Disney's Efforts to Revive its Indian Ambitions
Disney's ambitious plans in India hang in the balance, as the coming weeks hold the key to their success in the world's most populous nation
Over the next few weeks, the fate of Walt Disney in the world's most populous country will be determined. Disney (DIS) gained the coveted Star India network as a part of its acquisition of most of 21st Century Fox from Rupert Murdoch for a staggering $71 billion five years ago.
Following the blockbuster deal, the Magical Kingdom acquired Fox's business in India, expanding its audience to more than 700 million people in the South Asian country, known as one of the world's most lucrative media markets.
However, Disney's expectations for a happily ever after have not been met. CEO Bob Iger disclosed in an earnings call last year that "parts of that business [in India] are challenged for us."
The House of Mouse suffered a major blow in 2022 when it lost the digital streaming rights for the highly popular Indian Premier League (IPL) cricket matches to billionaire Mukesh Ambani's conglomerate. Now, the US company is working to revive its ambitions in India.
Disney and Reliance Industries led by the Ambanis are in talks to merge their Indian media businesses, potentially creating a major entertainment entity in which the Indian conglomerate would have the controlling stake. Legal firms have been brought in to conduct antitrust assessments for the merger, according to Reuters. In a report last December, The Economic Times suggested that Ambanis' energy-to-telecom conglomerate would hold 51% ownership, with Disney retaining the remaining 49%. The merger is expected to be finalized by the following month, the Indian publication noted.
CNN's request for comment was not responded to by Disney, and Reliance declined to comment. As Disney seeks a partner in the world's fastest growing major economy, they are also facing a range of issues in their home turf of Burbank.
The 100-year-old Hollywood powerhouse is grappling with an uncertain U.S. landscape as more viewers turn away from traditional TV in favor of platforms like TikTok and YouTube. Disney has experienced significant challenges from box office disappointments and internal corporate changes.
In November, Iger acknowledged that the company is exploring opportunities in India and evaluating their options in the market, expressing a desire to maintain a presence there.
The lukewarm star
Its easy to see why. With its relatively free market and vast English speaking population, India is an attractive country for global entertainment companies.
Prime Minister Narendra Modi's administration anticipates that the country will soon rise to become the world's third largest media and entertainment market, up from its current fifth place ranking. Disney gained access to this market through its acquisition of Fox. Star India has amassed a large and devoted following by investing billions in the broadcast rights for some of India's most popular sports, such as cricket. In 2017, it outbid Facebook (META) and Sony (SONY) with a $2.6 billion deal to broadcast the IPL for five years, solidifying its position as one of the most valuable sports properties in the world.
Star India's local content was a major advantage for the network. With nearly two dozen languages spoken in the country, Star India provides over 70 TV channels in 9 different languages. Disney, however, has had difficulty capitalizing on this opportunity.
Despite its successful TV business in India, Iger admitted in November that the company was facing challenges in other aspects. Following the loss of IPL rights to Reliance nearly two years ago, its streaming app, Hotstar, has seen a significant drop in subscribers.
The situation worsened in March 2023 when Hotstar stopped streaming HBO content. Shortly after, Warner Bros. Discovery (WBD), the parent company of HBO and CNN, transferred its content to Ambani's JioCinema, causing loyal Indian viewers of popular shows like "Game of Thrones" and "Succession" to switch platforms.
Analysts have raised concerns about Disney's approach in India, especially its significant investment in sports. Mihir Shah, a vice president at research firm Media Partners Asia, pointed out that while the company's entertainment assets are appealing, its sports business in India has encountered obstacles.
Disney lost the digital rights for IPL matches in 2022 but secured the TV rights until 2027 by paying over $3 billion. The company also retained the rights to broadcast International Cricket Council tournaments until 2027 for an additional "staggering $3 billion," according to Shah. He also noted that Disney's financial challenges were expected to persist in the future, largely due to their aggressive bidding in renewing rights.
From rivalry to partnership
The media giant has also missed out on fully leveraging its streaming services' "technical prowess," not only due to the loss of IPL but also because of "restricted investments in local entertainment content," according to Shah.
The American company's mistakes are occurring just as competition in India is heating up - the potential Reliance-Disney deal is not the only merger being considered. Sony and Zee Entertainment of India have been discussing a merger for over two years to create a $10 billion powerhouse. The fate of this merger is still uncertain, but analysts believe that such partnerships will be crucial for achieving scale and competing with global streaming giants like Netflix and Amazon, who both have a significant presence in India.
Analyst Aliasgar Shakir of Motilal Oswal Financial Services stated that these potential deals indicate that India's entertainment industry is moving towards a phase of consolidation, with only a few financially strong players able to operate. During his November earnings call, Iger expressed Disney's interest in not only continuing operations in India but also in improving their bottom line and strengthening their position in the market.
With his enormous wealth and growing media aspirations, Ambani, the second richest man in Asia, can offer Disney more than just financial support. The resulting company would be substantial, boasting over 100 TV channels and two streaming platforms.
"This doesn't necessarily mean that Disney is reducing its presence in India," commented Shah. "The specifics of the agreement are still unclear, but it seems to be shaping up as a collaboration between Reliance Industries and Disney."
It could also be the beginning of a strong partnership that extends beyond just media, with experts in the industry speculating about a potential joint venture into theme parks.
"We have to remember that both these companies have business interests beyond media and entertainment, and this partnership could be a start of something bigger," Shah said.
