What Disney Is Getting With "Jewel" Star India in Fox Deal


Fox’s Star India unit can significantly enhance Disney’s India foothold spanning not just entertainment content but by also bringing lucrative sports broadcasting to the table, especially cricket.

With the Walt Disney Co. set to acquire large parts of 21st Century Fox in a $52.4 billion blockbuster deal, Hollywood and Wall Street have started discussing the fallout for different parts of the entertainment empires and the industry at large.

What sector watchers agree on, though, is that the Fox deal will boost Disney's international reach and profile by getting its hands on Fox's stake in European pay TV giant Sky and Indian TV powerhouse Star India, the latter of which will give the Mouse House a particularly strong hand in the key market of India, where Fox is currently a more powerful player.

How big a deal is Star India? "Star would open up India as a huge market opportunity," Macquarie Capital analyst Tim Nollen wrote before the deal was officially unveiled.

Disney will, in the Fox acquisition, be "gaining instant dominance in India, arguably the world's best TV growth market," B. Riley FBR analyst Barton Crockett said. "Star is a jewel. Disney is under-exposed internationally, and India, as the world's second-most populous country, is an egregious area of under-exposure."

Fox's Star India is not only the leading TV network group in the country, but also "on pace to grow earnings before interest, taxes, depreciation and amortization (EBITDA) from $200 million last year to $500 million in 2018 and $1 billion by 2020," the analyst said. "We believe that Star could be worth $11.5 billion, at 25x calendar [year] 2017 estimated EBITDA, versus no. 2 India TV network group Zee, which is publicly traded at 26x EBITDA, and a market cap of $7.8 billion."

In other words: Disney and Fox would create a formidable powerhouse in India. Over the years, both companies have become bigger players in the country by investing heavily in local content and businesses across various platforms.

"If you want to be a strong player in Indian television, you need a presence in the general entertainment segment, so this deal accomplishes that for Disney in one stroke," Deloitte Consultants India partner Jehil Thakkar tells THR.

In addition to entertainment channels, Star has a strong presence in sports, a field that in India is ruled by cricket. Star India further tightened its grip on that area this year when it bagged global TV and digital rights for the lucrative Indian Premier League cricket property for $2.55 billion for the next five seasons, considered a record for the sport. Star outbid such rivals as Facebook and Sony Entertainment Network, which had held rights for the IPL’s first 10 years.

The IPL is also expected to significantly boost Star India's streaming service Hotstar, given the service has had a good run with other cricket properties, such as the World Cup. Research firm App Annie recently estimated that Hotstar had a subscriber base of 67.5 million in August, up from from 33.0 million in the same month last year.

Disney’s ESPN unit had been active in Indian sports via a joint venture with Star India, which ran for 18 years until the companies parted ways in 2013. But ESPN returned to India in 2015 by partnering with Sony Entertainment Television, which operates various sports channels. The ESPN Sony network also launched two additional channels offering various international sporting fixtures, such as NASCAR racing, the Australian Open tennis tournament and soccer events, such as the U.K.’s F.A. Cup and next year’s FIFA World Cup, among others.

"It's now really a two-horse game in sports broadcasting in India between Fox-Disney and Sony," Thakkar explains.