Top 10 news that rocked the M&A industry in 2023

2023 was indeed a challenging but nevertheless exciting year for the media and advertising industry, thanks to big mergers, new regulations, talks of consolidation and what not. While some big names were in the news for layoffs others were making headlines for seeking transparency in the industry.

We look back at some of the big developments in the sector this year.  

Merger of Wunderman Thompson and VMLY&R 

In a surprising move in October, WPP announced the merger of two major creative agencies, Wunderman Thompson and VMLY&R, rebranding the amalgamation as VML. This decision, viewed as a cost-cutting measure amid the challenges faced by both agencies, marked a significant shift in WPP's creative landscape.

What added to the shock was the fact that in 2018, the century-old J. Walter Thompson (JWT) had merged with Wunderman, forming Wunderman Thompson. JWT, often hailed as the "University of Indian Advertising," boasted a legacy dating back to 1864 globally and 1929 in India. 

Despite the historic merger, the latest consolidation decision saw WPP replacing three iconic brands with an unfamiliar one. However, this strategic move hinted at simplifying the organizational structure for enhanced back-office efficiency.

Influencer marketing regulations

After various complaints against influencers, including influencers, for propagating ads of untested or unverified products often in the disguise of normal posts, the Consumer Affairs Ministry finally came up with extensive guidelines for social media influencers on January 20. The influencer marketing guidelines impose a fine of Rs 10 lakh, escalating to Rs 50 lakh for repeated offenders, along with the potential barring of influencers from endorsing products for up to six years in case of continued non-compliance.

Influencers are now required to substantiate their claims, ensuring that products and services endorsed have been genuinely experienced by the endorser. The Consumer Protection Act of 2019 forms the foundation for safeguarding consumers against misleading advertisements and unfair trade practices. Even virtual influencers, characterized as computer-generated avatars, also fall under the purview of these guidelines.

Row over ISA media charter

Amid economic headwinds when every dollar is being accounted for, Indian Society of Advertisers came up with a “Media Charter” in August. The media charter, which described how a “model contract between an advertiser and agency should be” was released at a press conference, the first such press meet organized by the ISA. 

The model contract suggests that advertisers list each and every detail of the pitch and media duties for better transparency, and adds “Right to Audit" clause that does not only cover the agency vendors but also has the ability to audit the whole of agency turnover.  

The objective behind such a “water-tight” contract was to maintain transparency, especially in digital advertising, avoid conflicts and collapse of contracts and get the ‘fair share’ of Agency Volume Benefits or AVBs among others, ISA asserted. 

The advertising agencies were stunned with the ISA move, not only because of stringent measures suggested by advertisers but also with the way (press conference) it was conveyed to them. Though none of the agency heads or their association spoke on record on this matter, privately they admitted that the ISA neither consulted nor informed them about the Media charter. They also felt that ISA should have discussed the matter with agencies directly instead of going to the press. 

Layoffs and layoffs in the digital universe 

The year 2023 witnessed a pervasive trend of layoffs impacting various industries, indicating that no sector remained immune to workforce downsizing. The initial wave of layoffs, triggered by the pandemic, evolved into a persistent trend throughout 2022, affecting major tech giants and leading to mass layoffs, each exceeding 5,000 employees.

Prominent global and Indian tech companies, including Google, Amazon, Meta, Microsoft, LinkedIn, Zoom, Yahoo, ShareChat, PayTm, BYJU's, and Times Internet, underwent substantial layoffs. As the year progressed, the banking sector also experienced a cascade of downsizing. Most of these firms are either the tech platform offering digital ad services or have been the big advertisers. 

So far in 2023, there have been 1,992 layoffs at tech companies globally with 428,335 people impacted (1,183 people per day), as per TrueUp, a job marketplace. In 2022, there were 1,557 layoffs at tech companies w/ 243,318 people impacted (667 people per day).

New laws for telecom & broadcasting sectors

In December, during the winter session, Indian Parliament passed the Telecommunications Bill, 2023 to reform the century-old Indian Telegraph Act, of 1885. The bill cements rules for spectrum allocation and provides for a non-auction route for giving airwaves for satellite-based communication services which is likely to help companies like Starlink (owned by Elon Musk) get easy access to the world’s largest consumer market. 

The Bill also lays down stringent provisions for phone number spoofing for fraud and moots a "digital-by-design" online grievance redressal mechanism for addressing users' complaints. The Telecommunications Bill, 2023 also seeks to tighten the noose on pesky callers through various means, including by checking misuse of SIM.

The OTTs are not in its purview, especially those who provide communication services, such as WhatsApp (owned by Meta), Telegram and Signal - won't be covered under the bill. This has given a major relief to the industry. 

In November, the government also released the much awaited draft Broadcasting Services (Regulation) Bill, 2023, which seeks to replace the Cable Television Networks (Regulation) Act of 1995. The government has invited comments from the public by January 2024. 

While the Ministry of Information and Broadcasting (MIB) has pitched the Broadcasting Bill as a tool to consolidate the laws for the entire broadcasting sector and streamline broadcasting regulations in light of newer technologies, such as direct to home (DTH), internet television, and OTT services, critics say the language also includes digital news portals and thus affects press freedom as well. 

Retrospective taxes in gaming

India's online gaming industry, once a beacon of success, faced a setback with the GST Council's imposition of a 28% tax on gaming from October 1, resulting in a staggering Rs 45,000 crore retrospective tax liability since 2017. 

Earlier, online platforms offering games of skill attracted an 18% GST, which led to a lengthy debate to differentiate between games of skill and chance. However, the GST Council did not make any distinctions between games of skill and games of chance, taxing the two types of online gaming platforms equally.

The move, lacking differentiation between skill-based and chance-based games, has led to a 400% increase in GST liability for gaming startups, prompting layoffs and reduced sponsorship budgets.

Free streaming of IPL 

In March this year, Reliance group owned Viacom18 surprised the industry by announcing that IPL 2023 — just like Women’s IPL 2023 — will be free to watch on JioCinema. This was the first time that the coveted cricket league was streamed on JioCinema, which had acquired the digital rights of the tournament for a whopping Rs 23,758 crore last year.

IPL happens to be the most expensive sports IP in India, with its broadcast and streaming rights split between Disney Star and Viacom18 for the 2023-2027 period. 

JioCinema’s decision to make IPL free has also compelled Star to make 12 key matches (including the playoffs) available across its free-to-air (FTA) channel Star Utsav, at a time when India’s pay TV households are already declining 3 per cent annually.

Disney Explores Strategic Options for Star India

Soon after the IPL, a Wall Street Journal's report in July revealed that Walt Disney is exploring strategic options for its Star India business, including a potential joint venture or sale. This development created ripples in the media industry as Disney's India business comprises Disney+ Hotstar streaming service and Star India, acquired in 2019 through the purchase of 21st Century Fox's entertainment assets.

The financial outlook for Star indicated a projected 20% drop in overall revenue for the fiscal year ending September 2023, with a roughly 50% decline in earnings before interest, taxes, depreciation, and amortization. 

Simultaneously, the Reliance group intensified competition by targeting not only streaming giants like Disney, Netflix, and Amazon Prime but also the substantial linear TV viewer base in India.

Gambling and real-money firms in dock 

For a long time, the central government has been trying to take down illegal betting apps based within India as well as offshore due to cases of duping, financial frauds, and money laundering. 

In April this year, the Ministry of Electronics and Information Technology (MeitY) notified new rules under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) to ensure only 'permissible' online real-money games could operate in India. However, the self-regulatory bodies (SRBs) to certify such permissible games and enforce the rules have not been notified so far.

In November, MeitY issued blocking orders against 22 "illegal" betting apps and websites including Mahadev upon a request by the Enforcement Directorate (ED) amid an investigation of an alleged money laundering case.

The centre has blocked a total of 581 applications (app) so far out of which there are 174 betting and gambling applications (apps) and 87 loan lending applications. Minister of State for Finance Pankaj Chaudhary told parliament.

Ad agencies take to IPO route

Earlier, it was only the global advertising networks and their holding companies that were actually public. But in 2023, the landscape changed rapidly with more and more Indian ad agencies bracing themselves for an IPO. 

Crayons Advertising, India's first major integrated advertising agency, filed for IPO in May this year and listed on the NSE Emerge platform in June this year at a premium of 38% over its IPO price. 

Another integrated agency RK Swamy also gears for its IPO and has filed its Draft Red Herring Prospectus (DRHP) this year in August.