Disney Star Devaluation of $2 Billion After Zee-Sony Merger Fallout

In the wake of the terminated Sony-Zee merger, Disney Star is bracing for a substantial valuation setback, potentially amounting to $2 billion.


The discord stemming from Zee Entertainment Enterprises (ZEEL) challenging a $1.5 billion sub-licensing deal for the International Cricket Council (ICC) has raised concerns about Reliance’s possible downgrade of Disney Star, according to sources familiar with the matter cited by ET.


The heart of the matter revolves around ZEEL’s assertion that its commitment to honour the ICC deal with Disney Star was contingent on the successful completion of Zee’s merger with Sony.


However, Disney Star disputes this claim, setting the stage for a potential financial fallout.


Sources indicate that Reliance Industries (RIL) is closely monitoring the Sony-Zee merger’s situation due to its direct implications for Disney Star’s valuations tied to the ICC TV deal.


The report suggests that Reliance had prepared two valuation scenarios for Disney Star- one accounting for ICC TV rights obligations and another without them, with the latter potentially resulting in a $2 billion downgrade if Disney Star also services the ICC TV deal and the digital rights.


In August 2022, Disney Star announced licensing its television broadcasting rights for all ICC men’s and under-19 global events for the 2024-2027 period to ZEE Entertainment Enterprises.


However, the recent dispute has cast uncertainty on the fate of this agreement.


The ICC confirmed last week that Disney Star will cover the ICC U19 Men’s Cricket World Cup 2024 on Star Sports and Disney+ Hotstar.


Despite losing the Board of Control for Cricket in India (BCCI) media rights, Disney Star has incorporated the ICC television rights deal in its recent tariff releases, leading to an approximate 10% increase in bouquet prices.


Previous reports had indicated that Reliance and Walt Disney were in talks to merge Viacom18 and Disney Star, with ongoing due diligence and valuation exercises.


If this deal materializes, it could create a media giant with combined revenues of around INR 25,000 crore, as per ET’s report.


The report further highlights that Disney Star had bid $3 billion for ICC media rights based on its understanding with Zee, while Viacom18 and Sony had submitted bids worth $1.3-1.4 billion for the property.


The potential losses from this overpayment are significant, given the substantial margin.


In the broader context, Disney’s India business has been grappling with challenges, especially Reliance’s OTT market dominance, offering free streaming of Indian Premier League cricket (IPL) on its JioCinema app.


Reliance’s JioCinema app now holds the rights to broadcast IPL, a domain once dominated by Disney Hotstar. Additionally, Disney+ Hotstar ceased streaming HBO content in India last year, facing formidable competition from Reliance’s streaming offerings.