Turmoil in the Aftermath of Zee-Disney ICC Deal Dispute
Following the collapse of the Sony-Zee merger, Disney Star finds itself in a precarious position, potentially facing a substantial valuation setback amounting to $2 billion. Recent revelations by the Economic Times highlight concerns arising from a dispute between Zee Entertainment Enterprises Limited (ZEEL) and Disney Star over a $1.5 billion sub-licensing agreement for International Cricket Council (ICC) rights.
Clash of Claims: ZEEL vs. Disney Star
ZEEL contends that its commitment to honoring the ICC deal with Disney Star hinged on the successful completion of Zee’s merger with Sony. However, Disney Star vehemently disputes this assertion, introducing a cloud of uncertainty regarding the fate of their contractual partnership. This disagreement has emerged in the aftermath of the abrupt termination of the Sony-Zee merger.
Reliance Industries Monitoring the Situation
Sources suggest that Reliance Industries (RIL) is closely monitoring the developments surrounding the Sony-Zee merger due to its direct impact on Disney Star’s valuation linked to the ICC TV deal. RIL has reportedly outlined two valuation scenarios for Disney Star – one considering ICC TV rights obligations and the other excluding them. The potential $2 billion downgrade is contingent on Disney Star’s involvement in both servicing the ICC TV deal and digital rights.
Disney Star’s Reassurance Amid Uncertainty
Despite the prevailing uncertainties, Disney Star has reassured its audience by confirming its coverage of the ICC U19 Men’s Cricket World Cup 2024 on Star Sports and Disney+ Hotstar. Notably, the company has factored the ICC television rights deal into its tariffs, leading to a bouquet price increase of approximately 10%, even after losing the media rights deal with the Board of Control for Cricket in India (BCCI).
Both Disney Star and Reliance have chosen to remain silent on the ongoing situation, leaving the industry in suspense about the potential outcome of this high-stakes dispute.
Amidst the ongoing challenges, industry whispers suggest that Reliance and Walt Disney have signed a non-binding term sheet to merge Viacom18 and Disney Star. As due diligence and valuation exercises unfold, the realization of this deal could give rise to a media powerhouse boasting combined revenues of around ₹25,000 crore.
Zee’s Stock Plunge and Disney Star’s Dilemma
Zee’s stock witnessed a sharp 33 percent decline on the BSE following Sony Corp’s decision to terminate the proposed merger with Zee. Industry insiders speculate that Disney Star might incur losses surpassing $1.5 billion from the ICC deal, driven by a substantial gap between winning bids and rival offers.
A media executive involved in the ICC rights bidding process emphasized the potential massive losses resulting from over payment and the formidable challenges in monetizing the property if the Sony-Zee deal had materialized. The increasing value of digital rights has made it financially implausible for a single entity to secure both TV and digital exclusivity for major cricket properties.
SEBI’s Inquiry Adds to ZEEL’s Challenges
Complicating matters further, the market regulator Securities Exchange Board of India (SEBI) is reportedly nearing the conclusion of its investigation into alleged funds misuse by Punit Goenka and Subhash Chandra Goenka at ZEEL. Initial findings suggested a misuse of funds amounting to ₹200 crore, but recent sources indicate the alleged violation has escalated to ₹800-1,000 crore.
SEBI’s focus on allegations of fund siphoning and creative bookkeeping that favored ZEEL’s promoter family has intensified. The awaited final order from SEBI, expected within the next 2-3 months, may involve imposing a monetary penalty on the Goenka brothers and restricting their positions as directors or key managerial personnel at any listed entity.
Disney Star’s Uphill Battle in the Indian Media Arena
Disney’s entry into the Indian market has encountered challenges, with Reliance’s dominance in the OTT sector, especially through free streaming of the Indian Premier League (IPL) on JioCinema. This shift has significantly impacted Disney Hotstar, which formerly held the rights for IPL broadcasts. Additionally, stiff competition has led to Disney+ Hotstar discontinuing the streaming of HBO content in India.
As industry players keenly observe the intricate dance of mergers, contractual conflicts, and regulatory inquiries, the future of Disney Star’s valuation and its standing in the dynamic Indian media landscape remains cloaked in uncertainty. The repercussions of the Sony-Zee merger fallout and the ICC deal dispute could potentially reshape the trajectory of one of the leading players in the Indian media and entertainment sector.
