Fox's Star to bring Disney cash and cricket in India

Walt Disney Co’s expected deal with Twenty-Fi­rst Century Fox Inc would give the world’s best-known entertainment firm new advantages in India, such as cricket rights and local-language TV shows for the fast-growing media market.

Through the $75 billion deal, which a source said is expected to be announced on 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 streaming service in India for nearly 2 years, and Inc’s Pri­me Video has been courting cu­stomers there for one year.

Global expansion is important to Disney because its largest US 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 per cent 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 amortisation in FY18, rising to $1 billion in 2020. “Star India alone is by far the most successful TV network in the fastest-growing country,” said Macquarie Research analyst Tim Nollen.

Star’s TV business co­uld bring in new advert­i­sing reven­ue at a time when US ad spending is gr­o­wing at a slower pace. In the first fiscal quarter, Fox saw international ad revenue jump 10 per cent, fuelled by double-digit inc­r­eases in gro­w­th through Star India, while in the US the firm saw 3 per  cent growth in ad revenue. For Disney, owning Star In­dia co­uld give it an edge over competing conte­nt pro­vi­ders in the world’s se­cond-most populous nation.

“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 firm, 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.

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.

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, he 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.”