How JIO’s Masterplan Beat Disney & became the King of Indian OTT? | Business Case Study

Summary

In a landmark move, Disney Plus Hotstar and Mukesh Ambani's Reliance Industries have merged, creating a media giant that dominates India's OTT market. The joint venture, valued at $8.2 billion, gives Reliance control over 63.16% of the entity, with Disney holding 36.84%. This merger follows Reliance's strategic acquisitions of key content rights, including IPL and HBO, which weakened Disney's position. The case study highlights the importance of profitability, building a strong entry barrier, and the power of an ecosystem over individual products in business strategy.

Takeaways

• 📈 The Indian streaming market witnessed a monumental merger on 20th February 2024, with Disney Plus Hotstar entering a joint venture with Mukesh Ambani's Reliance Industries, creating a media giant valued at $8.2 billion.
• 👑 This merger made Reliance the dominant player in the Indian OTT (Over-The-Top) space, owning 35% of the market and commanding a viewership of 750 million viewers across 100+ channels and platforms.
• 🔄 Reliance's majority control (63.16%) of the merged entity, with Disney owning only 36.84%, signifies a major shift in the power dynamics of the Indian media landscape.
• 📊 In 2021, Disney was the leader in the Indian OTT space with 51 million viewers, but by 2024, it faced significant losses and challenges, including the expiration of its IPL streaming rights.
• 🏆 The strategic acquisition of IPL digital streaming rights by Reliance and the exclusive rights to stream HBO content in India dealt a significant blow to Disney's market position.
• 🤝 The merger is a strategic move by Reliance to leverage its diverse portfolio and cross-promote its brands, creating a more integrated and profitable media ecosystem.
• 📉 Disney's global struggles, including a drop in stock price and operational losses, influenced its decision to enter the joint venture with Reliance.
• 🚀 Reliance's aggressive expansion in the media and entertainment sector, starting from 2018 with the acquisition of Balaji Telefilms and leading up to the merger with Disney, demonstrates a calculated path to dominance.
• 🛠️ The business lessons from this merger highlight the importance of profitability, creating non-replicable barriers to entry, and building a powerful ecosystem over standalone products.
• 🌐 The merger is expected to reshape the Indian media landscape, with implications for other players in the industry and lessons for future business strategies.

Q & A

What significant event occurred in the Indian streaming market on February 20th, 2024?

On February 20th, 2024, Disney Plus Hotstar entered into a joint venture with Mukesh Ambani's Reliance Industries, marking the biggest merger in the Indian streaming market of the decade. This strategic joint venture combined a media and entertainment company with an 82-billion-dollar valuation, significantly altering the media landscape in India.

How did the merger impact the ownership distribution between Reliance and Disney?

Post-merger, Reliance controlled 63.16% of the merged entity, while Disney owned 36.84%. This was due to Mukesh Ambani's initial 73% stake in Wcom 18, which merged with Disney Star, and his additional $1.4 billion investment, which increased the joint venture's value to $8.5 billion.

What was the valuation of Disney's India business in 2021, and how did it change by 2024?

In 2021, Disney internally valued its India business at around $5.4 billion. However, by February 2024, the valuation had dropped to $3.9 billion, marking a decrease of $1.5 billion.

What were the three superpowers that Disney acquired with the Star India Network?

The three superpowers Disney acquired with Star India Network were extensive local content through Star's 77 TV channels spanning nine languages, broadcasting rights to major sports leagues like cricket and IPL, and a large audience reach with 700 million viewers.

How did Hotstar's business model differ from competitors like Netflix and Amazon Prime?

Hotstar's business model included both Advertising Video on Demand (AVOD) and Subscription Video on Demand (SVOD), allowing them to cater to a broader audience with free content (AVOD) and simultaneously generate revenue from paying subscribers (SVOD). In contrast, Netflix and Amazon Prime primarily operated on the SVOD model.

What major losses did Disney Plus Hotstar incur between 2021 and 2023?

In 2021, Disney Plus Hotstar's revenue was 1,670 crores, with losses at 600 crores. These losses were reduced to 343 crores in F22. However, between October 2022 and September 2023, Disney Plus Hotstar saw a total loss of 23.8 million subscribers.

What were the key strategic moves made by Mukesh Ambani that impacted Disney's dominance in India?

Mukesh Ambani outbid Disney for the 5-year digital streaming rights of the IPL from 2023 to 2027, made IPL available for free, acquired exclusive rights to stream HBO content in India, and secured a multi-year deal with NBC Universal for films and TV shows, effectively dismantling Disney's competitive edge in the Indian market.

How did the loss of IPL and HBO rights affect Disney Plus Hotstar's position in the Indian market?

The loss of IPL rights meant Disney lost a mass product that catered to a wide Indian audience, and the loss of HBO rights meant they lost access to premium content that attracted a high-end audience. These losses significantly weakened Disney Plus Hotstar's competitive position and subscriber base in India.

What business lessons can be learned from the rise of Jio and the fall of Disney in India?

The business lessons include the importance of profitability, building a barrier to entry that cannot be replicated with money, and the power of an ecosystem over a standalone product. Reliance focused on profitability, created a strong ecosystem with cross-promotion and data advantages, and leveraged their resources to outcompete Disney.

How did Reliance plan to turn the merged entity profitable despite Disney's previous losses?

Reliance planned to leverage its extensive portfolio of companies and brands to advertise and cross-promote their own services, control digital and TV rights of IPL to increase advertising prices, and offer bundled services with their telecom plans to attract more customers and increase revenue.

What was the role of Wcom 18 in the formation of the media giant under Reliance?

Wcom 18 played a crucial role as it had a wide presence across TV broadcasting, cinema, live broadcasting, OTT, and distribution. With its roots in TV broadcasting and a vast array of channels, including popular ones like Nick and MTV, Wcom 18's $4 billion valuation was a key factor in forming the media giant under Reliance.