Why US media giants are stepping back from India

On Thursday, Paramount (PARA) announced it would sell its stake in India's Viacom18. It follows a similar move from Disney (DIS), which is merging its India assets with Reliance Industries in a joint venture. Why are these two media giants making the move now? Yahoo Finance's Alexandra Canal explains in the video above.

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Editor's note: This article was written by Stephanie Mikulich.

Video transcript

BRAD SMITH: India's entertainment industry is booming right now, Ali, but US media companies like Paramount, we also knew Disney, finding it difficult to compete right now. So both companies recently retreating from their respective positions in the country. And tell us more what do we need to know about this.

ALEXANDRA CANAL: Yeah, so I just thought it was interesting that in two weeks time, we saw both Paramount and Disney really pull back in India. And India, 1.4 billion population. It's booming when you think about the opportunity there for TV, the opportunity for digital and online.

But there's a few reasons why these legacy media players are having a hard time. Number one, it's very difficult to monetize in India. The India consumer is used to really low-cost options. A lot of those streaming services are bundled with mobile providers, because there's not a lot of broadband infrastructure.

They also have a lot of free ad-supported services from those local providers. So there's a really low willingness to pay there on part of the consumer. So you're really up against a lot of those incumbent leaders.

At the same time, we also have those domestic struggles at home. There's not a lot of opportunity to invest in some of the riskier overseas opportunities that would be India because right now we have streaming that is unprofitable for the bulk of players. That requires a lot of capital investment that a lot of these domestic companies just don't have the luxury of exploring right now.

So it really comes to if you want to be successful overseas, you need to make the content investments. And really right now the only players that are doing that to a very successful level are Netflix and Amazon Prime Video. Netflix actually in 2024, their film and TV budget overseas is going to surpass that of their domestic investments. So they're really approaching localization very critically.

And these legacy players, they just don't have the luxury of time on their side to do that. Although experts I've been speaking with said if they just are patient, you could really see a pot of gold, so they say, at the end of the tunnel. But it's just right now there's a lot of other challenges. So it's a big timing issue, I think, for these players.

SEANA SMITH: Yeah, certainly under pressure. Many of these larger legacy players obviously under pressure to cut costs. All right, Ali, thanks so much.