Deal with James Murdoch may augur well for Viacom18

With the bidding for broadcasting rights for the Indian Premier League (IPL) just a while away, the battle has already started. First it was the announcement of Zee-Sony merger, which, if all goes to plan, could be done by September. Now, media reports say that Uday Shankar, former boss of Star India, and James Murdoch, his boss from Star, will pick up a 40 per cent stake in Viacom18 in a deal size estimated to be in excess of Rs 12,000 crore.

Viacom18 is the smallest player in the television broadcasting business -- it closed FY21 with a revenue of Rs 3,862 crore. Star India, now a Disney company, at Rs 12,026 crore revenue is the largest, followed by Zee and Sony. Growth has been hard to come by for Viacom, in which Mukesh Ambani's Reliance Industries holds a 51 per cent stake.

The contours of the deal, reports say, will have Viacom drop its 49 per cent holding to around 10 per cent. The rest will be owned by Shankar and Murdoch. In mid-2018, Murdoch's father Rupert had sold Star India to Disney as part of a global $71 billion deal to exit the entertainment business, and this deal could mark his return.

Sources familiar with the development say clinching IPL rights is critical for Viacom18. "If they have to move into the big league, they need cricket. It will be impossible for them to get scale in broadcasting without that," they explain.

Viacom18's flagship channel is Colors, a general entertainment channel, but there is stiff competition from Star Plus, Zee TV and SET. Viacom18's sports portfolio is today limited to a few properties, among which is the Spanish football league LaLiga, which was acquired last July for a three-year period.

On the specific bit of the Shankar-Murdoch combine, they say both coming together as equity investor is an indication that "they also have skin in the game." The five-year bid for IPL for 2018-22 period was sold for Rs 16,348 crore, and the expectation is that it will be at least twice as much now. Now owned by Star, it was Shankar who swung that deal in its favour as Star India's Chairman in 2017. "He has a good relationship with Reliance top brass and Murdoch too knows the folks at Viacom. With Shankar's experience, it may work out well," the sources add.

Vivek Menon, co-founder, NV Capital, believes that with Murdoch acquiring a substantial stake in Viacom18, the company will become a tough competitor to Disney and Zee-Sony. "With the Zee-Sony merger, Viacom needs a strong strategy going ahead on how they should position itself. Reliance is focused on the Jio brand, and with its Sony buyout having fallen through, Viacom has been finding it difficult to get it right on broadcasting and OTT. That could be the reason for roping in Murdoch as a strategic partner," he explains.

Citing the case of Voot, Menon points out that it has lagged behind its peers. "There have also been exits at the senior level at Viacom18, further compounding the problem."

By the looks of it, Murdoch will bring in the money, with Shankar being the hands-on professional. "Post entry of Murdoch, Viacom18 could get its mojo back and focus on multiple areas, including building their regional franchise, since Shankar has a pedigree of building all the pieces in the media and entertainment ecosystem. Regional would be a big focus area going forward for all the broadcasters and OTT platforms," says Menon.

The Murdoch family has always had a soft corner for India, and the growth of Star India is an example of that. With Jio's large telecom base, it is keen on getting a healthy chunk of the entertainment story. This deal could be a starting point for that.