In an unexpected turn of events, Disney Star finds itself caught in the crossfire of the aborted Sony-Zee merger, facing a potential $2-billion downgrade by Reliance due to Zee Entertainment Enterprises disputing obligations related to a $1.5-billion sub-licensing deal for the International Cricket Council (ICC TV Deal).
The repercussions stem from the uncertainties surrounding the media rights agreement and its connection to the failed Sony-Zee merger as per The Economic Times.
Zee Entertainment’s dispute over the $1.5-billion sub-licensing deal for ICC TV rights with Disney Star has triggered concerns of a significant downgrade for Disney Star by Reliance. The $2-billion potential downgrade is linked to anticipated losses stemming from the media rights agreement, with Reliance closely monitoring the situation.
The ICC TV contract with Disney Star, as per Zee’s claims, was contingent on the successful completion of the Sony-Zee merger, a point disputed by Disney Star. The ongoing turmoil has created an unusual predicament for Disney Star, impacting its valuation.
Two valuation for Disney Star
Insiders reveal that Reliance Industries had prepared two valuation scenarios for Disney Star, considering the ICC TV rights obligations. The potential $2-billion downgrade is contingent on Disney Star servicing the ICC TV deal along with the digital rights. The outcome will be pivotal for Reliance’s proposed merger of Disney Star with its own media businesses.
Last week, the ICC confirmed Disney Star as the provider for television and digital coverage of the ICC U19 Men’s Cricket World Cup 2024 on Star Sports and Disney+ Hotstar, respectively. Despite this, uncertainties surrounding the ICC TV deal have led to apprehensions about the true valuation of Disney Star.
Potential losses for Disney Star from ICC TV deal
The Zee stock witnessed an unprecedented fall of nearly 33% on the BSE after Sony Corp decided to call off the proposed merger, creating significant turmoil in the media industry. The fallout raises questions about potential losses for Disney Star from the ICC TV deal, estimated to be over $1.5 billion, given the disparity between winning bids and rival offers.
Industry insiders point out that the proposed Sony-Zee merger’s failure has averted potential challenges for the merged entity in monetizing the ICC TV deal, as the split in television and digital rights could have impacted profitability.
The rising value of digital rights has made it challenging for a single entity to secure both TV and digital exclusivity for major cricket properties. The fallout from the Sony-Zee turmoil highlights the intricate complexities in the media rights landscape and their implications for key stakeholders like Disney Star and Reliance.
As the situation unfolds, the potential $2-billion downgrade looms over Disney Star, emphasizing the far-reaching consequences of the ICC TV deal amid the Sony-Zee crisis.
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