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Reliance Industries, Disney deal gets thumbs up from D-St

Published:

MUMBAI: Most

brokerage houses

are positive on the

deal

that

Reliance Industries

and

Walt Disney

struck on Wednesday to merge their

media operations

in India. The

Disney

India-Viacom18 joint venture, with near-monopoly in cricket broadcasting rights in India, is expected to push up advertisement rates and turn the broadcasting industry highly competitive, especially for smaller players.

Analysts from various broking houses estimated that the merger would be value accretive to RIL’s stock price – it is expected to add between Rs 35 and Rs 45 per share. On Thursday, RIL shares on the BSE were marginally up at Rs 2,925. Disney shares rose just over 1% in the US on Wednesday while Reliance-owned Viacom18 is an unlisted entity.

Untitled design (95)

Untitled design (96)

“This merger will redefine India’s media landscape and also enhance sector growth in advertising and subscriptions,” a CLSA India report said. Analysts said the entity will enjoy a large market share of the broadcasting and digital spaces in India, which in turn could push up advertising costs. Analysts feel that the merger could be negative for smaller players in the space like Zee, Sony and Sun TV.
“The JV will be a dominant player in the ecosystem, with an estimated 40% viewership share in linear TV, and over 50% share in digital, as JioCinema and Disney+Hotstar are by far the largest streaming platforms in the country,” a report by UBS India said. RIL had said that the entity would have about 75 crore viewers across India. According to Jefferies, one of the leading foreign brokerages in India, the entities together now account for 40% market share in linear TV and OTT advertising markets combined.

The UBS India report also said that according to an advertisement industry veteran, advertising cost could go up 20-25% after consolidation in the space. “Bargaining power of the broadcasters (now fewer in number and larger in size) would increase at the cost of the advertisers,” the report said.
The Jefferies report also noted that the combined platform has ICC cricket broadcast and digital rights till 2027, digital rights for IPL till 2027 and media rights for BCCI domestic and international matches till 2027. “It also owns rights for EPL and the Olympics. The Jio Cinema app, Viacom18’s 40 linear TV channels along with Disney’s 70 linear TV channels, make it the most prolific player in India’s media space.”
According to a Kotak Institutional Equities report, RIL’s strong share in digital cable (Hathway + Den) and data consumption (Jio) augur well. “Merger synergies would be significant owing to better pricing on advertising and subscription, especially in the case of sports and cost rationalisation,” the report said.

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