Zee Entertainment Enterprises disputing its obligations to honour a $1.5-billion sub-licensing deal for the International Cricket Council (ICC) has raised the likelihood of an up to $2-billion downgrade of Disney Star by Reliance, on anticipated losses from the media rights agreement, people privy to the development told ET.
According to Zee, the ICC TV contract with Disney Star was contingent on successful completion of Zee’s merger with Sony, said the people cited. Disney Star disputes this claim.
A person familiar with discussions said Reliance Industries had been closely monitoring the Sony-Zee merger developments because the ICC TV deal was linked to it, with direct implications for Disney Star’s valuations.
India’s biggest company is seeking a merger of Disney Star with its own media businesses.
“Reliance had prepared two scenarios for Disney Star’s valuations – one with ICC TV rights obligations, and the other without them, with a potential $2-billion downgrade if Disney Star also services the ICC TV deal, besides the digital rights,” said one of the people cited above.Last week, the ICC confirmed that Disney Star will provide television and digital coverage of the ICC U19 Men’s Cricket World Cup 2024 on Star Sports and Disney+ Hotstar, respectively.Disney Star has also factored in the ICC television rights deal in its recently released tariffs by raising the bouquet price roughly 10%, despite losing the Board of Control for Cricket in India (BCCI) media rights.
Disney Star and Reliance declined to comment.
ET earlier reported that Reliance and Walt Disney had signed a non-binding term sheet to merge Viacom18 and Disney Star. Due diligence and valuation exercises are ongoing.
If the Reliance-Disney deal materialises, it will create a media goliath, with roughly Rs 25,000 crore in combined revenues.
In an unprecedented fall, the Zee stock was down almost 33% on the BSE on Tuesday after Japan’s Sony Corp decided to call off its proposed merger with Zee after two years of talks and despite receiving several regulatory approvals. The merger would have created one of India’s biggest media companies across platforms as diverse as cable TV, OTT and films.
Media Rights
A top-level executive with a leading media firm that participated in the ICC rights bidding said the likely losses for Disney Star from the ICC deal could be upward of $1.5 billion, since the difference between the winning bid and rival offers – from Viacom18 and Sony Group Corporation-owned Culver Max Entertainment – is massive.
“Disney Star had bid $3 billion for ICC media rights based on its understanding with Zee, whereas Viacom18 and Sony had offered bids worth $1.3-1.4 billion for the property. The losses from the property will be massive since they have overpaid by a huge margin,” said this executive, requesting not to be named.
The executive pointed out that if the Sony-Zee deal had succeeded, and Zee had honoured the pact with Disney Star, the ICC TV deal could have potentially eaten into the proposed merged entity’s profits, since monetisation would have been difficult due to the split in television and digital rights.
The rising value of digital rights has made it unaffordable for a single entity to acquire both TV and digital exclusivity to big-ticket cricket properties.
“Sony had to accept Zee’s decision to acquire the ICC TV rights, even though it was unviable since the merger had not received the Competition Commission of India’s clearance by then and the two companies were operating independently,” said the executive.
