with the popular English Premier League on Star Sports and Hotstar, and the Indian Super League and the Spanish LaLiga on Sports18 and JioCinema.

There will be a lot of synergies in the combined entity. “On the OTT side, despite being a late entrant, JioCinema has expanded aggressively, initially by bagging IPL rights and subsequently with the content of NBC Universal and Warner Bros. However, it still lacks a big content library, which has prevented it from building up a sizeable subscriber base. Disney+ Hotstar, on the other hand, has been a market leader in terms of paid subscribers. With this merger, JioCinema can take advantage of Hotstar’s superior technology,” said Pulkit Chawla, analyst at Emkay Global Financial Services.

There will be some cross-leveraging beyond the segment as well. RIL’s Jio is the largest player in the telecom space and the company could make use of this base to offer bundled plans.

The merger comes at a time when streaming platforms are seriously thinking about tweaking their subscription-based model in favour of advertising supported video on demand (AVOD). “In the OTT segment, 2023 saw subscription video on demand (SVOD) models take a bit of a backseat, with premium sports available for free across almost all platforms,” said Vibhor Gauba, associate partner, KPMG in India. “We believe that 2024 will continue to see the same phenomenon and hence SVOD monetisation is likely to be under pressure. Also, consumption is likely to see a robust growth, with premium sports properties primed to gain from advertisement/AVOD spends on digital.”

Two other major players, Zee Entertainment and Sony Pictures Network, were also in an advanced stage of a merger but it was called off by Sony. The deal had received most approvals, including from shareholders and the Competition Commission of India. Sony has filed a case in Singapore Arbitration Centre seeking compensation from Zee for not meeting the criteria for the merger, and Zee has approached the National Company Law Tribunal in a bid to get the merger deal enforced. For either party, the termination of the deal is a setback as they will have to take on the might of the combined strength of Disney and Viacom.

A merger between Zee and Sony could have created an entertainment behemoth with 75 channels, and Sony was planning to infuse $1.5 billion in the merged entity, which could have been utilised for content acquisition. This could have been a strong competitor to the Reliance-Disney JV.

Zee’s managing director Punit Goenka, however, remains upbeat on the network’s prospects. He said his company’s intrinsic value remained intact, and he had chalked out a structured plan to bring back its margins to industry-beating levels. “How I envisage taking the company forward in the coming quarters is centred on three key aspects. The first is frugality, the second is optimisation, and the third, the most important, is sharp focus on quality content,” said Goenka.

But analysts are concerned. “Though Zee is actively implementing measures to revive the business and efficiently run business operations as a stand-alone entity, concerns around weak financial positioning, corporate governance, and litigation outcomes continue to remain,” said Chirag Maroo, research analyst at Keynote Capital.

The focus of major broadcasters on OTT comes as no surprise―it is where the future is. According to the consulting firm PwC, India’s OTT revenue is expected to grow at a 14.32 per cent compounded annual rate to Rs3.51 lakh crore by 2027. It was only Rs1.80 lakh crore in 2022.

Content in regional languages has undoubtedly been a big driver of OTT growth. It is estimated that more than half of the movies on OTT platforms are regional titles. Similarly, regional content accounts for nearly half of the original content on OTT. According to PwC, “OTT video will continue to get its boost from regional play.”

OTT has also given companies a platform to expand their offerings in sports. Earlier, cricket and the major events in football, hockey and tennis accounted for bulk of sports coverage. But, today, companies have leveraged OTT to drive sports broadcasting in e-sports, kabbadi, basketball and volleyball, in addition to deepening the coverage in existing sports programming.

Not surprisingly, advertisers are also looking at digital marketing in a big way, with television advertising seeing a muted growth. As per an estimate of FICCI and EY, entertainment OTT platforms will generate around Rs6,000 crore of advertising by 2025.

Big companies are better positioned than the smaller ones to benefit from this booming market, as they could exercise significant bargaining power with advertisers and viewers. “Even the subscription business will get a fillip as bouquets [of channels] will be created around sports,” said Joshi of Prabhudas Lilladher. “Further, they may consider putting sports content behind paywall and raise subscription prices for OTT packs as well.”

Clearly, consolidation is the way ahead in the segment. “Consolidation should happen in the industry,” said Chawla. “Small individual players cannot take on Reliance and Disney. So, it becomes necessary for the smaller players to get together.”

Infusion of corporate money has also accelerated the consolidation. Adani Group took big media bets with its AMG Media Networks acquiring news broadcaster NDTV in 2022 . It has started expanding to regional languages. In December 2023, Adani Enterprises acquired a majority stake in the news agency IANS. It also controls Quintillion Business Media. “At the moment, the focus is to consolidate, expand the offerings across platforms and grow these businesses to become a preferred news destination for Indians in India and for a global audience,” said a spokesperson for AMG Media Networks.

Will there be an Adani vs Ambani battle in the entertainment broadcasting space, too? Will Zee and Sony shake hands again or will a new suitor emerge? Will OTT trump television as 5G gains traction? The broadcasting space has all the ingredients of a gripping soap opera.