Following the Rs 70,352-crore joint venture with Reliance, the handling of its 36.84% stake will be intriguing to watch.
The long-anticipated declaration regarding the Reliance-Disney agreement has been officially confirmed. The key details have been provided, indicating that The Walt Disney Company (Disney) will possess a 36.84% stake in the proposed joint venture. Reliance Industries will retain a 16.34% stake, while the remaining 46.82% will be under the control of Viacom18, a Reliance-owned entity. As part of the agreement, Reliance's stake will be acquired through a fund infusion of Rs 11,500 crore, valuing the joint venture at $8.5 billion (Rs 70,352 crore).
On a global scale, Disney acquired 21st Century Fox, previously owned by Rupert Murdoch, in mid-2018 for $71 billion, which included the Indian subsidiary then known as Star India. However, the overall value of this acquisition now indicates a significant decrease compared to previous estimates. Media approximations placed Disney's valuation between $15-17 billion at the time of the 21st Century Fox purchase in March 2019, and even lower, ranging from $7-10 billion, in earlier estimates. A report from Emkay Global released today highlights Disney's reduced valuation, attributed largely to anticipated losses in its sports business due to substantial increases in rights costs.
Based on the current deal terms, the estimated value of Disney's stake in the revised structure will be approximately Rs 25,920 crore (slightly over $3 billion), marking a decrease of at least half compared to the previous valuation range of $7-10 billion. It's crucial to highlight that this figure reflects Reliance's additional investment in the joint venture.
Disney has faced considerable challenges in India. A significant setback occurred when it lost the digital broadcasting rights for the Indian Premier League (IPL) to JioCinema, the OTT platform owned by Reliance. Reliance's decision to broadcast the tournament for free dealt a substantial blow to Disney's television advertising revenue and also impacted its own OTT platform, Disney+ Hotstar. Currently, Disney retains only the television broadcasting rights. In the latest bidding round for the rights spanning 2019-2022, Disney secured both sets of rights for a total of Rs 16,348 crore. Additionally, the rights for the period of 2023-2027 were acquired for a combined sum of Rs 48,390 crore.
Observers familiar with Disney's operations believe that the establishment of the new joint venture signifies the company's reluctance to further invest in India. Disney's foray into the Indian market dates back to the early 1990s. Initially, it formed a joint venture with the K.K. Modi Group to establish Buena Vista Television, aiming to introduce three channels. However, this initiative failed to materialize, and the focus shifted primarily to advertising sales for other networks. By 2001, disagreements emerged between the partners regarding Disney's proposal to establish a wholly-owned subsidiary. Following the dissolution of the joint venture, Disney proceeded to launch two children's channels—Toon Disney and Disney Channel—towards the end of 2004, signaling an intention to increase investment in the market.
In mid-2006, Disney acquired Hungama TV and obtained a minority 14.9% stake in UTV Software Communications, both of which were under the ownership of entrepreneur Ronnie Screwvala. Initially, Disney acquired its stake in UTV for $15 million. Two years later, this stake was increased to 32.1%, with an investment of around $230 million (equivalent to Rs 1,300 crore). This move also granted Disney a 15% ownership in UTV Global Broadcasting. Subsequently, in July 2011, Disney completed the acquisition of UTV Software for $454 million (then valued at Rs 2,000 crore).
Despite facing challenges in its operations, Disney made a significant global move in mid-2018 by acquiring Rupert Murdoch's 21st Century Fox for $71 billion, which included its Indian operations, then known as Star India.
The eventual actions taken by Disney regarding its 36.84% stake in the joint venture will be intriguing. Possibilities such as Reliance acquiring it at a predetermined date or Disney exercising a put option to sell the stocks remain on the table. Currently, all attention is focused on the unfolding process of regulatory approvals and steps to be taken next. The prospect of an Indian entity acquiring a foreign broadcaster in such a large-scale deal is uncommon, making this a potentially significant moment in many respects.
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