For CCI Approval, Reliance, Disney May Freeze Ad Rates for Two Years

Nitin Konde, Apoorva Bajj

Aug 23, 2024 — 3 min read

For CCI Approval, Reliance, Disney May Freeze Ad Rates for Two Years

In their most recent attempt to secure the approval of the competition watchdog for the merger of Star India and Viacom18, Reliance Industries Ltd (RIL) and Walt Disney are reportedly considering proposing a two-year freeze on advertising rate cards to the Competition Commission of India (CCI).

With an eye towards closing by October, RIL and Disney have been looking for methods to allay the regulator's fears regarding the merger's possible effects on India's media and entertainment (M&E) sector.

The Step Will Bring Marginal Loss to the Merger

Ad revenue loss from the ad rate freeze is unlikely to be significant, and media agency officials find RIL and Disney's plan intriguing because it could aid the Star-Viacom18 merger in obtaining CCI clearance.

The Indian Premier League (IPL) and other properties have taken a major hit from the recent advertising slump, but some executives are arguing that the combined business will suffer little harm from the planned rate freeze.

Due to the departure of modern sponsors and reluctance among established brands to make costly bets on cricket, Star Sports and JioCinema have scarcely filled their ad inventory, so they would be content to maintain the current ad pricing.

Given that the merged entity's market share would easily surpass the 40% mark in several markets, RIL and Disney are proposing a number of measures, including a tariff freeze and the closure of certain weaker channels in Hindi and regional markets.

CCI Keeping a Close Eye on the Developments

In its investigation into the proposed INR 70,000 crore merger between Viacom18 and Star India, the CCI is raising concerns about possible antitrust violations and challenging the companies' monopolies in the television and online video markets.

It is looking into whether the planned merger will give Star-Viacom18 an unbeatable competitive advantage by consolidating important cricket rights.

In India, cricket crosses demographics like age, income, and language to become the most watched show overall. Its premium ad prices are unmatched by any other genre.

According to an expert in the field, the merging company's negotiating power with advertising would be its greatest strength because of its market domination.

Claiming that the Star-Viacom18 merger would not substantially affect competition in the M&E market, RIL and Disney applied for clearance from the CCI in May.

The Merger’s Deal

To establish a media conglomerate with more than one hundred television channels and two streaming platforms, Disney+ Hotstar and JioCinema, RIL and Disney signed arrangements in February to merge Star and Viacom18. This will result in the creation of a media superpower. JioCinema seems to be the only streaming platform that the merged firm is likely to keep.

At the end of the joint venture, Bodhi Tree Systems, an organisation that is sponsored by Uday Shankar and James Murdoch, will keep the remaining interest. RIL will manage the joint venture with a 56% stake, followed by Disney with a 37% stake. On an annual basis, the combined entity would generate approximately INR 25,000 crore in revenue.

Shankar will have the position of vice chairperson, while Nita Ambani would serve as chairman of the combined firm.