We spoke to D Sport's R C Venkateish, Deloitte's Jehil Thakkar, Castle Media's Vynsley Fernandes and Big Synergy's Indranil Chakraborty to find out what they think of this merger.
'The Walt Disney Company' and '21st Century Fox' merger, where Disney has agreed to pay a sum of $52.4 billion to acquire most of Fox's assets, is definitely going to be a major game changer globally, but, how does this change things in the media and entertainment space in India?
Disney is currently the market leader in the kid's genre in India, but that's about it when it comes to this country. Include its mushrooming merchandising and licensing business, its top line in India would not be more than Rs 700 crore. With this merger, Disney becomes the largest broadcast conglomerate in India overnight.
On the other hand, Star India, which now will be a part of Disney, has a substantial presence in regional markets, leads the Hindi General Entertainment space with Star Plus and Star Bharat and is a clear leader in Sports (Star Sports bouquet), English Movies (Star Movies bouquet), English Entertainment (Star World) and Infotainment (National Geographic Channel). Not only linear broadcasting, if we omit YouTube and compare Netflix, Amazon Prime, Voot, with Star India's Hotstar, it is miles ahead of its rivals in the video on demand space in India. Fox Star Studios, which recently made movies like 'MS Dhoni' and 'Phillauri', will get Disney back into the Hindi Film Production business, which it exited last year. It will now also have a distribution tool in its arsenal with Tata Sky.
Overall, the merger is certainly an advancement for the Mickey Mouse creators, but will this bring in a set of changes or reshape the M&E space? Will the two culturally match each other? Will Disney, powered by Star in India, become too big for distribution platforms to negotiate with? Will it enhance the demand for content in the market? The questions are numerous...
We spoke to our experts, namely - former ESPN India managing director who was also chief executive officer of Dish TV and is now working closely with Discovery's sport channel, D Sport, R C Venkateish; Jehil Thakkar, partner, Deloitte India; Vynsley Fernandes, director, Castle Media; and Indranil Chakraborty, CEO, Big Synergy, to find answers to all these questions. Here's what they have to say...
R C Venkateish
As far as India is concerned, in the short term, because Star is a dominant player while Disney is a relatively smaller one, I don't see much of a change. However, it will be interesting to see how Disney plays out its streaming game in the years to come. They were planning to launch ESPN Streaming services in 2018 and follow it up with Disney Streaming Services in 2019-2020 to compete with Netflix, but now, with Hulu coming into the game, it becomes a very interesting field to watch.
When it comes to India, I don't see a cultural mismatch simply because Disney is a $30 million broadcast business while Star is a $2 billion entity. Also, Star India management has done a great job in building the business, so I don't see Disney changing anything there either. It will be a case of Star absorbing Disney employees and, at best, there could be a rebranding exercise, but nothing more than that.
I don't think anybody could have foreseen 21st Century Fox being a seller, but this then gives us an indication of the days ahead. If you see, what they retained are News and Sports, so it is quite clear that entertainment content like fiction shows, cinema and others will be the immediate ones to face challenges from Google, Facebook, Amazon, Netflix et al. These players are not only acquiring content but also creating themselves and Netflix and Amazon are great examples of that. Facebook's Rs 3900 crore bid to get the digital streaming rights for IPL was also an eye-opener for many. All of these factors might have played a vital role in Murdoch's decision.
A deal like this was always on the cards; if we recall, Murdoch tabled a bid of about $84 billion to acquire Time Warner about a year and a half ago. He realises that the way media and entertainment have been functioning in last 50-60 years will change now with the growth of streaming services. Earlier, content creators could not connect directly with consumers, it was always through a distribution network; but now, they can connect with their customers directly. So, a deal like this was well foreseen, but what surprised many is the fact that Fox is a seller here and not a buyer.
In the Indian context it is a complementary deal and with it, Disney now becomes the number one broadcaster in the country. It will be interesting to see what role Hotstar plays in Disney's streaming ambitions.
If you look at Disney's offerings at this stage in India, they do not have heavyweight channels to actually create a bouquet's strength; whereas Star's channels are heavyweight channels and have that strength. Now, if you look at the media and entertainment space in India, Zee, because of its interest in Siti Cable, Dish TV and Videocon D2H, has a muscle of strength in distribution and Star too has some strength because of Tata Sky. Disney did not have that strength either. Now, with Disney and Star coming together, they can actually provide a wider range of packages and with a stronger hold in the distribution business.
Any distribution platform (Cable, direct-to-home, HITS) as a matter of a business model, is always, in a way, concerned whenever there is an integration of content companies. Broadcasters coming with 90 channels will always have a stronger position whenever negotiating with the distribution platform. It's too early to make a call, but it's worth watching to see what happens in the distribution space.
In the short run, I don't see this deal making a big difference to content creators; I don't see any new investment coming into the content space because Star has already invested heavily on Sports and other entertainment content across regions and genres. This deal is to prepare for the next 25 years. Today Netflix, Amazon, Facebook, Google, and Apple, are in constant talks with content creators and nourishing the idea of original content creation. In the next 12-18 months, if Hulu launches in India or Hotstar starts creating fresh content aggressively, the need for content will go up.
While globally the discussion is of how this positions Disney to fight the new-age media players like Netflix, Amazon and others, in India, I know many will say that Disney, due to this merger, has overnight become the number one media conglomerate in the country, but in my mind, I still think it's not. To me, the biggest media company at this stage is Mukesh Ambani's Reliance. I say this because Jio has already started creating original content for the Indian market, which they plan to distribute to Jio subscribers' (140 million) handheld devices through its 'My Jio' bouquet (Jio TV, Jio Movies, Jio Music and others) and to TV screens through Jio cable and broadband. Reliance owns Network18 and in partnership with global content powerhouse Viacom, runs Viacom18, which is a formidable force in the general entertainment, youth and kid's genres.
Reliance has a serious presence in News Broadcasting with the CNBC-TV18 and CNN-TV18 bouquet and recently, it invested Rs 413 crore in Ekta Kapoor's Balaji Telefilms to enhance its content supply. The man already has his fingers on many things and is just waiting to begin the onslaught... it is just a matter of time before he goes out and acquires more assets to expedite his content play and then it will be interesting to see how the merger takes on this Reliance onslaught. That would be far bigger competition for Disney in India than the Netflixes, Amazons and Facebooks.