[Ishita Khandelwal and Sibasish Panda are students at National Law University Odisha, Cuttack]
INTRODUCTION
"All across the globe, content is king. And the audience follows the platform which caters to a large buffet of content."
There has been a steady trajectory globally in the mergers circumventing the media and entertainment industry. Recently, Reliance Industries Limited (RIL) through its broadcasting division Viacom18 Network also decided to enter into a merger agreement with The Walt Disney Company. The two entities mutually came to the decision to formulate a merger in the form of a Joint Venture (JV) which will be supervised and controlled by RIL. With this new merger, the new entity formed is estimated to be worth a whopping $8.5 billion. While RIL will have access to approximately 63% of the shares of Disney Company, the rest will remain to be vested with Disney. RIL, owned by billionaire Mukesh Ambani, is one of the most expansive entities currently functioning in India. With its gradual setting of paws in the Over-the-Top (OTT) entertainment industry, consumers have been introduced to one more platform for their rejuvenation with the inception of Jio Cinema.
UNDERSTANDING THE PROPOSED MERGER AND THE AFTERMATH
The Indian media and entertainment industry is aggregated to a whopping $28 billion. The merger, in the longer run, is supposed to bring to the fore access to various TV channels along with access to Jio Cinema and Disney+ Hotstar apps. Through this merger, RIL aims to cut down on its own competition by working in tandem with the Disney Company and not against it. Post the merger, both the merging entities will have a collective hold of almost 31% of the user base in India.
India hosts the highest number of cricket fans across the globe. Not very long ago, both RIL and Disney were in a cut-throat competition over obtaining the Indian Premier League (IPL) broadcasting rights. While Disney+ Hotstar earlier held the exclusive broadcasting rights of the IPL, in 2023, both Viacom18 and Disney+ were delegated the IPL broadcasting rights for a period of 5 years. When RIL received the broadcasting rights, it broadcasted the IPL on Jio Cinema for free to the public.
Till 2022, Disney+ Hotstar held the official broadcasting rights for IPL. With that, it generated revenue through digital advertisements as close to 5000 crores. However, right in the following year, broadcasting rights split up between Jio Cinema and Disney+ and that led Jio Cinema to make more money than Disney+ because of the diversion of the ad revenue from Disney+ to Jio Cinema. This led to a loss of ad revenue for Disney+ Hotstar.
The new merger attempts to bring a win-win situation for both entities. For instance, the Disney Company would benefit overall from the strategic growth investment amount of Rs. 15,000 that RIL will contribute towards the JV in alliance with Bodhi Tree and RIL will be able to expand its OTT business operations and usher in more profits in India. In order to trace its profit roots in a tighter manner, this JV would prove to be useful for RIL in return of the investment that it is making. As a rough estimate, the JV entity can be speculated to attract as many as 750 million consumers.
There are other foreign OTT players like Netflix, Amazon Prime that have constantly aimed to crack the code in the Indian OTT market. However, what they tend to lack is the quantity of homegrown content that is relatable to the Indian audience at large. With this upcoming JV, Netflix and other similar platforms might face heavier competition owing to the much larger content availability that both Jio Cinema and Disney+ Hotstar encompass as a whole as their arsenal.
Sometime back, the much talked about and celebrated Sony-Zee merger also came to a denouement due to various disagreements that existed in the compliance of the merger. With this merger fallout, the only major merger left now in the OTT platform is of Reliance and the Disney Company.
ANALYSING THE PROPOSED MERGER FROM THE COMPETITION OPTICS
The general axiom of the Indian Competition Law regime is to protect the interests of the consumers without hampering the rise of players in the market.
Recently, Microsoft and Adobe decided to join hands to provide a better user experience. Previously, it has been observed that when two major and dominant players of a market tread in a concert, it is a mixed bag to the consumers for all the obvious reasons. With the new JV, the consumers will now have a bigger platter of content to choose from. However, this might also attract competition concerns. In the future, it might occur that the JV imposes heavy subscription amount on the consumers. And this might render them either contentless or they might end up paying more than necessary amount since most of the OTT platforms have exclusive broadcasting rights over specific content. What is available exclusively on Disney+ Hotstar & Jio Cinema might not be available elsewhere and the content consumers cannot resort to anywhere else since now, instead of two there lies only one entity. A major example of the same can be witnessed in the aviation market with the sudden hike in the prices of flight ticket costs post the Vistara-Air India merger. Even though the price hike may not be intentional, yet the consumers are not really benefitting from the same since they get restricted options of flights to choose from. Alongside that, there are a lot of flights that have been cancelled post the merger which have caused inconvenience to the passengers who have always relied on the same. The aftermath of the merger may render a lot of market power in the hands of the merged entity since both Disney and Viacom hold up approximately 50 percent of general entertainment channel (GEC) TV market and also cater to region specific exclusive content. The two entities should be able to prevent steering the market for the purpose of price fixation since that would again bring them scrutiny under the act of cartelization as per Section 3 of the Competition Act, 2002.
As per the Competition Law of the country, monopoly in the market is not illegal per se but if there is an abuse of dominance by the dominant entity then it would be liable for leading to appreciable adverse effect on the competition (AAEC) in accordance with Section 4 of the Indian Competition Act, 2002. Anti-competitive strategies like usage of dark patterns to obtain the desired results, tying and bundling, price fixing etc. have to be kept at bay in order to prevent any consumer exploitation.
Another important aspect to be considered is with respect to the Ad-tech industry. In the status quo, the ad-tech industry has plummeted because of the less demand from the consumers and the sudden hike in the prices quoted by the online platforms. The rapidly growing ad-tech industry is likely to be swooped within this proposed JV. During the broadcasting of the IPL in 2023, when the broadcasting rights of IPL were divided between Jio Cinema and Disney+ Hotstar, the gross total revenue garnered by Disney went down from 5000 crores in the previous year to 4000 crores in that year. This happened because of the advertisements getting disseminated between Jio Cinema and Hotstar. The Competition Commission of India (CCI) must provide a wiggle room of bargaining power to the advertising companies with the incoming JV owing to the bolstered position of the two merging entities in the cricket broadcasting sector.
Even while customers receive lower prices in rupees and purported freebies like data, the telecom sector players profit from their data specifically. An interesting aspect to be noted here is that just like its establishment of a fortified position in the telecommunication sector, Reliance adopted similar tactics in the OTT platform and offered the viewers to ‘enjoy’ the IPL matches for free. This pincer movement of RIL led to an exponential increase in the subscribers of Jio Cinema up to 10 million. Even though the viewers of IPL were not charged any subscription fees, Reliance was able to earn huge profits through the advertisements.
The proposed merger will offer the advertisement companies a one-stop shop for their business. Previously this was not the case since the advertising companies had to choose between either Jio Cinema or Disney+ Hotstar for broadcasting advertisements.
CONCLUSION AND WAY FORWARD
The proposed merger between RIL and Disney Company aims to derive and maximise the profits from the OTT platform. The CCI must be vigilant in giving assent to the proposed merger and must ensure that the proposed JV does not lead to any anti-competitive concerns.
With the Digital Competition Law Bill in the pipeline, the CCI is expected to cater to these online platforms from a unique perspective without hampering healthy competition. Consumer protection laws must make sure that the interest of the consumers is protected in the long run if the Indian OTT market takes a dominant turn.
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