A source aware of the development said the ICC TV deal, which was announced in August 2022, is yet to be concluded as Zee has not given the required bank guarantees to Disney Star.
In its FY23 annual report, Zee has said that the acquisition of ICC TV rights is “subject to certain conditions precedent, including submitting financial commitments, guarantees, and ICC approval for sub-licensing to the firm, which are pending”.
The uncertain status of the ICC TV deal will be a key point of consideration during the due diligence and valuation exercises 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, which will be held in South Africa from January 19 to February 11, will be the first tournament under the new media rights cycle. Disney Star acquired the ICC TV and digital rights for India from 2024 to 2027 for $3 billion and sub-licensed the TV rights for the men’s and Under-19 global events to Zee while retaining the digital rights.
Interestingly, Disney Star’s winning bid of $3 billion was more than double that of Sony Pictures Networks India (SPNI) and Viacom18. The two firms are believed to have offered $1.3-1.4 billion for the ICC’s TV and digital rights. Both Disney Star and Zee declined to comment on the matter.If the ICC TV rights do not materialise, Disney Star, which signed the contract with the ICC, will have to service the entire $3 billion sports rights obligation over the next four years.Analysts tracking the media sector say that Disney Star’s valuation is likely to drop due to the expected losses from sports. Between ICC media rights and Indian Premier League (IPL) TV rights, Disney Star has committed $6 billion, and recovering those investments will be an uphill task. ET had reported in its December 25 edition that Disney Star’s parent Walt Disney has recently signed a non-binding agreement with RIL to merge Star India and Viacom18.
On the other hand, if Zee fails to honour its ICC TV sub-licensing deal with Disney Star, the latter might also explore legal options. “Disney Star would not hesitate to take Zee to court if it fails to honour the agreement,” a legal expert said.
‘Profitability Under Stress’
According to a top media executive, Zee is also in a bind as its priority currently is to salvage the merger deal with Sony Pictures Networks India (SPNI).
“Without the merger with Sony, Zee will find it difficult to service the $1.5 billion ICC TV deal, as its profitability is already under stress,” said the executive cited above. He further noted that Zee had acquired the ICC TV rights from Disney Star with the expectation that its merger with Sony would sail through and the latter would invest $1.5 billion in growth capital in the merged company.
Zee’s net profit in the first half of FY24 shrank 67% to Rs 141 crore as revenue remained under pressure from macroeconomic headwinds and costs continued to balloon due to content and marketing investments in TV and digital.
Disney Star’s sports division saw operating losses widen 82% to $432 million for the 12 months ended September, while revenue fell by 39% to $729 million.
“Sports broadcasting has always been a perennial loss-maker in India, even though it is important to have sports in your portfolio since it drives subscription revenue and brings in large sponsorship money. In streaming, live sports help acquire millions of new users,” said the former CEO of a leading sports network.
