A digital entertainment giant in the making

The Competition Commission of India (CCI) has provisionally approved a USD 8.5bn (Rs 70,350 crore) merger between Disney and Reliance Industries.

Reliance will control the merged entity, with a 56 percent stake. Disney will own 37 percent of the combined firm, while Bodhi Tree Systems will have the remaining 7 percent stake. RIL will infuse Rs 11,500 crore in the merged entity. Nita Ambani and Uday Shankar will be the merged entity’s chairperson and vice chairperson. Disney Star head K Madhavan is likely to exit.

The joint venture will have broadcasting rights for most of India’s sports events, including coveted cricket tournaments.

Shardul Amarchand Mangaldas & Co and Khaitan & Co advised Reliance Industries and Viacom 18 on the Competition Law aspect of the deal.  AZB & Partners served as legal counsel to Disney on the transaction.

The deal is subject to the compliance of voluntary modifications. A CCI order detailing these modifications will be released soon.

Concerns had been raised about the control this merger would grant the two companies over broadcasting rights for cricket, the country’s most popular sport with a massive fan base. The two companies have spent USD 9.5bn on TV and streaming rights for the IPL, T20 World Cups, and matches held by the International Cricket Council. With the merger, the two companies will also have Indian broadcast rights for the Wimbledon, MotoGP and the English Premier League.

One of the main concerns raised by the CCI was the potential for the merged entity to control the sports TV channel segment. The watchdog highlighted that the sports TV channel market is already highly concentrated, with most popular sports content, such as cricket, being streamed on Disney or Reliance platforms. In the 2023-24 period, Disney had a market share of 77.7 percent in this segment, while Reliance’s media division held a 7.5 percent share. Sony was a distant third with 8.6 percent. The merger could increase their market power, allowing them to dominate negotiations for broadcasting rights and advertising deals.

The CCI also examined the bidding patterns for sports rights, noting that Disney and Reliance were already close competitors in this space. Post-merger, their combined financial strength could potentially stifle competition further.

CCI had raised concerns that the new entity could increase advertising prices for these matches. Both Disney and Reliance are key players in this sector, and their merger could reduce the number of competitors, leading to less competitive pricing for advertisers. This could leave advertisers with fewer options and less bargaining power. However, the two companies have pledged not to raise advertising rates excessively for cricket match streams. They have also said they would sell seven to eight of their non-sports TV channels to balance out revenues.

With CCI approval in place and the National Company Law Tribunal (NCLT) posting the merger scheme for final hearing, integration between the two companies will begin soon. The final approval has to come from the ministry of information & broadcasting.
BCS Bureau