Reliance Deal Dented Disney India’s Business By $2 Bn

In its financial report for the second quarter of 2024, US based entertainment major Walt Disney said it incurred over $2 Bn charges due to goodwill impairments related to Star India and entertainment linear networks in India. 

The company said that the dent could be attributed to entering a binding agreement with Reliance Industries Limited (RIL) in the quarter to contribute Star India’s operations in a new joint venture. 

Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The goodwill impairment can be attributed to the revenue decline for Star India as well as Disney+ Hotstar in the quarter. 

In the quarter, Star India’s sports broadcast revenue fell 17% year-on-year (YoY) to $105 Mn from the $127 Mn in the same quarter year ago. The company said that the decrease in revenue was due to lower programming and production income, which can be attributed to the non-renewal of its contract with the Board of Control for Cricket in India (BCCI). 

Along with this, paid subscribers for its OTT arm Disney+ Hotstar decreased by 6% YoY to 36 Mn from 38.3 Mn in the year ago quarter. Further, Disney+ Hotstar’s average monthly revenue per paid subscriber decreased from $1.28 in the year-ago quarter to $0.70 due to lower advertising revenue.

The depreciation in the media major’s India business comes against a backdrop of the deal between RIL and Viacom18 to combine the businesses of Viacom18 and Star India Private Limited in a JV.

The resultant JV, which is valued at $8.5 Bn on a post-money basis, will see Disney holding a 36.84% stake against Viacom18’s 46.82% and RIL’s 16.34%.  

The transaction is expected to be completed between October and December this year or in the first four months of 2025.

The unnamed entity will boast more than 120 TV channels, including Star Plus, Colors, and Star Sports. In addition, it will have streaming platforms JioCinema and Disney+ Hotstar under its ambit. 

While Reliance is expected to control a majority stake in the company with an investment to the tune of INR 11,500 Cr, Disney counts on the JV to continue to float its boat in the country.  

“It’s kind of the best of both worlds. We stay in the market at a significant level. We have a very good partner in Reliance, and we get to have a chance of growing a business and lowering the risk of doing so,” Disney’s CEO Bob Iger had said earlier.

At a global level, The Walt Disney Company reported a 1% increase in revenue YoY to $22.1 Bn.