The fate of the $1.5 billion (₹12,500 crore) International Cricket Council (ICC) TV rights deal between Disney Star and Zee Entertainment Enterprises is reportedly in jeopardy, casting a shadow over the impending new media rights cycle set to commence next month.

What Happened: The ICC TV deal, announced in August 2022, remains unconcluded as Zee Entertainment has yet to furnish the required bank guarantees to Disney Star, the Economic Times reported, citing sources.

Zee’s FY23 annual report had highlighted that the acquisition of ICC TV rights is contingent upon fulfilling specific conditions precedent, including the submission of financial commitments, guarantees and ICC approval for sub-licensing to the firm, all of which are currently pending.

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The uncertain status of the ICC TV deal will be a critical consideration in the due diligence and valuation processes between Walt Disney and Reliance Industries (RIL) regarding the potential merger of Star India and Viacom18.

The ICC Under-19 Men’s Cricket World Cup 2024, scheduled for January 19 to February 11 in South Africa, will mark the inaugural tournament under the new media rights cycle. Disney Star secured the ICC TV and digital rights for India from 2024 to 2027 for $3 billion and sub-licensed the TV rights for men’s and Under-19 global events to Zee, retaining the digital rights.

Disney Star’s winning bid of $3 billion (₹25,000 crore) surpassed that of Sony Pictures Networks India (SPNI) and Viacom18, which reportedly offered $1.3 billion-1.4 billion (₹10,819 crore-₹11,653 crore) for the ICC’s TV and digital rights.

Should the ICC TV rights fail to materialise, Disney Star, as the contracting party with the ICC, will bear the entire $3 billion sports rights obligation over the next four years.

Why It Matters: Media sector analysts anticipate a potential drop in Disney Star’s valuation due to expected losses from sports, considering the hefty commitments made towards ICC media rights and Indian Premier League (IPL) TV rights, totaling $6 billion (₹50,000 crore). A recent non-binding agreement between Walt Disney and RIL to merge Star India and Viacom18 has added another layer of complexity.

Conversely, if Zee fails to fulfill its ICC TV sub-licensing agreement with Disney Star, legal actions may be explored. A legal expert told Economic Times that Disney Star would not hesitate to take Zee to court if the latter fails to honor the agreement.

Zee is facing challenges in prioritising its merger deal with Sony Pictures Networks India (SPNI), with profitability already under stress. The anticipated merger with Sony was crucial for Zee to navigate the financial commitment of the $1.5 billion ICC TV deal, assuming that Sony would invest $1.5 billion in growth capital post-merger.

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