The Competition Commission of India (CCI) has made a preliminary determination that the proposed $8.5 billion merger between Dependence and Walt Disney‘s media assets in India could adversely affect competition, according to four sources who spoke to Reuters. The main concern is the combined entity’s control over cricket broadcasting rights.
It is the most significant obstacle so far to the planned Disney-Reliance merger, which aims to create India’s largest entertainment company. two streaming platforms.
Sources said that the CCI has issued private notices to Disney and Reliance, expressing concern over their potential dominance in cricket broadcasting rights, which are very popular in the world’s most populous country.
The CCI asked the company to provide an explanation within 30 days as to why an inquiry into the matter should not be initiated.
“Cricket is the biggest pain point for CCI,” another source said.
The combined entity, which will be primarily controlled by Mukesh Ambani, Asia’s richest man and the boss of Reliance, will have important broadcasting rights to cricket matches on television and streaming services. The rights are estimated to be worth billions of dollars, raising concerns about the company’s potential pricing power and its impact on advertisers.
When contacted for comment by Reuters, representatives of Reliance, Disney, and CCI did not respond. All individuals who provided information for this report requested anonymity due to the confidential nature of the CCI process.
Prior to the merger announcement in February, antitrust specialists had warned that the deal could face a tough test, particularly over the allocation of sports rights.
Reliance and Disney have responded to CCI’s earlier inquiries on the merger, expressing their readiness to release some television channels to address market power issues and speed up the approval process, according to sources who spoke to Reuters. The company has reportedly offered to sell less than 10 channels in an effort to ease the watchdog’s concerns.
However, the companies have stood firm on their stance cricket rights. They have told the CCI that the cricket broadcast and streaming rights will expire in 2027 and 2028, so they cannot sell it now. Furthermore, they have stressed that the sale would require the cricket board’s approval, which could delay the entire process.
Reliance-Disney is set to acquire the digital and television broadcast rights for popular cricket leagues, notably the world’s richest cricket tournament, the Indian Premier League.
Approval process for acquisition may be delayed due to notification from CCI. However, participating companies have the option to mitigate the concerns raised by proposing additional concessions, according to one of the sources.
“This is a precursor to things getting complicated… The news means that the CCI initially thought the merger was distorting competition and that whatever concessions were offered were not enough,” the person added.
The CCI has asked the companies involved to resolve the issue within 30 days, according to another source. The main issue relates to the potential pricing issues that advertisers may face if the proposed merger goes through.
“CCI is concerned that entities may increase rates for advertisers during live events,” the source said.
Jefferies, a financial services company, predicts that the joint venture between Disney and Reliance will capture a significant 40% market share in the advertising market on television and streaming platforms in India.
In India, cricket enjoys an unparalleled following and passion among its estimated 1.4 billion citizens. As a result, cricket matches are highly sought after by advertisers who want to reach a large audience.
According to an estimate by media agency GroupM, the total spending on sponsorship, endorsement, and media related to the sports industry in India will reach nearly $2 billion by 2023. Interestingly, cricket accounts for only 87% of that spending.
KK Sharma, the former head of mergers at the CCI, has expressed concern that the merger could lead to “almost absolute control over cricket.”
By 2022, Zee and Sony plan to create a $10 billion television empire in India. However, they received the same warning notice from CCI. To solve the problem, he made a concession by dropping three TV channels, which eventually helped him get CCI’s approval. Despite this, the merger ultimately failed.
It is the most significant obstacle so far to the planned Disney-Reliance merger, which aims to create India’s largest entertainment company. two streaming platforms.
Sources said that the CCI has issued private notices to Disney and Reliance, expressing concern over their potential dominance in cricket broadcasting rights, which are very popular in the world’s most populous country.
The CCI asked the company to provide an explanation within 30 days as to why an inquiry into the matter should not be initiated.
“Cricket is the biggest pain point for CCI,” another source said.
The combined entity, which will be primarily controlled by Mukesh Ambani, Asia’s richest man and the boss of Reliance, will have important broadcasting rights to cricket matches on television and streaming services. The rights are estimated to be worth billions of dollars, raising concerns about the company’s potential pricing power and its impact on advertisers.
When contacted for comment by Reuters, representatives of Reliance, Disney, and CCI did not respond. All individuals who provided information for this report requested anonymity due to the confidential nature of the CCI process.
Prior to the merger announcement in February, antitrust specialists had warned that the deal could face a tough test, particularly over the allocation of sports rights.
Reliance and Disney have responded to CCI’s earlier inquiries on the merger, expressing their readiness to release some television channels to address market power issues and speed up the approval process, according to sources who spoke to Reuters. The company has reportedly offered to sell less than 10 channels in an effort to ease the watchdog’s concerns.
However, the companies have stood firm on their stance cricket rights. They have told the CCI that the cricket broadcast and streaming rights will expire in 2027 and 2028, so they cannot sell it now. Furthermore, they have stressed that the sale would require the cricket board’s approval, which could delay the entire process.
Reliance-Disney is set to acquire the digital and television broadcast rights for popular cricket leagues, notably the world’s richest cricket tournament, the Indian Premier League.
Approval process for acquisition may be delayed due to notification from CCI. However, participating companies have the option to mitigate the concerns raised by proposing additional concessions, according to one of the sources.
“This is a precursor to things getting complicated… The news means that the CCI initially thought the merger was distorting competition and that whatever concessions were offered were not enough,” the person added.
The CCI has asked the companies involved to resolve the issue within 30 days, according to another source. The main issue relates to the potential pricing issues that advertisers may face if the proposed merger goes through.
“CCI is concerned that entities may increase rates for advertisers during live events,” the source said.
Jefferies, a financial services company, predicts that the joint venture between Disney and Reliance will capture a significant 40% market share in the advertising market on television and streaming platforms in India.
In India, cricket enjoys an unparalleled following and passion among its estimated 1.4 billion citizens. As a result, cricket matches are highly sought after by advertisers who want to reach a large audience.
According to an estimate by media agency GroupM, the total spending on sponsorship, endorsement, and media related to the sports industry in India will reach nearly $2 billion by 2023. Interestingly, cricket accounts for only 87% of that spending.
KK Sharma, the former head of mergers at the CCI, has expressed concern that the merger could lead to “almost absolute control over cricket.”
By 2022, Zee and Sony plan to create a $10 billion television empire in India. However, they received the same warning notice from CCI. To solve the problem, he made a concession by dropping three TV channels, which eventually helped him get CCI’s approval. Despite this, the merger ultimately failed.