MUMBAI: Last week, Bob Iger’s statement that Disney was looking for an out – either totally through a sellout or a joint venture partner in Disney Star India sent tremors across the entire media ecosystem.
From the outside, Star India seems to be doing well with its general entertainment channels Star Plus lording over the space like a colossus. It has also been seeing its channels’ fortunes rise in some of the regional languages.
Yes, the sports business appears to be under pressure as the network refused to invest top dollar for digital rights of the IPL, ISL and several other important sports properties. And the recently concluded IPL was allegedly a millstone, reportedly not even recovering what was invested. Or at least that was what was being claimed by the Reliance owned rival Viacom18 and Sports18 which is now led by former Star India CEO Uday Shankar.
At least one professional believes that there is a possibility that Iger and Ambani could get into bed for the complicated Indian market. And that’s Investment analyst Karan Taurani of Elara Capital. Predicts he in a newsletter Elara Diet Report released last week: “We believe there is also a likelihood of Viacom 18 (73 per cent owned by RIL/TV18, 11 per cent TV ad market share)- the third largest broadcaster after Zee/Sony and Disney, becoming a strategic partner with Disney India as the former is aggressively seeking to make inroads in the media segment (TV via TV18/NW18; digital via Jio Cinema).”
Taurani also is pretty bullish on the continued sustainability of television as a business, despite all the soothsayers saying that it is headed south. “As per our assessment, unit economics of the TV business is strong, led by healthy profitability margin (30-32 per cent EBITDA for larger broadcasters core TV business, ex OTT losses),” he writes in the report. “We continue to believe that despite converging growth rate, linear TV medium is a key mode of mass campaigning for larger advertisers (FMCG contributes 45 per cent to TV ad revenue), given the reach/scale it has. Digital has the potential to grow, but unit economics are not yet proven. We, thus, prefer the linear TV business from a profitability standpoint and believe it will be a win-win for India despite tepid growth rates, as digital is an expensive medium. This may be a challenge to scale at mass – digital ARPU for a consumer with major OTT platforms subscriptions and data costs is around Rs 1,500, 4x higher than that of TV ARPU (Rs 350). “
Overall, his opinion is that an exit or strategic change in Disney Star India bodes well for the overall market with peers such as Zee, Sony, Viacom18 and Sun TV gaining. He explains: “This could enable a strategic shift in the ‘go to market’ strategy, in turn benefitting other players to gain market share. Disney India enjoys strong recall across genres such as urban GEC, Tamil, Telugu, Marathi, and sports, which together contribute 65 per cent to India’s TV revenues. TV may become further consolidated post Z-Sony merger with top two players (Z-Sony and Disney India) commanding around a 60 per cent ad market share, leaving little or no potential for peers to gain (or spike) market share.”
If Taurani’s prediction of Reliance and Disney forging a marriage come true, it will be a homecoming of sorts for the savvy mover and shaker Uday Shankar. Already, he has been shopping aggressively at Disney Star India and has managed to recruit many senior executives from there for his charge.
