What the WarnerMedia-Discovery deal means for India
Experts say that the overall impact of the merger will be minimal in India as the players lack size and scale, yet there's potential if HBO Max launches in the country
Earlier this week, AT&T had announced a $43 billion deal to merge WarnerMedia with Discovery. AT&T, which had acquired Time Warner for $85 billion, will form a new media company with Discovery in which it will own a 71% stake with the latter holding the remaining 29%.
But the deal may not have much impact in India as the two players lack size and scale in the fast-growing media & entertainment (M&E) market. WarnerMedia has been facing challenges in the Indian market following the implementation of the new tariff order (NTO). Likewise, Discovery has been unable to scale up its India business.
The combined WarnerMedia-Discovery entity in India will have a presence in kids, infotainment, and lifestyle genres. WarnerMedia owns and operates four channels Pogo, Cartoon Network, CNN International, and Cartoon Network HD+.
Discovery Communications India has a bouquet of 13 channels comprising Discovery Channel, Animal Planet, TLC, Discovery Kids, DSPORT, Investigation Discovery, Discovery Science, Discovery Turbo, Discovery HD, Animal Planet HD WORLD, TLC HD, DSPORT HD, and Investigation Discovery HD.
The combined entity will also have a streaming platform in discovery+ along with the likelihood of HBO Max getting launched next year. It is pertinent to note that HBO has licenced its content to Star in India for both TV and digital.
Discovery Communications India reported revenues of Rs 857.74 crore on a net profit of Rs 54.9 crore in FY20. Revenue from distribution support stood at Rs 731.1 crore while programme sourcing revenue came in at Rs 126.5 crore.
WarnerMedia India's revenue for FY20 was Rs 440.4 crore while net loss stood at Rs 7.5 crore. The company reported ad and subscription revenue of Rs 148.55 crore and Rs 266.9 crore respectively.
The combined share of both the networks will be in low single-digit as most of their channels fall in niche genres. WarnerMedia-Discovery will have a strong presence in the kids' genre with Cartoon Network, Pogo, and Discovery Kids. However, the kids' genre itself faces the problem of under-indexation despite being the fourth biggest category in terms of viewership share. To make matters worse, Pogo and Cartoon Network have been losing market share.
To be fair, both WarnerMedia and Discovery have experimented with the Hindi general entertainment market by launching Imagine TV and Discovery Jeet respectively. However, both the experiments failed to yield positive results. WarnerMedia-owned Turner Asia Pacific had acquired NDTV Imagine from the NDTV Group and rebranded it as Imagine TV. However, the Hindi GEC foray was a short-lived one as Imagine TV folded in 2012.
Discovery's dalliance with the Hindi GEC genre ended within six months of launching Discovery Jeet. The male-skewed channel couldn't create an impact right from its inception as the original programming failed to impress the viewers.
The New Tariff Order (NTO) by the Telecom Regulatory Authority of India (TRAI) sounded the death knell for niche genres like English entertainment. Other genres like infotainment and lifestyle are also finding the going getting tough as the bigger broadcasters took away the major share of the consumers' wallet.
The NTO and the migration of English content viewers to OTT forced WarnerMedia to unceremoniously shut down HBO and WB in 2020.
"WarnerMedia was actively planning to bring HBO Max to India next year because they know the importance of the Indian market. Even Discovery knows how important the Indian market is. Warner had a strategic plan for India; now Discovery will also get involved in that. HBO Max and discovery+ as a combination might be interesting," said the head of a TV channel.
"In India, there won't be much impact of this deal as Time Warner has already exited this market by shutting down HBO and WB. They only have Cartoon Network and Pogo. Discovery is not a driver here. Both are niche players. Moreover, they have entered the Hindi GEC space and failed. The English entertainment genre on linear video is almost dead," said the head of a leading distribution company.
"AT&T wouldn't have stayed in the media business for too long as it is a pure-play telco. It had taken a huge debt to buy Time Warner and DirecTV. For AT&T, their deal got delayed by two years due to the Trump administration's move to block the deal. It got cleared only in mid-2018. So they lost almost two years in the process. The telecom business is very different from the way entertainment operates. Since AT&T had taken so much debt they started getting desperate," a senior media executive said on condition of anonymity.
The executive further stated that WarnerMedia lacks patience when it comes to the Indian market. "WarnerMedia is not known to be a patient company as they unceremoniously shut down HBO and WB. A few years back, they had walked out of Imagine TV also. Now they are left with kids business, which is struggling in the face of competition from incumbents," the executive said.
On Discovery, the executive stated that the network was not going anywhere barring the Discovery Channel. "In early days of cable & satellite, they created long-tail channels. However, the implementation of NTO started hurting those long-tail channels. Discovery Channel and Discovery Kids, to an extent, remain the driver channels," the executive added.
Ormax Media Founder and CEO Shailesh Kapoor said both the networks are not present in the GEC and movie genres. Therefore, the impact of the merger on the TV business will be zilch. "They will come together as a single company but will continue to be niche players," Kapoor added.
He, however, feels that the two can become relevant in the OTT space if HBO Max launches in India. "There is more interest on the OTT side since HBO Max is not launched in India yet. I don't know what their plans might be - whether they will look at combining HBO Max with Discovery+ internationally under one brand name and launch the service to take on Disney+ and Netflix. OTT space is growing, and if HBO Max launches in India and makes its international content available, there would be an audience for that," he stated.
Elara Capital VP Karan Taurani shared, "On the streaming side, WarnerMedia has no presence in India, whereas Discovery+ is a small OTT offering in terms of genre, reach, and content. The only impact will be if Discovery+ and HBO Max come together in India and bundle their offering. Otherwise, Discovery is too small to impact the overall OTT space. On the linear business, it is unlikely to have an impact because they hardly have a major presence in India. The genres that these two networks operate in are niche in the Indian market."
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