A review of the anti-competitive JV of Reliance and Disney-Hotstar

On February 28th, Reliance and Disney India announced a joint venture for their media businesses, creating a behemoth valued at $8.5 billion. This move positions Disney-Hotstar and Viacom 18 (including Jio TV and Jio Cinema) as the largest SVoD platform in India, based on monthly active users (MAUs). The current major players in the market include Viacom 18, Disney, Prime Video, Max Entertainment, YouTube, Amazon, Netflix, and Airtel, among others. Our division of market share is quite generous, as it does not distinguish between subscription-based and non-subscription-based services.

One method that we could use to identify the extent of competitiveness (or lack thereof) of this industry is by calculating the HHI. Putting this in context, the HHI (Herfindahl-Hirschman Index) for 'All Categories' in this sector is 2,596, and for 'Sports', it is 2,936. An HHI of 1,800 indicates a 'highly concentrated' market, calculated by summing the squares of the market shares of each company, suggesting that the market currently is 'highly concentrated'.

Based on the existing nature of the SVoD industry, one can intuitively imagine that this joint venture might do more harm than good for the Indian streaming industry, especially online sports streaming. Post-venture, Disney/Viacom 18 would control a significant portion of general streaming (approximately 22%) and sports-streaming channels (approximately 70%). Focusing further on the sports segment, the joint venture would hold contracts for streaming rights of major events, including the IPL (Disney Hotstar, until 2027), all ICC cricket tournaments in India (Disney Hotstar, until 2027), all Indian bilateral cricket series (Viacom 18, until 2028), the Premier League (Disney Hotstar, ongoing), the 2024 Olympics (Viacom 18), the Pro Kabaddi League (Disney Hotstar), and many more. Given the vast market for sports streaming in India, spanning cricket, football (soccer), and the Olympics, the joint venture is poised to gain a significant advantage in negotiating contracts with broadcasting suppliers and subscription prices with customers.

The joint venture offers no benefits for Indian consumers and sports producers. The dominance of the sports streaming industry by a single partnership raises concerns about potential increases in subscription prices, reductions in content quality and variety, and further reductions in competition due to the market power established by this venture. Viacom 18 (Reliance) and Disney-Hotstar would have 281 million MAUs, while the next competitor, with a sports-streaming service, Amazon Prime (whose sports streaming is provided by Fan Code), would have 60 million MAUs. Therefore, Viacom18-Disney-Hotstar would have greater control over all aspects of market dynamics.

Revisiting the HHI calculations provides further insight into the anti-competitive nature of this transaction. The US Department of Justice states that an increase in HHI by 100 points in a highly concentrated market "…are likely to create or enhance market power or facilitate its exercise." As a result of the joint venture, the HHI for all categories is set to rise to 2,823 (up 226 points from 2,596), and for sports-based SVoD, to 5,250 (up 2,314 from 2,936)

.All data and observations direct attention towards the Competition Commission of India (CCI). The CCI has not yet made any public announcements regarding the review of this joint venture. Ideally, the CCI should intervene to assess this joint venture and propose either the divestiture of the sports-streaming business or the dissolution of the joint venture. These measures would align with Section 3 of the Competition Act, 2002, which prohibits "...agreements that cause or are likely to cause an appreciable adverse effect on competition within India" and support in improving the competitive landscape of the streaming industry

Notes:

• The cover image was generated using Open AI
• Interpretation of the market share is based on MAUs i.e., Monthly Active Users. This data has been sources from multiple sources, but more specifically Statista.com and corroborated with alternative sources that offered a similar or close estimate.
• Most data are sourced from mid-2023. Due to limited data available on these streaming services and their MAUs, it is difficult to generate an apples-to-apples comparison of market share performance. Therefore, approximations used in this study, sourced from multiple sources, help us maintain the goal of this study.

Sources:

S, V. (2023, 08). After IPL, Viacom18 bags BCCI’s 2023-28 bilateral cricket rights as well. Retrieved from Business Today: https://www.businesstoday.in/latest/trends/story/after-ipl-viacom18-bags-bccis-2023-28-bilateral-cricket-rights-as-well-396422-2023-08-31

Statista.com. (2023, 01). Average monthly active users of selected video over-the-top platforms in India. Retrieved from statista.com: https://www-statista-com.proxy1.library.jhu.edu/statistics/1427536/india-maus-of-video-streaming-platforms/

US Department of Justic and FTC. (1992, April 2). Horizontal Merger Guidelines. Retrieved from Antitrust Division of DoJ: https://www.justice.gov/atr/horizontal-merger-guidelines-0