The Media Eldorado – Quo Vadis

So the Disney – Reliance merger is inked eventually . It did not come as a surprise as Disney was unable to live with the uncertain nature of the Indian market. Hanging their hat on digital revenues , and be willing to wait to make them happen in emerging markets , has never been the cup of tea of Global corporations. And with the xenophobia surrounding the Indian media business currently, its probably just as well , that a leading Indian business group guides the premier media corporation in the world , in potentially the largest and the most exciting media landscape the world will see over the next few years.

The pricing of the deal surprised me . It’s priced too cheap , if I may say so . Of course , Disney probably doesn’t care as at 30 % plus share holding in the combined entity, its on the bullet train for the ride. Even if it one compares it to a completely depleted ZEE ( market cap 15000 crs ) , and a very well run company Sun TV ( market cap 25000 crs ) , this behemoth looks very attractively priced . In fact , the whole media business in India looks very very attractively priced for any one . My estimate is that the media business in the US is probably valued at a trillion dollars across various companies ( and it is probably a conservative estimate as its difficult to value the tech companies overhang in this space ) , and at these numbers , the Indian market is valued at 2-3 % of the US market when it has 20 % of the world’s consumers!! Does it make sense ?? It doesn’t to me , and I will watch this space with much interest, as an Industry man , and as an investor.

Apart from the financial metrics of the deal , I think its an important pitstop for the industry. In a fundamentally creative business , is such consolidation required . Size usually slows innovation, and are we at a stage to let that happen ? Does this require a regulatory oversight , will this stifle new start ups , and how will the competition react , and will this create a completely new vertical of Creative Delivery vis – a- vis the humongous platforms which are emerging , are some of the questions I grappled with as I watched this merger happen .

With 300 million people who stream content on their devices , and this number expected to grow at upwards of 10 % per annum , we are now the second largest digital market in the world . With such an explosion in viewing minutes, its interesting that the industry still struggles for digital revenues, but I guess the strategy has been to drive penetration and worry about pricing later . And therein lies the opportunity, as the addiction and the fix required to satisfy the demand will drive digital revenues as never before. Think about it , if 300 million people started paying a 1000 Rs a year across digital platforms for basic access at a price which is less than half of cable pricing, we have essentially created a cable revenue system in India on digital , and if we started adding the premium viewing , and On Demand viewing , we are probably looking at significant larger numbers. What is even more exciting is the advertising and influencing opportunity around this , where the sheer nature of the product brings so many more companies who can spend money more effectively , and we see a very cogent ecosystem. Cricket and Television which were able to service 200 and 2000 customers only , will suddenly be replaced by the 20000 and more who focused on reaching their customers through print and outdoor . The pace of change will be dynamic , too dynamic , and expect action from tech , telecom and social media around this space of an accelerated nature.