Reliance-Disney Merger: Why has the CCI Raised Objections Over Cricket Broadcasting Rights

The highly anticipated Reliance-Disney merger could cause disturbances in the level playing field of broadcasting sector, according to the Competition Commission of India (CCI). A Reuters report highlights that this concern arises from the companies' dominance over cricket broadcasting rights.

The $8.5 billion merger will create the biggest entertainment company in India. Sony, Zee Entertainment, Netflix, and Amazon will be some of the direct competitors of the media giant. 

The consolidation of content, distribution, and advertising power within one entity is expected to significantly impact the overall market dynamics. 

Even before the Reliance-Disney merger was announced, there were ongoing consolidation attempts in the industry. For instance, the planned merger between Zee Entertainment and Culver Max Entertainment (Sony), agreed on in December 2021, was called off in January of last year.

Read: Reliance, Disney Merger Could Stifle Competition, Warns CCI: Report

The commission has raised concerns about Reliance and Disney's control over cricket broadcasting rights, according to Reuters, and has issued notices to both companies. They reportedly have thirty days to justify why an investigation shouldn't proceed. This brings up a crucial question: What does this mean for the future of cricket broadcasting in India?

Before delving further, let's understand what the merger is about. 

The Reliance-Disney Merger 

In February this year, Reliance and Disney announced plans for their merger. As part of the merger, Nita Ambani would be the chairperson of the Star India-Viacom18. While Star is owned by Disney, Viacom 18 is owned by Reliance. 

Mukesh Ambani's Reliance, along with its affiliates, will invest $1.4 billion in the merged entity. This will help the company secure over a 63 per cent stake in the merger. Disney, on the other hand, will retain around 37 per cent. The companies together will have two streaming platforms and 120 TV channels. 

Read: How Shein, Once Banned in India, Is Planning a Comeback with Reliance Retail

The merger, as per Mukesh Ambani, is a “landmark agreement that heralds a new era in the Indian entertainment industry.”. 

Bob Iger, CEO of Walt Disney reportedly said, “Reliance has a deep understanding of the Indian market and consumer, and together we will create one of the country’s leading media companies.” He further added that this merger would allow them to better serve consumers with a broad portfolio of digital services and entertainment and sports content. 

Future of Cricket Broadcasting in India

The potential merger, has raised questions about what will happen to cricket broadcasting in India. Currently, Reliance's Viacom 18 has a monopoly on it after it won the bid to broadcast cricket in India.

In August 2023, Viacom 18 secured the bid to broadcast India home cricket across TV as well as the digital section for a tenure of five years from September 2023 to December 2023. The BCCI conducted the bidding with a base price of Rs 25 crore for digital rights in India and TV and digital rights for the rest of the world. 

Additionally, the base price for television rights in India was set at Rs 20 crore. All cricket matches played in India would be covered in this deal. 

The deal was bagged by the company for Rs 5963 crore. Disney, meanwhile, lost the right to stream the IPL digitally in 2023.

Disney, on the other hand, has the rights to stream ICC matches in India until 2027.The merger of their content libraries, which includes over 200,000 hours of TV shows, movies, and sports events, is expected to help Disney recover from the drop in viewership it faced after losing the digital IPL rights in 2023.

However, the fact that this will be one of the biggest merger, makes it a matter of concern.

“The future of broadcasting in India, particularly cricket, hangs in the balance, as this merger could redefine the competitive landscape. Should the merger proceed, we may witness increased market dominance, potentially affecting pricing and consumer access to sports content, which is why the CCI remains cautious,” says Nilesh Tribhuvann, Managing Partner, White & Brief—Advocates & Solicitors. 

In an earlier interview with Outlook Business, Vibodh Parthasarathi, an associate professor at the Centre for Culture, Media, and Governance at Jamia Millia Islamia in Delhi, mentioned the significant impact of the upcoming joint venture (JV) on various media markets. 

Given this wide-ranging influence, Parthasarathi highlighted that the Competition Commission of India (CCI) will need to take a more detailed and nuanced approach in its examination of the JV to ensure fair competition across these markets. 

CCI Flags Concern on Cricket Rights 

The CCI, for one, has to see if this deal is anti-competitive; Reliance, on the other hand, has to highlight that market dominance does not necessarily mean abuse of power. 

Taking into consideration the ongoing deal, the commission sent around 100 private queries to Reliance and Disney regarding their merger. In response, the companies offered to sell less than 10 television channels to address concerns related to market power and get early approval. 

However, Reliance and Disney declined to compromise on the cricket broadcast and streaming rights. The companies mentioned that these contracts are set to expire in 2027 and 2028 and cannot be sold now. They also noted that any sale would require approval from the BCCI, which could further delay the merger process. 

One of the fears that CCI has highlighted is the grip the companies will have over advertisers, which might lead to pricing power. According to multinational investment bank Jefferies, the Disney-Reliance venture is expected to capture 40 percent of the advertising market in both TV and streaming sectors. 

Speaking to Outlook Business earlier, an industry source said, “Now with Disney and Reliance coming together, you suddenly have almost 50 per cent of every digital eyeball between both their platforms. You now have this giant that has the privilege of controlling and commanding the advertising rates. In a scattered market, advertisers had the edge.” 

While it is a matter of wait and watch, the concern raised by the CCI might delay the merger. If RIL-Disney fails to present a strong case in their favor, the CCI may need to impose certain restrictions. For example, the CCI might decide to revisit the issue one or two years after the merger starts operating, said Abhishek Malhotra, managing partner at TMT Law Practice to Outlook Business earlier.