On Wednesday, Anil Ambani's Reliance Mediaworks merged with Namit Malhotra's Prime Focus in a Rs 240-crore deal. Just a month ago, Reliance Industries Ltd (RIL), owned by Anil's elder brother Mukesh Ambani, announced a management takeover of the Rs 2,692-crore Network18.
Is it raining deals in the Rs 83,000-crore Indian media and entertainment (M&E) sector? And, are the Ambani brothers turning out to be the biggest movers and shakers?
Funnily enough, no, if one goes by an analysis by VCCEdge, a data service from VCCircle. "Private equity investments into the sector have slowed noticeably," says P V Sahad, founder and editor, VCCircle. Though it looks like mergers and acquisitions are rising, Sahad says it is only the RIL-Network18 deal, which totals well over Rs 3,300 crore, which is skewing the analysis. A look at other deals reveals much of the money is actually going into technology companies that dabble in media. For example, a big private equity deal this year is a $15-million investment in Octro, a mobile gaming company, by Sequoia Capital. Octro, in fact, defines itself as a technology firm (A LOOK AT RECENT DEALS IN THE INDUSTRY).
"Traditional media is not on the radar of investors," Sahad says, simply echoing what almost every banker says, off the record - M&E has simply not delivered for retail or private investors. And, it won't till consolidation happens and the hyper-fragmentation that marks this business ends. Till media firms start merging among themselves, reduce the number of brands available to advertisers, cut cost duplication and improve operating efficiencies, it is unlikely pricing power will return to the M&E business. India is one of the world's largest media markets by audience size and penetration, but it is also one of the most under-monetised ones. As a result, deals in M&E continue to be a fraction of those across sectors, in value.
The two big deals by the Ambani brothers aren't representative of consolidation. The merger of a debt-ridden Network18 with ETV, financed by RIL, might be of strategic value to RIL, but is unlikely to generate returns for a long time. Ditto for the Reliance-Prime Focus merger. Both companies operate in a highly commoditised post-production business, threatened globally by technology firms.