The wooing of Rupert Murdoch

Whether Comcast gets 21st Century Fox or Disney gets it, the game is about to change irrevocably for Star India

Rupert Murdoch, 87, must be very flattered. It isn’t every day that you have some of the world’s largest media firms fighting over a business you’ve built over six decades.

On June 13, the $84.5 billion Comcast Corporation, the world's second largest media firm (Alphabet, Google’s owner is the largest) offered $65 billion, in cash, to buy the assets that the Murdoch-controlled 21st Century Fox was on the verge of selling to The Walt Disney Company.

Within a week, on June 20, the $55.1 billion Disney announced that it had signed an amended acquisition agreement with 21st Century Fox. This essentially ups its bid for Fox to $71.3 billion from the $52.4 billion it made in December 2017. Comcast is very keen and is expected to come back with a higher offer. Analysts and media are gearing for a battle between Murdoch, who usually gets his way, and his shareholders who might be keener on Comcast’s more lucrative offer.

The winner gets the $28.5 billion 21st Century Fox’s movie studios, television production, regional sports and international businesses, including Sky Plc and Star India.

And that brings us to the point of this column. How does being owned by Disney versus Comcast change things for the ~110 billion Star India, a Fox subsidiary and one of the largest media companies in India? Remember that in 2017 Star accounted for over five per cent of Fox’s revenues and brought in about a fifth of the value of the earlier Disney deal.

If Comcast takes over, it will finally mean the (much-needed) entry of a foreign player in India’s disorganised cable industry. Comcast dominates broadband and cable access in the US and owns broadcast brands such as NBCUniversal and digital ones such as Xfinity, its bundled internet service. It is one of the few players along with the Rs 837 billion Bharti Airtel, capable of taking on Reliance’s Jio in the media space.

Disney, which entered India in 1993 has been around for almost as long as Star which came in 1991. While globally Disney is roughly twice Fox’s size, here Star India is about fifteen times Disney India in revenues. With 52 channels in 8 languages, it is one of the largest media firms in the ~1,473 billion Indian media and entertainment market. It has been nimble at picking up growth opportunities — in local programming, distribution (Tata-Sky), languages (Maa TV, Asianet), sports (kabaddi, football, cricket and the Indian Premier League) and digital (Hotstar). It is along with Zee, Viacom18, Sun and Sony among the top five broadcasters in India.

The ~7 billion Disney India has had one big acquisition, UTV, is a solid player in the kids' space and has eight channels and a consumer products business. It shut down its local film studio in 2016. Put Star and Disney together and you get a largely complementary business.

However, there are some serious cultural differences between them. Disney has a highly process-driven American multi-national culture while Star is more entrepreneurial much like Murdoch himself. Twenty-First Century Fox believes in going local wherever it goes; Disney believes in monetising its existing content assets. Disney has done very well in developed markets and Fox in emerging ones. At a management level, Disney’s India head Mahesh Samat reports to whoever heads the international business. Star India chairman Uday Shankar, on the other hand, reports directly to the Murdochs. This kind of ‘cultural conflict’ is among the top five reasons mergers fail.

Would Comcast’s control over Star India mean a freer hand for Shankar and his team? Maybe. The fact is Disney is a known entity while none of us here in India have seen Comcast at work. It might be more American and more process-oriented than Disney or it might be more entrepreneurial than Fox. On the other hand, Star could create the culture because it would be the first Comcast outpost in India.

Either way, by the summer of 2019, when either of these transactions will be fully operational, Star India will look and behave differently.

http://twitter.com/vanitakohlik