Reliance Industries Limited, led by the ambitious Mukesh Ambani, is leaving no stone unturned to dominate India’s entertainment space, encompassing both Over-the-Top (OTT) and Television distribution domains. In the latest development, Reliance is reportedly in discussions to acquire Disney’s 29.8% stake in Tata Play, the country’s largest subscription-based satellite television (DTH) service provider. This strategic move aligns with Ambani’s overarching goal of elevating JioCinema to become India’s most popular and widely embraced OTT streaming platform.
Reliance is also negotiating with Walt Disney to acquire Hotstar, further solidifying its position in the dynamic entertainment landscape. Rumours of RIL’s interest in acquiring Hotstar had been circulating for some time. However, the confirmation came in December 2023 when authoritative sources involved in the negotiations revealed their meticulous efforts on a non-binding term sheet.
Ambitions for JioCinema
If the Reliance Tata Play deal materializes, Reliance would not only solidify its standing in India’s television distribution sector but also secure access to the entire Tata Play customer base, ultimately expanding the reach of its OTT platform, JioCinema. Reliance’s existing presence in cable TV, with significant ownership stakes in Hathway (75%) and Den Networks (74.9%), would be complemented by this potential acquisition.
Karan Taurani, an analyst affiliated with Elara Capital, has shared his perspective on the potential acquisition of a stake in Tata Play by Reliance. He asserts that this proposed deal is a logical move for Reliance. He points out that Reliance is already established on the MSO (multiple-system operator) side but lacks a presence on the (DTH) (direct-to-home) side, which delivers television content directly to viewers via satellite.
With the current market dynamics favouring DTH over MSO and DTH boasting a more premium customer base in terms of ARPUs (Average Revenue Per User), Taurani suggests that DTH services have a “protected base” of premium customers who are less likely to switch providers, providing stability.
By leveraging the premium customer base of DTH, JioCinema, Reliance’s streaming platform, could gain a strategic advantage. This move positions the OTT platform to outperform existing players such as Netflix, Amazon Prime Video, and Hotstar, intensifying competition for user subscriptions in the market.
As of March 2023, Tata Play boasts 21.3 million subscribers, representing 32.65% of total DTH users in India, according to TRAI.
Additionally, Karan Taurani, believes that Reliance’s foray into the DTH segment through Tata Play would ease competitive pressures, especially considering the conglomerate’s bundled offerings.
What’s In It For Tata Play & Customers
For Tata Play, acquiring access to JioCinema’s extensive content library could serve as a catalyst, potentially revitalizing its offerings and drawing in new subscribers in India. In addition, collaborating with industry giants like Reliance would provide much-needed resources and strategic direction for Tata Play, helping it navigate the competitive landscape.
Depending on how the deal is structured, Indian consumers would surely benefit from bundled offerings, wider content choices, and potentially lower prices.
Overall, the Reliance Tata Play deal signifies a strategic alignment between two major players in the Indian media and entertainment landscape, poised to reshape the industry’s dynamics.
Current Ownership Structure
As of now, Tata Sons, the holding company of the Tata group, holds a majority stake of 50.2% in Tata Play. The remaining ownership structure includes a 29.8% stake owned by Walt Disney Co. and the rest of the shares held by Temasek, a Singapore-based investment firm.
In December 2023, reports emerged that Walt Disney plans to divest its 29.8% stake in Tata Play Ltd during the proposed initial share sale by Tata Play. The decision is primarily driven by Disney’s strategic focus on prioritizing its broadcast and streaming service businesses in India. However, due to the planned listing delay, Disney has initiated exploring alternative exit strategies.
In October last year, media sources indicated that the Tata Group is in advanced discussions with Temasek Holdings Pte to buy back its 20% stake. The valuation of this potential buyback is reported to be in excess of $1 billion, according to individuals familiar with the matter.
According to Business Standard, bankers are currently evaluating the worth of Disney’s stake in Tata Play. This scrutiny is not without cause, as Tata Play, despite maintaining a substantial market presence, reported a 5% YoY decline in its revenue, amounting to Rs 4,499 crore, while the losses increased 53% YoY to Rs 105 crore in FY23, ending on March 31, 2023.
What are your thoughts on Reliance’s potential acquisition of stakes in Tata Play to establish JioCinema as India’s largest entertainment platform for everyone?
