Disney-Reliance offer $8.5 billion India merger franchises, but won’t sell cricket rights

Disney and Reliance have offered some concessions to win approval from India’s antitrust regulator for their $8.5 billion media merger, but they are not willing to sell the rights to broadcast cricket matches, the biggest benefit in the deal, two sources familiar with the matter said.

Reuters reported earlier this week that the Competition Commission of India (CCI) had sent a warning to the companies, expressing concerns that the combined entity would have tight control over most of the rights to broadcast cricket matches on television and streaming services in India, which could hurt advertisers.

In response, the companies offered not to increase advertising rates without justification, the sources said.

Reliance-Disney aims to create India’s largest entertainment player, competing with Sony, Netflix and Amazon, with 120 TV channels and two streaming services. But cricket, which has a loyal fan base in the country, is the jewel in the crown.

Many antitrust experts have said one way to overcome the antitrust hurdle is to sell cricket rights, perhaps for tournaments or television broadcasts. But Disney and Reliance have filed a new private filing with the CCI saying they are not willing to do that, said two sources, who asked not to be identified because the process is confidential.

The requests are being made for the first time. Reliance, Disney and CCI did not immediately respond to Reuters queries. The companies have told CCI they are ready to give an undertaking that they will not increase cricket ad prices in any unjustified manner, the sources said. The first source, however, added that the companies have not committed to imposing any price caps or freezing the increase in ad rates for a specified period.

Antitrust experts predict that to finalize the deal, the companies will have to make structural changes to their arrangements or apply so-called conduct remedies, or both, which could include selling broadcast rights and setting caps on advertising rates.

The companies believe the rights to cricket in the cricket-mad country, on which they have spent an estimated $9.5 billion, are too lucrative to walk away from and are key to the deal, the first source said.

The CCI will likely review the applications and assess whether the new concessions are sufficient to alleviate antitrust concerns or whether a broader investigation is necessary.

For years, both companies have offered free viewing of matches to attract users to some of their streaming platforms in the hope that they will purchase a subscription and watch more content.

Jefferies said the Disney-Reliance joint venture will have a 40 percent share of the advertising market in the television and streaming segments.

The CCI had earlier privately asked Reliance and Disney about 100 questions related to the merger. The companies had already told the regulator they were willing to sell fewer than 10 TV channels to ease concerns about market power and get early approval.