Disney Forced to Take Much Less for Star India Than it Paid Under Terms of New Sale Agreement
The Mouse House has agreed to terms on a sale of a controlling interest in Star in India for $3.9 billion.
When Disney purchased the vast majority of Fox’s entertainment assets in 2019, it thought of the Indian Star business as one of the most important parts of the deal. But five years later, Disney is officially backing away from Star India. According to The Wall Street Journal, Disney has agreed to sell a 60% stake in Star India, which includes linear television networks and the company’s Indian streaming platform Disney+ Hotstar.
- Star India was valued at between $7 and $16 billion in 2019 when Disney acquired it as part of Fox’s assets.
- Disney+ Hotstar lost millions of subscribers when it lost the rights to stream Indian Premier League cricket.
- Selling the company frees up much-needed cash that Disney can use for its domestic streaming operations.
What Are Terms of the Star Sale?
According to WSJ, Disney signed a memorandum in late December to merge Star with Viacom18, an Indian media outlet owned by a local conglomerate and Paramount Global. The terms of the deal, which is expected to close later this month, will see Disney sell 60% of its Star operations. Reliance Industries Limited will get 51%, and investment fund Bohdi Tree Systems will control 9%.
Disney was first reported as nearing a deal to sell Star to Reliance in October. Disney will make $3.9 billion in the deal, which is likely a significant loss over what the company paid for Star as part of the Fox deal in 2019. At that time, analyst estimates valued Star at between $7 and $16 billion; even if the true valuation of Star was closer to the lower end of that scale, Disney would still be taking a loss selling 60% of the company for $3.9 billion.
One of the biggest reasons that Star’s valuation has slumped in recent years was Disney’s failure to secure Indian Premier League cricket streaming rights in 2022. Until then, Disney+ Hotstar had been responsible for digitally distributing the IPLs’s matches, but it was outbid for the rights by Viacom18, which paid $2.6 billion to acquire them; Disney, instead, opted for the linear rights. From the end of 2022 through mid-2023, Disney+ lost 18 million global subscribers, nearly all of whom were Indian customers who had the streamer primarily to watch cricket.
What Will Disney Do with its Newfound Cash?
An extra $3.9 billion is nothing to sneeze at, but for a company like Disney, it may not go all that far. After all, Disney was projected to spend more than $10 billion just on original video content in 2023, and it has its parks segment to worry about in terms of further investment as well.
Still, a company with plans as ambitious as Disney can use all of the extra cash it can get its hands on. Disney is currently waiting on a final independent determination as to what it will have to pay in order to purchase the remaining one-third of Hulu from Comcast. The two sides have already contractually agreed to a minimum of $8.6 billion for the outstanding 33% of the general entertainment streaming service and an extra $3.9 billion would make that financial lift easier.
However, that is not the only substantial capital outlay that the company will need additional cash for. Disney is currently in the process of building a standalone ESPN streaming service that will likely offer all the content you can find on the linear ESPN group of channels. The Mouse House has been seeking investment partners for that venture, but having an extra $3.9 billion may help it move that process along further on its own.
The proceeds from the Star sale could also be put toward further integrating Disney+ and Hulu. Disney+ first began adding Hulu content in December, but that process won’t be complete until spring. There are obviously costs associated with integrating the content of the two streamers, such as paying software engineers and making new licensing deals that allow shows to stream on both services.
There are plenty of options for Disney as to how it will spend its $3.9 billion. It hasn’t received any of that cash as of yet, but its deal to sell a majority stake in its Star India operations appears all but complete. Disney will likely fold the proceeds back into its American streaming business, but only time will tell for certain.
Disney+
Disney+ is a video streaming service with over 13,000 series and films from Disney, Pixar, Marvel, Star Wars, National Geographic, The Muppets, and more. It is available in 61 countries and 21 languages. It is notable for its popular original series like “The Mandalorian,” “Ms. Marvel,” “Loki,” “Obi-Wan Kenobi,” and “Andor.”