The Reliance-Disney merger is great for them. But will it be for consumers?

Reliance Industries, India's leading conglomerate, and Walt Disney have announced a merger of their Indian TV and streaming media assets, establishing an $8.5 billion entertainment powerhouse, placing them significantly ahead of competitors.

Reliance will inject ₹11,500 crore into the venture, securing a stake of over 63.16%, while Disney will have 36.84%. The entities have signed a definitive agreement to create a joint venture, combining Viacom18's and Star India's digital streaming and television assets. Viacom18's media operations will merge into Star India Pvt, owned by Disney, through a court-approved arrangement. The venture is valued at ₹70,352 crore, or approximately $8.5 billion, not accounting for synergies.

Nita Ambani would chair the board of combined entity, and former top Disney India executive Uday Shankar would serve as vice chair.

For Disney, this merger marks the culmination of efforts to stabilize its struggling India streaming business, plagued by user attrition, and alleviate financial pressures stemming from substantial investments in Indian cricket rights. Valuing Disney's Indian operations at approximately one-fourth of its $15 billion acquisition price during the Fox deal in 2019, the merger signifies a strategic growth engine for Disney in India — tipped to grow into one of the largest consumption markets in the world.

The joint venture is poised to become a prominent player in India's TV and digital streaming scene, merging prominent media assets, encompassing entertainment (e.g., Colors, StarPlus, StarGOLD) and sports (e.g., Star Sports and Sports18), and providing access to major events through JioCinema and Hotstar. This will attract an audience of over 750 million viewers in India and the global Indian diaspora. 

Additionally, the joint venture will hold exclusive rights to distribute Disney films and productions in India, along with a licence for over 30,000 Disney content assets, presenting a full suite of entertainment options for Indian consumers.

Together, the companies reported ₹25,000 crore in revenue for fiscal year 2022-23 (FY23). Upon completion of the merger, they will form India's largest media empire, capturing nearly 40% of the market share. This is yet another large Indian conglomerate owning a large chunk of the sector.

Given Jio's bolstered position in the ecosystem, it could apply pressure on other telecom players like Airtel, leveraging its enhanced content offerings. This might compel competitors to invest in content creation or explore alternative strategies to maintain competitiveness.

Smaller TV channels could face pressure, especially with the failed merger between Sony and Zee, Disney-Viacom’s domination would be higher. Additionally, global over-the-top (OTT) players like Netflix and Amazon Prime Video operating in India may feel the heat due to the extensive content offerings of JioCinema and Hotstar.

While it's likely that the Competition Commission of India (CCI) will approve this merger, the critical question remains: will consumers benefit from it?

CCI was founded under the Competition Act, 2002, with the mandate to deter practices that could harm competition, foster and maintain a competitive environment in Indian markets, safeguard consumer interests, and uphold the freedom of trade conducted by all market participants.

It has set parameters for determining if a market player is dominant and if it may abuse that power to hurt consumer welfare.

The Disney-Reliance merger could initially attract advertisers with its broad channel and product portfolio. Yet, it's crucial to consider whether consumers will ultimately benefit through lower prices or face higher costs due to reduced competition, as it happens in markets where one or two large players operate?

Consider the aviation industry, where the consolidation led to a monopoly of Tatas (Vistara & Air India) for premium class passengers and a duopoly (Tatas and Indigo) for the economy segment. The Air India acquisition deal was cleared by CCI. But the sector now grapples with high fares and reports of disruptions to flight schedules, negatively impacting consumers, who are at the mercy of airlines, although the airlines are clearly not in breach of the CCI’s norms for market competition.

Similarly, the telecom sector has faced its share of challenges with competition. With only three major players, Jio, Airtel, and a struggling Vodafone, Jio's aggressive pricing strategies have intensified the battle for amassing consumers. Jio, with its competitive pricing, has succeeded in edging out the competition, while staying within the legal boundaries enforced by the CCI. The fact is that while consumers have lower rupee pricing and so-called freebies including data, it is exactly their data which telecoms monetise. If the value of this data was imputed, would consumer welfare be higher or lower due to lower competition in the telecom market? Does this assessment of consumer welfare get covered in the CCI’s scrutiny?

In today's rapidly changing marketplace, particularly with a few large Indian conglomerates increasingly dominating multiple sectors, consumer protection laws need to evolve to address new challenges. As these entities gain substantial market share, it's critical to revisit our understanding of what constitutes anti-competitive behavior. Practices like price-fixing, exclusive agreements, or using market dominance to stifle competition are areas of concern.

Equally important is defining actions that genuinely benefit consumers, emphasizing practices that encourage fair competition, innovation, affordability, and choice. Such pro-consumer actions would ensure a variety of products and services are available at competitive prices, enhance transparency in corporate practices, protect consumer data privacy, and prevent any predatory strategies that could harm consumer interests over the long term.

Therefore, while the Reliance-Disney merger may promise large market share and enhanced offerings initially for the JV partners, the long-term implications for consumers remain uncertain. Will this consolidation lead to improved services and competitive pricing, or will it result in reduced options and potential exploitation of consumer data to the advantage of companies? These are questions that regulators and consumers alike must ponder as the landscape of the media and entertainment industry evolve.