Industry hails JioStar; will create scaled-up entity, could herald the consolidation process

With over 100 TV channels producing 30,000+ hours of TV entertainment content annually and an aggregate subscription base of over 50 million, the long-in-the-making merger of the media and JioCinema businesses of Viacom18 into Star India Private Limited (SIPL) has become effective, after receiving the approval from the NCLT Mumbai, Competition Commission of India and other regulatory authorities.

Reliance Industries, Viacom 18 Media, and The Walt Disney Company made this announcement yesterday (November 14, 2024), thus heralding the birth of a media joint venture behemoth that is valued at Rs 70,352 crore (~US$ 8.5 billion). At the closing of the transactions, the JV is controlled by RIL and owned 16.34% by RIL, 46.82% by Viacom18 and 36.84% by Disney. RIL has invested Rs 11,500 crore (~US$ 1.4 billion) into the JV for its growth.

Christened JioStar, the JV is home the combination of ‘Star’ and ‘Colors’ on the television side and ‘JioCinema’ and ‘Hotstar’ on the digital front.

The formation of this joint venture is expected to herald a new era in India’s entertainment industry, being one of the largest Media & Entertainment companies in India. This unique joint venture of Reliance and Disney brings together the companies’ content creation and curation prowess, world-class digital streaming capabilities along with a digital first approach that will help the JV deliver unparallelled content choices at affordable prices to Indian viewers and the Indian diaspora globally.

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The industry has largely given a thumbs up to the formation of JioStar. In conversation with Adgully, they discuss the implications for the media and entertainment ecosystem in India and how JioStar can change the dynamics of this industry.

Ashish Bhasin, Founder, The Bhasin Consulting Group, felt that this will create a scaled-up entity and, in some ways, herald the consolidation process. He added, “I believe all advertising and media will undergo consolidation. On the advertising agencies’ side, already four or five groups control 80% of the advertising spends globally. Now, in television, we have one big player. If the Sony and Zee merger had fructified, then we would have had another big consolidated player. But be that as it may, I think an era of consolidation is in front of us. Television is already showing signs of this, and soon, print and other media will also follow. So, that’s one thing.”

Continuing further, he said, “The second thing is that I think India has immense content capabilities. We have a great storytelling culture, strong filmmaking capabilities, and some incredible talent. So far, we’ve been importing content, like Spanish serials or Hollywood productions. I think there’s an opportunity for India to become a global supplier of talent and content.”

“The formation of this scaled-up entity is a good sign because it allows increased investment. I hope they will be investing heavily in content, and this has the potential to make us large exporters of content over time,” he added.

Lloyd Mathias, Investor & Business Strategist, considered the Jio-Disney merger to be a very big and significant development in the Indian media industry. “What has happened is that two global digital giants were beginning to become dominant players in the Indian media and entertainment industry. The first, of course, being Google, with its vast range of offerings. The fact that Google, along with YouTube, was very significant in terms of capturing a lot of advertising revenues – Google for search and YouTube for videos. The other big player is Meta. So, between Facebook, Instagram, and increasingly WhatsApp, they were taking a big chunk of the advertising revenue. The Indian media industry was heavily influenced by these two giants, who were mopping up close to 50-60% of total ad revenues,” he noted.

Elaborating further, Mathais said, “Traditional media houses had two main segments. One was television, where you had Jio as a separate entity and Star Disney as another big player. Then you had Sony and Zee. Additionally, there were traditional print houses like Dainik Bhaskar, The Times of India Group, and Hindustan Times. They were getting squeezed in this process because a lot of advertising was shifting towards digital media, as consumers increasingly consumed content online, driven by social media growth. This has forced a lot of mergers and acquisitions among the remaining players.”

“Clearly, Jio took the lead by acquiring Disney’s interest in India, creating a very large entity. Now, there’s a clear challenger to the two big global monopolies. Although the Sony-Zee merger talks did not materialize, we are now looking at three fairly big players. Google and Meta will continue to have a significant presence, but the combined entity of Jio and Star will now be a very strong and significant competitor. This is because they have excellent platforms, great entertainment options with Star and Colors, and strong OTT platforms like Jio Cinema and Hotstar. Together, they have an extensive presence across digital media, as well as cable and satellite media. Additionally, they have the backing of a strong, deep-pocketed industrial house like Reliance. So, I think it’s a positive development that will make the Indian media and entertainment space more competitive,” he added.

Shubho Sengupta, Marketing Consultant, remarked, “This will create a new Meta, so to speak. It will be the biggest monopoly in the media industry – both traditional and digital. Also, the writing is on the wall for Netflix. There could also be a new advertising framework that is more data driven.”

Shripad Kulkarni, Media and Marcom Advisor and Co-Founder, ReadyToBeMom, said, “These are exciting times, and we should expect such dramatic shifts and disruptions. All such shifts need to be welcomed. Among other things, it signals the vibrancy of our economy.”

At the same time, Kulkarni said, “The integration of the various entities is a big challenge, as it’s the media equivalent of that of the complex, multi-sector TATA group.”

While the industry is upbeat about JioStar, at the same time, they have also voiced concerns on whether the reduced competition would lead to a monopoly situation.

Experts also predict a 20-25% increase in advertising rates due to the merger’s enhanced bargaining power. With projected advertising revenue of $28.3 billion by 2025, the merged entity could significantly influence industry-wide ad rates.

Senior media professional Mona Jain cautioned that this will create a monopoly situation for the consolidated entity as they will be dominant in entertainment, Regional and sports genre – linear and digital.

“Majority of their channels currently, too, enjoy dominant viewership shares and with consolidated entities will be in a commanding position. It all depends on how strategically they will take the proposition to the marketplace – both from pricing and share of business, they will like to garner from advertisers and how aggressive they will be in the marketplace. Also, the approach competition will take and how innovative they will be in their stance to create preferred status with advertisers,” she added.

Speaking on this, Mathais also said that, “This will put pressure on other players, especially Zee, Sony, and similar companies, as Jio-Star will corner a lot of media spending. This could pose a challenge because when Jio and Star were competitors, there was more competition and pricing flexibility for advertisers. For example, last year during the IPL, there was head-to-head competition between Jio, which had the digital rights, and Disney Star, which had the television rights via Star Sports. Now, that competitive intensity might reduce slightly.”

Referring to the fears expressed by some in the industry on a monopoly situation, Shripad Kulkarni said, “I have seen some comments on a ‘monopolistic possibilities’, which is completely misplaced as far as advertising is concerned, business monopoly is a different ball game. The mix of inventory for AdSales is too vast from Live Sports to linear TV, OTT and connected TV and across multiple genres and languages, from GEC, News, Kids, to Business. The spread itself will ensure they will not be a monopoly.”

While acknowledging that it can impact advertising prices because when there are large players involved, Bhasin said that pricing is a function of supply and demand. “Eventually, water finds its own level, so I’m not too concerned about it,” he said, adding, “Having large, consolidated players can also bring order into distribution and good industry practices. So overall, I see it as a positive thing.”

Jain said that it will be interesting to see how agencies will operate in this dynamic scenario.

“I will also be keenly observing how they handle the most critical aspect, viz, the profit centers and corresponding sales structure,” said Shripad Kulkarni, adding, “The hard choice is total group revenue maximization vis-a-vis individual business imperatives. I expect them to have an agile approach to this, but you never know how Boards look at how Boards look at businesses and revenues.”

Also Read: Rs 70,352 cr JioStar behemoth – Heralding a new era in India’s entertainment industry