A mega merger aims to reshape India's entertainment landscape

A significant merger is on the horizon that could transform the entertainment landscape in India. Bollywood icons Shah Rukh Khan and Salman Khan, who are well-known for their roles in popular films and shows, may soon be part of a much larger entertainment platform. Imagine having the ability to binge-watch your favorite series and movies, such as The Bear, Succession, and Deadpool, all on a single streaming service. This exciting possibility could become a reality for millions of viewers in India if a major merger between two entertainment giants is finalized. The deal involves Reliance Industries, one of India's largest conglomerates, and Walt Disney, a global leader in entertainment. Valued at an impressive $8. 5 billion, this merger aims to establish the largest entertainment company in India, potentially controlling around 40% of the television market and reaching an audience of approximately 750 million viewers through 120 channels. This merger would not only strengthen Disney's position in the competitive Indian market but also support Reliance's ongoing expansion efforts. However, the merger has raised concerns about the potential for monopolistic dominance in the Indian entertainment and advertising sectors. Critics worry that this merger could lead to a situation where one company holds too much power, making it difficult for smaller competitors to thrive. The newly formed entertainment powerhouse would face stiff competition from established streaming services like Netflix, Amazon Prime Video, and others. Disney's Star India currently operates over 70 television channels in multiple languages, while Reliance's Viacom18 manages 38 channels in eight languages. Both companies also own major streaming platforms, including Jio Cinema and Hotstar, and have significant stakes in film production. Their influence is further amplified by their ownership of broadcasting rights for numerous sports events in India, including the immensely popular Indian Premier League cricket tournament. In a country where cricket is a national obsession, this gives the merged entity a prime position in the market. According to Elara Capital, a global investment and advisory firm, the new company is expected to control 75-80% of the Indian sports streaming market across both traditional television and digital platforms. This dominance in the sports sector means that Reliance and Disney would command a substantial share of the overall advertising market. Karan Taurani, an analyst at Elara Capital, noted that sports are a key driver of viewership on both television and digital platforms, describing the merger as a 'large media juggernaut. ' While the merger promises to provide consumers with a diverse range of content, some critics are concerned about the concentration of power in the hands of a single player. KK Sharma, a former head of the merger control division of the Competition Commission of India, expressed that the emergence of such a giant in the market could raise red flags for competition regulators, especially when the next competitor struggles to maintain a single-digit market share. This is why analysts believe that India's competition watchdog has closely scrutinized the agreement before granting approval, with conditions that require the companies to comply with certain voluntary modifications. Although the specifics of these modifications have not been made public, reports suggest that both companies have committed to not excessively raising advertising rates during cricket match broadcasts. The success of the merger hinges on these assurances, as the Competition Commission retains the authority to intervene if the dominant entity poses a threat to market competition. In an increasingly competitive yet expanding Indian streaming market, both Disney and Reliance stand to gain significantly from this merger, which allows them to solidify their leading positions. However, experts caution that this could also lead to a decline in business for smaller players. The Indian market is known for its price sensitivity, and the combined entity could offer a comprehensive package that includes access to web series, movies, sports, original content, and a global catalog. Taurani emphasized that if the merged company can leverage Reliance Jio's extensive telecom subscriber base, it may become challenging for other streaming services to raise their prices. Reliance has a proven business strategy that has allowed it to thrive in the price-sensitive Indian market. For instance, when it launched Jio in 2016, it provided affordable mobile data, and its JioCinema streaming subscription is available for as little as 29 rupees per month. Mukesh Ambani, the chairman of Reliance, has promised 'unparalleled content at affordable prices' as part of this merger. This could create pressure on other streaming platforms to lower their prices as well. Media and entertainment industry specialist Vanita Kohli-Khandekar expressed concerns about the potential impact on content costs and programming expenses for other streaming services. She noted that Reliance's strategy of offering low prices could 'destroy value' for competitors. While streaming competitors may be manageable, the new company will also face stiff challenges from other well-funded rivals, including Google, Meta, and Amazon, who are actively trying to expand their presence in India. These global tech giants have played a crucial role in the growth of India's video market, which is now estimated to be worth $8. 8 billion in revenue for content owners. In the 2022-23 period, Google's YouTube alone held an impressive 88% share of India's premium video-on-demand market. As a result, the new Reliance-Disney entity will aim to dominate not only news, movies, and sports but also redirect digital advertising revenues from these major firms to its own coffers. Kohli-Khandekar remarked that the competition is now more balanced, as approximately 80% of digital revenues currently go to Google and Meta. To compete effectively, the new company must achieve scale, and it finally has the potential to challenge some of the large global players operating in India. However, she cautioned that while the new entity may possess scale and resources, it must also deliver quality content alongside quantity. If the streaming market shifts its focus toward viewership rather than subscriptions, the quality of programming may only be high on one or two platforms. This is a critical aspect to monitor as the merger unfolds.