Reliance, Disney may offer 2-year freeze on ad rates to secure CCI nomination

Mumbai: Reliance Industries Ltd (RIL) and Walt Disney are considering proposing a two-year freeze on advertising rates to the Competition Commission of India (CCI), their latest move to seek the competition watchdog’s nod for the Star India-Viacom18 merger, people familiar with the matter said.

RIL and Disney, which are aiming to complete their merger by October, are looking at ways to assuage regulator’s concerns about the potential impact of the merger on the Indian media and entertainment (M&E) industry.

“The proposal we are discussing internally is a two-year freeze on ad rates for all advertisers and agencies,” one of the people said.

The second person added that “both sides are confident that the merger agreement will overcome the CCI hurdle.” “A price freeze on ad rates could ease CCI concerns about the impact of the merger on competition,” the person said.

Media agency officials feel that the RIL-Disney proposal is interesting as it could help the Star-Viacom18 merger in getting CCI approval and the potential loss of advertising revenue due to the freeze in advertising rates would be minor.

Some officials, however, say the combined entity will incur a marginal loss due to the proposed rate freeze, especially for properties like the Indian Premier League (IPL), which have been badly hit by weak advertising over the past two years. “Both Star Sports and JioCinema would not mind keeping their ad rates unchanged, considering that they have barely managed to fill their inventory due to the exit of new-age advertisers and caution by legacy brands against making expensive cricket buys,” said a media buyer. Both RIL and Disney declined to comment.

Apart from the rate freeze, RIL and Disney are also coming up with other proposals that include shutting down some weaker channels in Hindi and regional markets as the combined entity’s market share would easily cross the 40% mark in many markets.

The CCI is probing the Rs 70,000-crore merger proposal of Viacom18 and Star India, citing potential antitrust issues and questioning their dominant market shares in the television and streaming segments.

The Company is investigating whether the consolidation of key cricket broadcasting rights with Star-Viacom18 would provide a clear competitive advantage to the proposed combined entity.

Cricket is the most popular content genre in India, transcending age, income and language barriers. It commands the highest premium advertising rates, unmatched by any other genre.

According to an industry expert, the biggest advantage of the merger will be the bargaining power the combined entity will have over advertisers due to its dominant position in the market.

In May, RIL and Disney had filed an application with the CCI seeking clearance for the Star-Viacom18 merger, arguing that it would not significantly impact competition in the M&E industry.

On the subscription issue, RIL and Disney have argued that both the bundled and a la carte rates are regulated by the Telecom Regulatory Authority of India (TRAI) and the combined entity will have to offer content to all TV distribution platforms at uniform rates.

Even the discounts that broadcasters provide on TV packages are regulated and uniform across all platforms, ensuring that broadcasters do not discriminate between the two service providers.

In February, RIL and Disney signed agreements to combine Star and Viacom18 to create a media giant with over 100 TV channels and two streaming platforms, Disney+ Hotstar and JioCinema. The combined entity is likely to retain just one streaming platform, JioCinema.

RIL will control the joint venture with a 56% stake, followed by Disney with a 37% stake and Bodhi Tree Systems, an entity promoted by Uday Shankar and James Murdoch, will hold the remaining stake. The combined entity will have annual revenue of around ₹25,000 crore.

Reliance Foundation CEO Nita Ambani will be the chairperson of the combined entity and Shankar will serve as vice-chairman.