After some initial hiccups, the Competition Commission of India (CCI) has given interim approval to the merger of two entertainment and media behemoths – Disney India and the Reliance-controlled Viacom18. The merged entity will be a $8.5 billion powerhouse, dwarfing all others. With about 120 broadcasting channels, a reach of 750 million people worldwide, cornering a combined revenue of 43% of the advertising market, and with two of the largest streaming platforms – Jio Cinema and Disney + Hotstar – what we are seeing is an outsized media monopoly.
Analysts have been speculating the entertainment market will be reduced to a duopoly – or a ‘trio-poly’ if you take Zee Entertainment Enterprises and Sony Television as two standalone groups. This is wishful thinking. Zee plus Sony won’t be half the size of the Reliance-Viacom-Disney juggernaut. What we have on the horizon is an undisputed monopoly.
The domination will have a serious impact on consumers: for advertisers, airtime rates will be fixed; and media consumers will have to pay more for access to live cricket and other content.
There is little forthright questioning, but one can sense the nervousness in the industry. The CCI had initially stalled the merger; and, according to a Reuters report, had raised some key concerns:
In sports broadcasting the two companies – Disney with 77.7% share and Reliance Viacom 7.5% - together had cornered a combined share of 85.2%. “The sports TV channel segment is already highly concentrated,” the CCI said in its letter. “Most of the current sports content such as cricket ... are streamed on either of the two platforms (of Reliance and Disney)”. This meant “higher negotiating power …”.
The CCI said it found that Disney and Reliance are “close competitors….After the merger, there may not be an adequate number of competitors ... for advertisers.”
However, after these pointed concerns, the Competition Commission cleared the merger “subject to the compliance of some voluntary modifications”. These were not spelt out but it is speculated the two companies have agreed to lessening their grip over cricket rights and they may divest some channels too.
Skipping the law
Monopolies by their very nature are anti-consumer as they restrict competition and fix prices. They reach monopoly scale by deliberately killing competition through lower-than-cost predatory prices. Historically, in the US, consumer action has seen the passage of anti-trust laws like the Sherman Act of 1890 and then the Clayton Act, 1914 that forced monopolies like John Rockefeller’s Standard Oil being to break up.
More recently, it is the Big Tech companies that have faced the heat. Meta, which owns 3 of the largest 5 social networks – WhatsApp, Instagram and Facebook –has been sued by the Federal Trade Commission (FTC) for monopolistic practices. So has Apple Inc. which controls 65% of the US’ smartphone market.
The spirit of India’s Competition Act, 2002 is similar where Section 3 says: “No enterprise or association of enterprises… may enter into an agreement regarding production, supply, distribution, storage, acquisition or control of goods or provision of services which may adversely affect the competition in the Indian market”. Section 4 of the act forbids‘unfair or discriminatory’ pricing, by the abuse of a ‘dominant position’. But the Competition Commission, mandated to enforce these laws, seems to have given up on the Reliance-Disney monopoly.
Industry shakeout
The entertainment industry saw a vibrant boom in the late 1990s and early 2000s when the film industry was given ‘industry’ status and an open door policy saw a rash of launches of news and entertainment channels.It was a heady period of growth driven by foreign investment and dismantling tight broadcasting regulations.
Zee was the pioneer but Rupert Murdoch’s NewsCorp and Sony Pictures Entertainment (SPE) invested heavily in launching a slew of entertainment channels. Satellite television and last-mile delivery through cable TV and direct-to-home (DTH) got consumers spoilt with choice. Star TV grew to No.1 on the back of the saas-bahu serials and KBC; but then Zee TV and Sony were never far behind.
After 2007, the frenetic growth of the entertainment industry was replaced by measured consolidation and a shakeout. Network18 which started as a CNBC news franchisee in 1998 by Raghav Behl, rapidly grew to a conglomerate across print, internet properties such as Moneycontrol.com and broadcasting. However, by 2012, weighed down by a debt of Rs 1,400 crore, it entered into a complex loan arrangement which ultimately led to its takeover in 2014 by the Mukesh AmbaniReliance group.
UTV, another local chain on channels and film studios promoted by Ronnie Screwvala, was taken over in 2012 by Disney for $454 million. Disney’s strategy was to kill UTV’s kids channels to provide better visibility for its own offerings; and to piggyback on UTV’s film network to launch Disney as a local film studio. Neither ploy worked.
And now, Paramount Global, which had a tied up with Raghav Bahl’s TV18 for launching channels such as MTV and Nickelodeon in India, exited in March this year bag and baggage selling its 13% stakein Viacom18 for Rs 4,300 crore.
Finally, this is what the current bird’s eye view is. Most of the foreign investors have taken a beating and have exited India’s complex entertainment market. The only big foreign brand which succeeded was Star TV. But because its holding company, Murdoch’s 21 Century Fox merged with Disney, Star is now a Disney asset. The Zee-Sony merger, which could have kept the Reliance-Disney juggernaut at bay, has fallen apart. Walt Disney, after 2 decades of reverses, seems to have little stomach for business in India, and could exit soon selling its 34% stake in the new merged entity.
That leaves 3 conglomerates in the field: the all-powerful Reliance-Disney; and Zee Entertainment and Sony – a distant second and third.