India flags cricket rights concerns with Disney-Reliance $8.5 bln merger
Watchdog concerned about combined cricket broadcast rights
Companies can still win approval with more concessions -sources
Disney, Reliance aim to create India's No. 1 entertainment giant
Adds context on cricket spends, details in paragraph 10, 18-21
By Aditya Kalra
NEW DELHI, Aug 20 (Reuters) -India's antitrust body has reached an initial assessment that the $8.5 billion India merger of Reliance and Walt Disney media assets harms competition due to their power over cricket broadcast rights, four sources told Reuters on Tuesday.
It is the biggest setback so far to the planned Disney-Reliance merger which aims to create India's biggest entertainment player which will compete with Sony 6758.T, Zee Entertainment ZEE.NS, Netflix NFLX.O and Amazon AMZN.O with a combined120 TV channels and two streaming services.
The Competition Commission of India (CCI) has privately warned DisneyDIS.N and Reliance RELI.NS through a notice in which it has shared its concerns about their grip over rights to broadcast the favourite sport of the world's most populous country, one of the sources said.
The CCI has asked the companies to explain within 30 days why an investigation should not be ordered.
"Cricket is the biggest pain point for the CCI," said anothersource.
The merged company, which would be majority owned by Asia's richest man Mukesh Ambani's Reliance RELI.NS, would have lucrative rights worth billions of dollars for the broadcast of cricket on TV and streaming platforms, raising fears over pricing power and its grip over advertisers.
Reliance, Disney and the CCI did not respond to requests for comment. All sources declined to be named as the CCI process is confidential.
Antitrust experts had warned the merger, announced in February, could face intense scrutiny, especially on the sporting rights issue.
The CCI earlier privately asked Reliance and Disney around 100 questions related to the merger. The companies have told the watchdog they are willing to sell fewer than 10 television channels to assuage concerns about market power and win an early approval, sources told Reuters.
But they had refused to relent on cricket, telling the CCI that broadcast and streaming rights will expire in 2027 and 2028 and cannot be sold right now, and that any such move would require the cricket board's approval, which could delay the process.
The Board of Control for Cricket in India has Jay Shah, the son of Prime Minister Narendra Modi's home minister Amit Shah, in one of its top positions as secretary.
"GETTING COMPLICATED"
Reliance-Disney will own digital and TV cricket rights for top leagues, including for the world's most valuable cricket tournament, the Indian Premier League.
The CCI notice may delay the approval process but the companies can still address the concerns by offering more concessions, the first source said.
"This is a precursor of things getting complicated ... The notice means that initially the CCI thinks the merger harms competition and whatever concessions offered are not enough," added the person.
A second sourcesaid CCI has given the companies 30 days to respond and explain their position, and the concerns currently revolve around how advertisers could face pricing challenges if the entities are merged.
"The CCI is concerned the entity can increase rates for advertisers during live events," said the person.
Jefferies has said the Disney-Reliance entity will have a 40% share of the advertising market in TV and streaming segments.
Cricket has a fanatical following in India, the world's most populous country with an estimated 1.4 billion people, and matches are sought after by advertisers.
Media agency GroupM estimates spending on sports industry related sponsorship, endorsement and media totalled to near $2 billion in 2023. Cricket accounted for 87% of those spends.
The former head of mergers at the CCI, K.K. Sharma, has said the merger could lead to "almost an absolute control over cricket."
Zee and Sony planned to create a $10 billion TV behemoth in India and in 2022 and got a similar warning notice. They offered some concessions by selling three TV channels which helped them win a CCI approval, but the merger eventually collapsed.
Analysis: Grip over cricket may lead to antitrust heat in Disney-Reliance India merger https://www.reuters.com/sustainability/boards-policy-regulation/grip-over-cricket-may-lead-antitrust-heat-disney-reliance-india-merger-2024-03-01/
Analysis: Technology and cricket big wins for billionaire Ambani in Disney tie-up https://www.reuters.com/markets/deals/technology-cricket-big-wins-billionaire-ambani-disney-tie-up-2024-02-29/
Reporting by Aditya Kalra; Additional reoprting by Munsif Vengattil; Editing by Conor Humphries and Louise Heavens
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
