In the first stage, The Walt Disney Co., the parent of Disney Star and the world’s largest media company, will transfer the Indian television and digital assets to a new company, said the people cited above on condition of anonymity. RIL will buy 60% stake in this entity.
The transaction will not include Disney Star’s 30 percent stake in direct-to-home (DTH) company Tata Play, consumer goods business and visual effects studio Industrial Light & Magic (ILM), the first of the two people said.
“The talks are at an advanced level for a multi-layered deal,” the person said, requesting anonymity. “First, Disney India will transfer Disney Star channels and Disney+Hotstar to a new company in which Reliance will buy 60% for up to $2.4 billion. Rival Viacom18, in which Reliance holds a majority stake, is not part of this deal.” Reliance, the majority owner of Viacom18, may buy minority partner U.S. media company Paramount Inc., with the intention of merging it with the new Disney Star unit, the person added.
“Eventually, the plan is that the two entities (Viacom18 and the new Disney unit) will merge. While Paramount has indicated that they do not want to invest further, there is a possibility that it may leave the joint venture and continue to offer its content as part of license agreement,” he said. Disney Star declined to comment, while a RIL spokesperson said the company does not comment on speculation. Bodhi Tree, a joint venture between former Disney Asia Pacific chairman and India chairman Uday Shankar, and James Murdoch’s Lupa Systems, may eventually buy 7-9 % of the merged entity, but RIL will buy. continues to have a majority in the media and entertainment business, both people said.Disney Star is among India’s largest broadcasters with more than 70 linear channels across nine languages in SD and HD formats covering general entertainment, movies and sports genres. In the last financial year, it posted standalone revenue of ₹17,332.78 crore, with a net profit of ₹2,000 crores.
Meanwhile, Novi Digital, which owns Disney+Hotstar, recorded revenue ₹4,413.41 crore, and a net loss of ₹748.34 crores. At its peak, Disney + Hotstar had 61.3 million paid subscribers, which fell to 37.6 million in the last quarter after the streamer lost the rights to the Indian Premier League and did not renew its deal for HBO Originals. The valuation of the Indian business is down significantly from its peak when Disney acquired it from Rupert Murdoch’s 21st Century Fox as part of a global deal. Disney paid $71.3 billion for Fox’s entertainment assets in 2018, valuing Star India at more than $15 billion.
“Disney Star has since lost its top leaders, and the business, while growing, has also made some decisions that will result in the company reporting a net loss for the first time this fiscal year,” said a media analyst on condition of anonymity. “While its entertainment business remains profitable, streaming will continue to be unprofitable for some time. Which is good. But the sports business will be extremely unprofitable, and may trigger a capital call for the first time for operational reasons.”
Rumors of a Reliance-Disney deal have been circulating since the latter’s CEO Bob Iger famously announced last year that the company wanted to focus on its core business and called linear TV non-core. In an interview to CNBChe first said everything was on the table, but later during an earnings call, said he would like to stay in the market.
“In India, our linear business is actually doing quite well. It makes money. But we know that other parts of that business are challenged for us and for others, and we’re looking, I’ll call it broadly. We are considering our options there. We have an opportunity to strengthen our hand…We would like to stay in that market. And we’re also looking to see if we can strengthen our hand, obviously, improve the bottom line,” Iger said.
While the entertainment business alone generates a profit of over ₹2,000 crore annually, Disney Star did ₹23,575 crore for five years of TV rights of the IPL (2023-2027) and $3.03 billion for ICC media. While Disney Star sublicensed TV rights worth $1.4 billion to rival Zee Entertainment Enterprises, the latter has now sought to end the deal as its own merger with Sony Pictures’ India unit unraveled.
“Disney Star’s collective losses from the three properties—ICC World Cup last year, IPL 2024 and the ICC T20 World Cup 2024—will be in the range of ₹6000-7000 crores. Even after the profits of the entertainment business are considered, the company will have ₹5,000 crore of losses on its books in Disney’s single financial year (Disney follows the October-September accounting year). So it wants it to sell the majority of its business before the end of the year,” the analyst said.
Sources said the Reliance-Disney deal is expected to be announced by the middle of this month, and may not face scrutiny from the Competition Commission of India. However, the second stage of the deal, when Viacom18 will be merged into the company, is likely to face regulatory hurdles, they said.
Lata Jha contributed to the story.
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Published: 01 Feb 2024, 19:16 IST