The Disney Star-Zee ICC media rights deal explained

After winning the rights to broadcast and stream the International Cricket Council’s (ICC) global events in India until the end of 2027 on Saturday, Disney Star on Tuesday licensed the TV broadcasting rights of the men's and under-19 events to Zee. Disney Star retained the rights to stream the matches on its video streaming platform Disney+ Hotstar.

Industry analysts are surprised by this strategic alliance between Disney Star and Zee. ICC is said to have earned a whopping $3 billion from the sale of rights to Disney Star. As per industry watchers, Disney Star bid to win and found itself paying a high price for the media rights. In comparison, Star Sports had won media rights for the last eight years (2015-2023) for about $2 billion. According to persons in the know, the second highest bid for the ICC media rights was about $1.4 billion. This bid was made by Sony.

“While the partnership allows Disney to reduce the exorbitant burden of rights cost, it will also have to compete with Zee for the same ad and subscription dollars,” says Mihir Shah, vice president, Media Partners Asia.

The overall value of the media rights for the Indian Premier League (IPL) for 2023-2027 is about $6 billion. The split between Disney Star and Viacom18 for television and digital rights is almost 49-51. The final value of the TV rights was Rs 23,575 crore while Viacom18 bid a total of Rs 23,758 crore.

While the exact details of the Disney Star-Zee deal are not known, a senior media industry executive who suspects the deal was agreed upon before the bid was won expects the digital rights holder to bear the larger chunk of the cost of the ICC media rights.

Elara Capital estimates that Zee has paid approximately Rs 53 crore per match for the marquee tournaments - Champions trophy, World Cup and World Cup T20. At that rate, the acquisition price is 5% lower than IPL’s TV rights (Rs 57 crore per match).

TV rights can be monetised better than digital but the numbers don’t necessarily work in favour of Zee. Monetisation potential of ICC’s matches is less than that of IPL, feel analysts. “Only one marquee cricket tournament happens every year and the time frame is limited for some of them (3 weeks sometimes) whereas IPL goes on for two months and may increase with more matches,” says Karan Taurani, SVP, Elara Capital.

He adds, “key matches (playoffs and India matches) in the marquee tournaments account for almost 20-30% of the matches and non-India matches offer a low potential in terms of monetisation.” In addition, TV rights are not absolutely exclusive to ZEE as the feed needs to be shared with Prasar Bharati.

For now, ZEE has filled the gap in its content offering - sports. Announcing the agreement, ZEE said in a press statement, "ZEE reaffirms its commitment of presenting thrilling international cricket action to viewers and elevating the experience and engagement to unprecedented heights."

Once the Zee-Sony merger is through, the ICC men’s matches, could find a home on Sony’s sports channel, says one media industry analyst.

IPL had been a growth driver for Disney+ Hotstar in India. In the Q2 earnings call, Christine McCarthy, senior EVP and CFO, Disney, observed that more than 50% of the 8 million new subscribers Disney+ added during the quarter were from Disney+ Hotstar - a result of the start of the new season of IPL.

Further, at the third edition of D:CODE, the Ad Club’s annual digital review, Sidharth Shakdher, EVP, Disney+ Hotstar, made a point about the importance of the cricketing months in Disney+ Hotstar’s success. Presenting a graph that depicted how the cricketing months resulted in spikes in monthly active users, Shakdher said, “To get to a healthy orange line (the base) you need the blue spikes.”

Losing the streaming rights to rival Viacom18 which outbid Disney Star aggressively will impact the user base of Disney+ Hotstar. In the Q3 earnings call, Disney lowered its 2024 forecast for Disney+ to 215-245 million from 230-260 million subscribers - partly due to the loss of IPL streaming rights. The company cannot afford to let this number slip further.

“Disney Star realises how critical the streaming rights are to growing Disney+ Hotstar in India. With the IPL television rights in its kitty, it stands to reason that the broadcaster chose to hold on to the digital rights for the third most valuable cricketing media property and traded the linear rights with Zee,” says N Santosh, managing partner, D&P Advisory.

Disney+ Hotstar now has 58.4 million paying subscribers. As per the company’s Q3 statement, it is targeting to have 80 million paying subscribers by the end of fiscal 2024.