Disney's valuation slips in Viacom18 deal: What went wrong?

The much anticipated Disney and Viacom18 deal is on the horizon. According to a Wall Street Journal report the deal that would be finalised this month, involves Disney selling 60 percent of its India unit to Viacom18, with a reported value of $3.9 billion.

The deal reportedly was finalised in December last year when a MoU(memorandum of understanding) was signed between both parties.

The current deal size is significantly below Disney's initial expectation of $10 billion.The decline in the valuation of the India business reflects the challenges encountered by major media companies in navigating a market with a dense and diverse population.

As per a Wall Street Journal Report, under the sale arrangement, Disney will retain ownership of 40 percent of its India operations, while Reliance will own 51percent and Rupert Murdoch and Uday Shankar-backed Bodhi Tree System will own 9 percent. Viacom18 is expected to pay approximately $1.5 billion in cash and offer stock to acquire its share in the combined entity.

It all started with a Wall Street Journal (WSJ) report in July 2023 that said Disney is actively considering strategic alternatives for its India business in response to the evolving landscape of Star India post Disney's acquisition of Fox's entertainment assets. As per the report, options under consideration included potential joint ventures or a sale of the business.

The WSJ report was succeeded by another media report where Disney CEO Bob Iger hinted at the possibility of selling its linear TV assets. Iger openly acknowledged the challenges faced by the traditional media industry due to the increasing dominance of streaming and digital platforms.

While there was no clear mention of the company’s India business it is only obvious the plans to sell the India business were on the table for the media giant.

The turbulence for Disney+ Hotstar began with the loss of streaming rights for the Indian Premier League (IPL) to Reliance's JioCinema. Disney+ Hotstar had built a substantial cricket audience universe, and losing IPL streaming rights posed a considerable obstacle, potentially leading to a decline in user engagement and risking the loss of a significant portion of its dedicated audience.

The loss of popular content has been a significant factor contributing to Disney + Hotstar's decline in subscription revenue. Beyond the IPL loss, Disney+ Hotstar also surrendered all HBO content offerings to JioCinema, resulting in the loss of a loyal audience for popular shows like Game of Thrones and Succession, among others. All of these factors added to drop in valuation said experts.