Viacom-Star merger will substantially reduce bargaining power, says advertising industry

The merger of the Indian media business of Walt Disney with Reliance Industries’ Viacom18 will create a ”significant dominant player”, which might reduce the bargaining power for media buying agencies, the country’s advertising industry has said. The Rs 70,000-crore behemoth, created post-merger may enable it to exert greater control over pricing and inventory of media rights and also influence over content, advertising industry leaders said.

According to the experts, the merged entity will almost have a monopoly in sports properties as it will collectively control 75-80 per cent of the Indian sports market, in both linear TV and digital platforms and may uptick the rates.

The joint venture, which is expected to receive approvals by the first quarter of 2025, will have over 70 channels from Star India and 38 TV channels from Viacom18 in eight languages, along with two large OTT platforms — Jio Cinema and Hotstar — and two film studios owned by each of them.

”The Star-Viacom merger will substantially reduce the bargaining power of the media buying agencies,” Rediffusion Chairman Sandeep Goyal told PTI.

Last year, media buyers and clients reduced rates during the Indian Premier League (IPL), playing the broadcaster versus the digital rights holder, he said.

”That will not happen now. This year, I think there will be an uptick in IPL rates,” Goyal added.

Expressing similar views, Dentsu South Asia CEO Harsha Razdan said this combination ”heightens competition and enhances the negotiating power of the newly merged entity, enabling it to exert greater control over pricing and inventory”.

”Once it has cleared all industry-specific regulation protocols, the combination should create a significantly dominant player in the market, wielding substantial influence over content creation, distribution, and consumption trends,” he said.

According to a joint report from industry body Ficci and EY, the Indian advertising industry crossed the Rs 1 lakh crore-mark in 2022.

The report estimates the ad industry to grow at 11 per cent till 2025 and expects it to cross Rs 1.42 lakh crore by 2025, in which traditional media, such as TV, will have a 46 per cent contribution and the remaining 54 per cent will be from new age digital media.

Razdan further said the newly merged entity presents a dual prospect of opportunities and challenges for the advertising and marketing sector.

On the positive side, it provides extensive reach to the industry with its diverse portfolio of channels and platforms, but it also enhances the negotiating power of the newly merged entity.

”I hope that in the coming years, the merger achieves a balanced outcome. It is crucial to maintain two or three major players in the market to foster a healthy and competitive environment, which ultimately should serve the end consumer,” he said.

Elara Capital Senior Vice-President, Karan Taurani said the monopoly in sports properties may lead to higher ad revenues of the merged entity.

Disney and Jio collectively control 75-80 per cent of the Indian sports market across both linear TV and digital platforms, he added.

”This dominance in sports, primarily cricket, will help command a substantial share of the overall ad market, showcasing strong growth in an industry where sports is a key viewership driver for both linear TV and digital platforms,” said Taurani.

In CY22, sports advertising expenditure in the country stood at Rs 7,100 crore jointly for TV and digital, in which Disney India had a contribution of 80 per cent.

The combined entity will have lucrative sports properties, including the IPL (both TV and digital), ICC cricket tournaments (both TV and digital), Wimbledon, Pro Kabaddi League, and BCCI domestic cricket.