Gloves come off in India’s digital content wars

The gloves are coming off in India’s content wars, and the traditionally cautious Disney (DIS.N) is proving a more ruthless fighter than many had expected.

Days after winning a bid for the International Cricket Council’s television and digital rights for the four years through to 2027, pegged by local media at roughly $3 billion, the $200 billion House of Mouse sub-licensed the television rights to its Indian peer Zee Entertainment (ZEE.NS) for an undisclosed sum. Such arrangements are common in other major sporting markets, but this marks the first in India. By looping in Zee, Disney boss Bob Chapek has established a loose alliance against Mukesh Ambani’s $215 billion Reliance Industries (RELI.NS) read more , the top competitive threat for the duo. Disney was helped by the ICC’s preference for a partially sealed bidding process; it would have been harder to beat Ambani in an open e-auction given his ambitions and powerful backers including James Murdoch. It is an elegant pincer move.

After the deal, Disney will have a rounded cricket portfolio. It will own television rights for five years to the lucrative Indian Premier League read more , an annual tournament that lasts two months, which it bought in June for an eye-watering $3 billion. It also will hold digital rights to the ICC games throughout the rest of the year. Disney has lost rights to stream the IPL online to Reliance, which also paid $3 billion for those. But the dispersed nature of the ICC is arguably a better and cheaper hook for the U.S. company’s 58 million subscribers for its Disney+ Hotstar service that is popular in India.

By selling off some of the rights, Disney might reduce its spend on the ICC by a third or more. That also means the company has paid considerably less than Reliance for the cricket content on its streaming platform. That may be prudent; average revenue for Disney+ Hotstar in India and Southeast Asia is a paltry $1.2 per user compared to the $6.3 the company earns in the United States and Canada.

The deal suggests Disney is confident that Punit Goenka, boss of $3 billion entertainment powerhouse Zee, can assuage the competition regulator’s concerns over its plan to merge with Sony India, through which it will get a cash infusion. Shares in the Indian television pioneer have fallen 2% since Reuters reported on Thursday that the antitrust regulator found the proposed $10 billion enterprise would have “unparalleled bargaining power”. The stock is trading below a price that assumes 50% probability of a merger going through, per analysts at IIFL Securities. But Disney has been taking market share from Zee, which buttresses Zee’s competition defense. This cunning cricket deal may be the clue to how the larger union plays out.

Context news
A merger between the Indian unit of Japan’s Sony and Zee Entertainment to create a $10 billion enterprise could hurt competition by having “unparalleled bargaining power”, the country’s antitrust watchdog found in an initial review, Reuters reported on Sept. 1 citing an official document seen by reporters.

Disney’s India business on Aug. 30 announced a deal to sub-license the television broadcast rights of the International Cricket Council’s (ICC) Men’s and Under 19 global events for a period of four years, to rival broadcaster Zee. The American-owned company will hold onto the streaming rights for its digital platform, Disney+ Hotstar. In a joint statement, Disney and Zee said the ICC has approved the arrangement in principle.

The ICC said on Aug. 27 that Disney had won the TV and digital rights to events through the end of 2027. Indian media reported Disney paid $3 billion. Reuters