The Competition Commission of India (CCI) on Wednesday approved the merger between Reliance Industries Ltd (RIL) and The Walt Disney Company, contingent on some voluntary modifications. The deal will merge Viacom18 and Star India into a single media powerhouse valued at around USD 8.5 billion, reaching over 750 million viewers globally.
Industry experts anticipate that the merger will wield substantial market influence and broaden content offerings. However, it also raises concerns about potential monopolistic practices, particularly in sports broadcasting. Though further regulatory approvals still pending, this merger is set to reshape the media landscape and heighten competition within the entertainment sector.
Market impact & reach
According to Sanjay Trehan, digital & new media advisor, this is an exciting development that will create a media behemoth. “I expect both the consumers and the company to benefit from the efficiencies of scale that it will unleash. It will be interesting to see how other players will react to this. The space is set to see more such consolidations, and I am all for market forces playing it out there, though we need to watch out for monopolistic or duopolistic mergers,” said Trehan.
The value of the combined Disney Star-Viacom18 entity will be Rs 24,411 crore. According to industry experts, while Disney Star has 32% share in the ad market, Viacom18 has 11% ad market share. The merged entity will have 43% ad market share with over 100 TV channels, two streaming platforms and two film studios.
Currently, Disney Star owns over 70 TV channels in eight languages, a streaming platform Disney+ Hotstar and a film studio, whereas Reliance’s broadcast division Viacom18 owns 38 TV channels in eight languages, a digital streaming platform - Jio Cinema - and a film studio Viacom18 Studios.
Industry watchers feel the broadcast sector will soon be dominated by two major networks instead of four. While the merger appears strategically sound, it will create overlaps in some markets and genres, which experts believe will be resolved after the merger.
“The merger will establish a duopoly in the sector,” one expert remarked. Furthermore, both networks will have a near-monopoly in live sports, a sector with rapidly increasing ad revenue. They collectively own major cricket rights, including the IPL, ICC Cricket World Cup, BCCI domestic matches, and the Women’s Premier League (WPL), positioning them to control the sports broadcasting market.
Meanwhile, Karan Taurani, SVP, Elara Capital, shared that CCI clearance of the merger without any channel shut down augurs well for both entities. “Expect NCLT approval to come and the merger could close by Jan '25 forming India’s largest M&E entity (TV/OTT).”
Concerns about Cricket monopoly
According to Rohit Jain, Partner, Singhania and Co, while the CCI has approved the merger, concerns about a potential monopoly in the entertainment and sports broadcasting sectors, particularly cricket, remain.
The CCI’s approval came with voluntary modifications, and the detailed order is still pending. Jain said, “It is possible that these modifications might include commitments from the merging parties to divest some non-sports channels and to adhere to fair practices in cricket broadcasting, such as avoiding unfair increases in advertisement rates. Despite these commitments, there are still concerns in the market that the combined entity’s control over key media rights such as the IPL (held by Viacom18) and ICC matches (held by Disney) could lead to pricing power and reduced competition in sports broadcasting.”
According to KK Sharma, Partner, Singhania & Co, if the modifications are of structural nature, they are easy to monitor. However, if there are any behavioural remedies involved, which have been accepted by the commission, in that event, the appointment of a Monitoring Trustee is likely to be involved.
Sharma added, “Monitoring Trustee is an agency to oversee the modifications offered. On the other hand, if the modifications relate to only divestitures of a few channels that would be much faster and easier. About the fear of a monopoly of the merged entity coming true or not, it cannot be predicted with certainty now.”
Vivek Menon, Managing Partner, NV Capital, added, “Though the merger was always on track and the fact that CCI has given the go ahead to the deal with certain modifications does reinforce the conduciveness of CCI towards the deal. One would need to see how the voluntary modifications pan out. Though there are multiple options like divestment of channels/sporting rights to freezing of advertising/subscription revenues as well various other options which can be explored, it depends on the CCI. As long as the CCI feels, the merger doesn’t tantamount to a monopoly, then the odds are in the favour of the merger.”
Future outlook
While the CCI's conditional approval is a major milestone, the merger may still encounter further legal and regulatory hurdles.
Jain said, “The merged entity must fully comply with the CCI's conditions, as failure to comply with the conditions could result in further scrutiny or even potential revocation of approval. Rival broadcasters, advertisers, and consumer advocacy groups may challenge the merger in court if they believe it creates an unfair market advantage or harms competition, potentially leading to more legal battles, delays, or increased regulatory oversight.”
Meanwhile, Pranav Bhaskar, Partner, SKV Law Offices, shared that the size of the merged entity does place it in a dominant position under Section 4 of the Competition Act. However, the Competition Laws in India are specifically designed to prevent monopolistic practices.
“The CCI is expected to carefully adjudicate any changes in market practices introduced by this merger in the entertainment sector. Given the CCI's role and mandate, it is unlikely that a monopoly will be allowed to form, as the CCI will actively intervene to ensure competitive market conditions are maintained and any attempts at monopolistic behavior are curbed.”
