The senior India leadership of both companies have held multiple meetings in recent weeks. Blackstone is exploring either buying the business partially — a combination of assets including sports properties and media rights, and the Disney+ Hotstar streaming service — or the whole portfolio that also includes its linear TV franchise such as the flagship Star India TV network, OTT and a 30% stake in Tata Play (Tata Sky earlier), the people said.
It is widely believed that Kevin Mayer and Tom Staggs — two former Disney executives who have been brought back this July by chief executive Bob Iger as advisers to help him navigate the company’s legacy television business and the ESPN sports network — have been the key catalysts to bring Blackstone to the discussion table. After their earlier stints in Disney, Staggs and Mayer have been running Candle, a media group that they founded with backing from Blackstone.
Staggs, a former chief financial officer at Disney, had held multiple roles in the organisation, including as its chief operating officer and head of theme parks. Mayer, once seen as Iger’s likely successor, especially after the launch of Disney+, had worked closely with the CEO on a series of acquisitions and was a key architect of Disney’s streaming strategy. Another factor that may swing a deal between Disney and the Wall Street buyout major is Vanguard — the world’s second largest asset manager after Blackrock and the largest shareholder in both firms.
What is still not clear is if Blackstone would eventually look at a bigger global transaction or just restrict themselves to India. Globally, the media giant has been beset with poor financial performance, less-than-optimal revenue, ballooning $44.5 billion of debt, a declining TV business, box office duds, strike by Hollywood writers, shareholder activism, large sale layoffs, falling share price and a major rift between the company and the state of Florida just after its theme parks opened after 2 years of Covid. Iger has been striving to wipe out $5.5bn in costs in an effort to “restructure the company, improve efficiencies, and restore creativity to the centre of our business” by focussing on just three businesses to drive future growth: film studios, theme parks and streaming while simultaneously considering “strategic options” for the company’s legacy TV networks like ABC. Iger has already struck a deal with Penn Entertainment for ESPN that will provide $1.5 billion in cash over the next decade and also negotiating with Comcast for the final price to buy out the residual 33% stake in Hulu between this September and January 2024.
Disney India and Blackstone spokespersons declined to comment.Disruptive landscape
There is still no guarantee that these discussions will culminate in a transaction, warned the people cited earlier. It is also premature to talk about valuation numbers at this point, they said.In 2017, when Disney acquired Rupert Murdoch’s 21st Century Fox, $14 billion was ascribed to the India franchise, including the minority interest in Tata Play. However, back-of-the-envelope estimates by industry players now peg that figure to be $5-7 billion, on the back of a fast changing, disruptive media landscape. ET could not independently verify the figure.
Analysts say, for a value conscious buyer like Blackstone, even this valuation will be steep. The only other media company that will boast of a similar valuation would be the $10 billion Sony-Zee combo. Viacom18 Media — a joint venture among Mukesh Ambani’s Reliance Industries, Paramount Global and Uday Shankar’s investment firm Bodhi Tree Systems — is valued at $4 billion.
In August, US multimedia company The Wrap first reported about the possibility of Blackstone outright buying Disney globally following the return of Mayer and Staggs. The Wall Street Journal on July 11th was the first to report that Disney is exploring strategic options for its Star India business, including a joint venture or a sale, a sign of strain at one of the premier properties it acquired from Fox.
Blackstone has evaluated several media assets in India over the years including Sony’s local operations, Airtel DTH, Dish TV and Eenadu; and had bought into Jagran Media Network. It had also weighed a co-investment with Star in Asianet for a minority stake, after Murdoch bought a controlling interest in the Kerala-based network from Rajeev Chandrasekhar, a former telecom-and-media business magnate and the current minister of state for electronics and information technology. K Madhavan, the current Disney India head, was the managing director and CEO of Asianet at the time.
“Diluting a strategic stake to a PE player and bringing capital into the company is a much better strategy than exiting India by selling the entire business to another entity,” said Nitin Menon, managing partner, NV Capital. Menon noted that there are only a handful of players apart from Reliance Industries who might have the wherewithal to evaluate an asset like Star India. Reliance is believed to be also evaluating Disney’s India operations.
Mickey’s magic waning?
While it continues to be a dominant player in regional pockets, Disney has lost significant ground in the sports broadcasting business due to the loss of Indian Premier League’s digital rights to Viacom18 Media, which outbid Disney with a $2.7 billion offer and chose to broadcast the event free earlier this summer. Disney is now streaming the ongoing Cricket World Cup in India for free to woo back some subscribers even at the cost of revenue.
In August, Ambani also walked away with the BCCI media rights after stumping Disney this summer, bagging a multi-year pact to broadcast Warner Bros Discovery Inc’s HBO and other content library that were earlier with Disney. Disney+ Hotstar, which is operated by a separate company, Novi Digital Entertainment, had 40.4 million paid subscribers, but with an average revenue per user of $0.59 (under Rs 50). The app has been downloaded by over 500 million users but has been losing subscribers this year due to the loss of IPL digital rights and non-renewal of content deals. Reliance Jio had also refused to renew its mobile content deal with Disney+ Hotstar.
