Reliance and Disney Agree On $8.5 Billion Merger to Create an India Entertainment Powerhouse

Reliance and Disney are set to dominate 85% of the Indian streaming industry after their merger, slated for March 2025, succeeds.

The merger will see the two boost their competitiveness against other streaming platforms offering their services in India such as Amazon Prime Video, Apple TV, Netflix, Sony, and Zee.

Reliance and Disney announces joint merger for entertainment brands in India. pic.twitter.com/hZeojFqJC9

- Indian Tech & Infra (@IndianTechGuide) February 28, 2024

The merger will also create an $8.5 billion media entertainment powerhouse. Reliance will invest $1.4 billion in the merger and hold a 63% stake, while Disney will hold a 37% stake in the new company.

Disney Expands Further Into India

The merger between Disney and Reliance will see the former expand its presence across India according to Reuters.

Disney has previously struggled to manage the outflow of customers from its Indian streaming business. The US entertainment firm has also strained to maintain the billions of dollars needed to make rights payments on Indian cricket, further showing how foreign businesses have been struggling to expand their presence in India.

Under this merger, Disney has been valued at around $3 billion. Which is notably low compared to its 2019 valuation of $15 billion. However, with Reliance, Disney seeks to expand its presence in India and grow its valuation.

The merged entity will have 120 TV channels and two streaming platforms. It will also hold streaming cricket rights to two major tournaments for one of the most popular sports in India. India has a very large following for cricket.

Disney and Reliance are looking to leverage this allegiance to cricket to become a sports behemoth in the country. It also aligns with the efforts made by other streaming companies such as Disney and Prime Video to expand their presence into sports.

Given that the two will control a massive market share of the Indian streaming industry. They will have more authority when negotiating advertisement contracts. Disney is also joining hands with a company with high liquidity, which may help cushion its financial status.

Disney has already made inroads in India's sports industry. Last year, Disney's Hotstar confirmed providing free streaming services for cricket tournaments across India. The offering seeks to bring millions of viewers to the platform and rival competitors that already have a presence in the industry.

Reliance to Outperform Competition in India

On the other hand, the merger will also help Reliance to expand its presence in India and outperform the competition. Reliance, owned by Asia's richest man, Mukesh Ambani, has been battling competition from rivals such as Sony, Zee Entertainment, and Netflix.

Last year, Hotstar also announced that it would give users access to the Asia Cup. And the ICC Men's Cricket World Cup tournaments without any additional cost to users. Interestingly, Disney has previously offered cricket on the platform at no additional cost. However, it required users to make a paid plan subscription to access the sport.

In January, Sony pulled out of a planned $10 billion merger with Zee. Which could have seen the two dominate the Indian entertainment industry. Sony opined that the decision to halt the merger was triggered by Zee's failure to fulfill certain conditions.

Sony is said to have withdrawn the agreement to merge its India operations with Zee Entertainment, taking the final step in scrapping a two-year-old plan that sought to create a $10 billion media giant https://t.co/sq6P7wTeXB

- Bloomberg (@business) February 29, 2024

The fallout exposed Zee and Sony to weakened competition from other industry giants. Reliance and Disney will now have the upper hand in the industry and be in charge of one of the largest entertainment industries globally valued at $28 billion. India's entertainment market also targets 1.4 billion people.

Under the new merger, the wife of billionaire Ambani will be the chair of the board. On the other hand, the former Disney executive, Uday Shankar, will be the vice chair.

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