Disney Star might unexpectedly become a casualty of the collapsed Sony-Zee merger. The recent dispute between Zee Entertainment Enterprises and Disney Star over a $1.5-billion sub-licensing deal for International Cricket Council (ICC) rights has prompted Reliance to consider a potential $2-billion valuation downgrade for Disney Star. This comes amidst predictions of financial losses from the media rights agreement.

What Happened? The controversy stems from Zee’s claim that their contract with Disney Star for ICC TV rights hinged on the successful merger with Sony, a point contested by Disney Star, according to an ET report.

Reliance Industries, eyeing a merger with Disney Star for its media businesses, has been keenly observing these developments. The conglomerate prepared two valuation scenarios for Disney Star: one with and one without the ICC TV rights obligations. Without these rights, Disney Star might face a hefty $2-billion valuation cut.

Despite these uncertainties, Disney Star confirmed it would cover the ICC U19 Men’s Cricket World Cup 2024 on Star Sports and Disney+ Hotstar. Concurrently, the company raised its bouquet price by roughly 10%, even after losing the Board of Control for Cricket in India (BCCI) media rights.

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This valuation dilemma occurs amidst ongoing due diligence for a potential mega-merger between Reliance and Walt Disney, which could forge a media giant with revenues nearing ₹25,000 crore. If realized, this merger would reshape India’s media landscape.

However, Zee’s stock plummeted by nearly 33% after Sony terminated the merger talks, which had been progressing for two years with multiple regulatory approvals. The merger’s success would have positioned the combined entity as a dominant force across various media platforms.

Why does it matter? A top executive from a leading media firm involved in the ICC rights bidding suggested to ET that Disney Star could face losses of over $1.5 billion, as their bid was significantly higher than rivals Viacom18 and Sony’s Culver Max Entertainment. The deal’s failure potentially jeopardizes profits for the proposed merged entity, complicating the monetization due to the split in television and digital rights.

The evolving dynamics of digital rights, growing in value, make it increasingly challenging for a single entity to hold exclusive rights to major cricket properties across both TV and digital platforms. The independent operations of Sony and Zee further highlighted this complexity, as they had not yet received the Competition Commission of India’s clearance for the merger at the time of acquiring the ICC rights.

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