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 Through the $75 billion deal, which a source said is expected to
be announced Thursday morning, Disney would be able to
distribute its programming on Star India, operator of 69 TV
channels in eight languages, as well as the popular Hotstar
streaming service. Disney also would gain global rights to
professional cricket.
"It is an amazing opportunity to get into the best developing
market in the world," MoffettNathanson analyst Michael Nathanson
said, "but it is highly competitive."
Netflix Inc has been offering its streaming service in India for
nearly two years, and Amazon.com Inc's Prime Video has been
courting customers there for one year.
Global expansion is important to Disney because its largest U.S.
network, ESPN, has been losing subscribers as audiences migrate
from traditional television to digital viewing.
India represents the second-largest subscription TV market in
Asia, with 154 million households in 2016, according to
consultancy PricewaterhouseCoopers, which projected that number
will grow to 167 million in 2021.
Mobile video traffic, meanwhile, is booming. KPMG expects it
will grow at a compound annual growth rate of 68 percent between
2016 and 2021.
Disney did not immediately respond to a request for comment. Fox
declined to comment.
Star India is also flush with cash. Fox projects it will earn
$500 million before interest, taxes, depreciation, and
amortization in fiscal 2018, rising to $1 billion in 2020.
"Star India alone is by far the most successful TV network in
the fastest-growing country," Macquarie Research analyst Tim
Nollen said.
Star's TV business could bring in new advertising revenue at a
time when U.S. ad spending is growing at a slower pace. In the
first fiscal quarter, Fox saw international ad revenue jump 10
percent, fueled by double-digit increases in growth through Star
India, while in the United States the company saw 3 percent
growth in ad revenue.
EDGE OVER NETFLIX
For Disney, owning Star India could give it an edge over
competing content providers in the world's second-most populous
country.
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"New entrants like Netflix will need a lot of time to recreate" a
service like Hotstar because of its sports rights and head start in
producing programming in multiple Indian languages, Barclays
analysts said in a research note.
Disney networks including the Disney Channel are distributed now in
India but overall the country is "an egregious area of
under-exposure" for the company, B. Riley FBR analyst Barton
Crockett said in a research note.
Adding Star, which reaches 720 million viewers per month, would
vastly expand Disney's TV presence there. Disney could put its
content on the Star channels and Hotstar, said Prem Parameswaran,
chief executive of North America for Eros International Plc, a
distributor of Indian movies, shows and music that also has an
online streaming service.
THE POWER OF SPORTS
Global sports rights, particularly cricket which Fox recently won,
should add to Disney's bottom line, Parameswaran added.
"In India there is religion, there is cricket and there is Bollywood,"
he said.
In September, Star paid $2.55 billion for broadcast and digital
rights of the Indian Premier League cricket tournament, beating
Facebook which also bid.
FILM OPPORTUNITY
The deal also could allow Disney to boost its film business in
India, where the vast majority of movies are local Bollywood
releases, Parameswaran said.
Disney had produced Bollywood films through its Indian film studio,
UTV, but recently has focused instead of promoting its global
English-language blockbusters in the country.
With the acquisition of Star, Disney may decide to return to
local-language film production through UTV for distribution on TV or
streaming, Parameswaran said.
"They could now have the ability to create films and offer them
exclusively to their viewers, rather than through the box office,"
he said. "There are a lot of synergies here."
(Reporting by Jessica Toonkel in New York and Lisa Richwine in Los
Angeles; Editing by Lisa Shumaker)
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