Disney is reportedly considering strategic alternatives including joint ventures or even a sale.
The global entertainment conglomerate’s potential exit or exploration of strategic alternatives in India could have a significant impact on the country’s media scene. While it is unclear whether it would be a joint venture or sale but what is certain is the development, if and when it happens, would undoubtedly reshape the dynamics of the industry, prompting a realignment of content distribution, streaming platforms, and partnerships in the ever-evolving Indian media landscape.
Quick History
Change has been a constant for Star India ever since it started.
Established in 1990, Star TV started as a joint venture between Hutchison Whampoa and Li Ka-Shing. Channels like Star Plus, Star Chinese Channel, Prime Sports, Channel V, and BBC World Service Television were part of the initial line-up.
In 1992, Rupert Murdoch’s News Corporation acquired a majority stake of 63.6% for $525 million, followed by the complete buyout in 1993. Star India launched channels like Star Movies, Channel V, Star News, and later, Star Plus, catering to Indian viewers. This expansion solidified Star TV’s presence and brought diverse content options to the Indian audience.
In a landmark move in 2012, Star India made a significant leap by acquiring the broadcast and digital rights for all cricket matches played in India through a deal with the Board of Control for Cricket in India (BCCI). Valued at Rs 3,851 crore, this groundbreaking deal granted Star India exclusive media rights to cricket matches organised by the BCCI until 2018. With this strategic move, Star India solidified its position as the go-to destination for cricket enthusiasts, capturing the nation’s attention with comprehensive coverage of one of India’s most beloved sports.
Two years later, Star India announced acquiring the licence for digital distribution rights for the 2014 edition of the Indian Premier League (IPL) from Times Internet Ltd. This strategic move pushed the platform’s subscriber base to new heights, firmly establishing it as the go-to destination for live sports streaming in India.
Fast forward to 2019, and Star India underwent a transformative acquisition. The Walt Disney Company acquired 21st Century Fox, which included Star India as one of its assets. This merger brought together two industry giants and expanded Disney’s footprint in the Indian market. This is also when Star India’s digital streaming platform Hotstar was rebranded as Disney+Hotstar.
How losing IPL streaming rights hurt Star India
All looked well till Disney+Hotstar retained its cricket audience universe both on TV and digital. The platform was experiencing continuous growth, largely driven by its exclusive streaming rights to the IPL. However, this growing user base turned into a significant challenge when they lost the streaming rights of IPL to Reliance’s JioCinema. This setback posed a considerable obstacle for Disney+ Hotstar, as the loss of such a marquee sporting event meant a potential decline in user engagement and a risk of losing a substantial portion of their dedicated audience.
As per a recent WSJ report, Hotstar is expected to lose 8 million to 10 million subscribers in its fiscal third quarter. The report also says Star’s overall revenue for the fiscal year ending September 2023 is expected to drop around 20 percent to slightly less than $2 billion. Its earnings before interest, taxes, depreciation and amortisation are expected to fall roughly 50 percent for that period, from about $200 million last year. That is a sharp decline from Fox’s projections before the deal that Star India would earn $1 billion in Ebitda by 2020.
The loss of popular content is a big reason behind Disney+Hotstar losing subscription revenue. The drain didn’t stop with IPL. Disney+ Hotstar also lost all of HBO content offering to JioCinema thereby losing the loyal audience of popular shows like Game of Thrones, Succession and others.
Why is Disney exploring strategic options in India?
As per the recent WSJ report, Disney is considering strategic alternatives for its India business, prompted by the changing landscape of Star India after Disney’s acquisition of Fox’s entertainment assets. The options being explored include potential joint ventures or even a sale.
The options being explored include potential joint ventures or even a sale.
In an effort to support the growth of its India operations and alleviate financial pressures, Disney has also initiated discussions with at least one bank, it said. However, the exact direction Disney will take remains uncertain as talks are still in the early stages.
The WSJ report was followed by a CNBC scoop where Disney CEO Bob Iger suggested that the company might consider selling its linear TV assets. Iger said they recognised the challenges the traditional media industry is facing due to the increasing prominence of streaming and digital platforms. While he didn’t mention anything about the India business in particular, the announcement sparked speculations as the India business has not only been seeing a drop in its audience universe but also some major exits.
The first major exit happened two years back when Uday Shankar stepped down as president of The Walt Disney Company APAC and chairman, Star & Disney India. Interestingly, earlier this year, Uday Shankar was appointed to the Board of Viacom18 which owns JioCinema, after the completion of a strategic partnership between Reliance Storage Ltd, Bodhi Tree Systems and Paramount Global (formerly known as ViacomCBS). Bodhi Tree Systems is backed by James Murdoch and Shankar.
More recently, Kevin Vaz, president and head of network entertainment channels at Star India, joined Viacom18 as CEO of its TV business.
Experts also point out how Disney never cracked the localisation code in India.
“Disney has great difficulty tackling any market which is deeply local. And India is a deeply local market. Star India got stellar offerings to their audience here. They brought Kaun Banega Crorepati to India, they got Star News. They innovated and innovated and localised in this market. That’s how they did well. Disney is incapable of doing that. It knows how to run theme parks and cruises; it cannot run a mass media business outside the US,” Vanita Kohli-Khandekar, author of The Making of Star India, told The Signal Daily in an interview.