Disney+ Hotstar and JioCinema Outpace Linear TV Valuations of Parent Companies
News Mania Desk/Agnibeena Ghosh/6th August 2024
Disney+ Hotstar and JioCinema have achieved remarkable valuations that eclipse those of their parent companies’ traditional TV operations, underscoring the growing prominence of digital media over conventional television. Recent valuations from Ernst & Young (EY) and BDO reveal that Viacom18, backed by Reliance Industries (RIL), is valued at ₹33,000 crore, while Star India, owned by Walt Disney, stands at ₹26,000 crore.
EY was tasked with evaluating Viacom18, a key player in the media industry backed by RIL, prior to the finalization of a significant merger deal. BDO, on the other hand, was engaged by Star India, which is under the ownership of Walt Disney. The merger between Star India and Viacom18, concluded on February 28, 2024, created a new entity valued at ₹70,352 crore, which includes a substantial ₹11,500 crore investment from RIL.
The valuation process employed by both firms utilized the comparable companies multiples (CCM) method, which determines a company’s value based on the performance metrics of similar companies. BDO’s evaluation of Star India revealed a stark contrast between its linear TV and digital businesses. The traditional entertainment segment of Star India was valued at a revenue multiple of 1.75 times, amounting to ₹15,999 crore. In contrast, Disney+ Hotstar, Star India’s digital arm, was valued at a significantly higher revenue multiple of 3.81 times, reaching ₹16,040 crore. This valuation reflects the growing market preference and revenue potential for digital platforms compared to traditional TV.
BDO’s analysis estimated an enterprise value of ₹31,992.9 crore for Star India. After accounting for liabilities related to its sports business, the equity value was adjusted to ₹25,900.2 crore, translating to approximately ₹524.5 per share. This valuation reinforces the trend that digital media assets command premium valuations due to their wider distribution capabilities and revenue-generating flexibility.
Rajesh Sethi, a media expert, highlighted that this trend demonstrates the higher valuation multiples for digital businesses compared to their traditional counterparts. He also noted that the valuation of sports content is likely to be reassessed as the market evolves from a three-player landscape to a more concentrated two-player competition. Media Partners Asia projects that the video entertainment industry will reach a value of $13 billion by 2028, with over-the-top (OTT) platforms contributing significantly to new revenue growth.
In the case of Viacom18, BDO’s valuation calculated an enterprise value of ₹15,622 crore, derived from a revenue multiple of 2.6 times based on a revenue of ₹6,012.5 crore for the trailing twelve months ending December 2023. After adjusting for various factors such as cash reserves and investments, Viacom18’s equity value surged to ₹32,937 crore.
The merger arrangement includes the transfer of JioCinema to Viacom18’s subsidiary Digital18 for ₹24,186 crore and other media assets for ₹2,769 crore. Digital18 will then transfer these assets to Star India.
EY’s valuation pegged Viacom18 at ₹32,955 crore and Star India at ₹25,926 crore, with Star India’s valuation done on a debt-free basis. According to the merger agreement, RIL will hold a controlling 56% stake in the combined entity, Walt Disney will retain 37%, and Bodhi Tree Systems, led by James Murdoch and Uday Shankar, will own 7%.
