Zee Entertainment Enterprises Ltd (ZEEL) may face legal action if it fails to fulfil a four-year strategic licensing agreement with Disney Star for the broadcast rights to ICC Men's and Under-19 global cricket events.

In August 2022,ZEE and Disney Starannounced an agreement by which Disney Star will license thetelevision broadcasting rightsof the International Cricket Council’s (ICC) Men’s and Under 19 (U-19) global events for four years to ZEE while keeping the digital rights.

According to industry experts, ZEE is under pressure now that theZEE-Sony mergerhas been called off and the broadcaster may face legal implications if it fails to complete the deal. Sources close to the development also shared that  Zee entered into this partnership hoping to merge with Sony as the company’s profitability is under pressure. However, they believe that by this point, ZEE should have a strategy in place.

“I think there would be a couple of landmines including the ICC rights and given the uncertainty over the last month or so, ZEE should have a contingency plan to navigate through all these,” said a senior analyst on the condition of anonymity.

Given that the deal has been called off, experts expect ZEE's values to come under pressure in the immediate future, as the merger with Sony was the main driver of valuation growth over thelast two years.

Analysts who monitor the industry stated that there is a risk that this will result in legal action if ZEE fails to comply with its agreement with Disney.

ZEEL in its annual report of FY23 said that this acquisition is subject to certain conditions precedent including submission of financial commitments, guarantees and ICC approval for sub-licensing to the Company which are pending.

On the agreement with Disney Star for the broadcast rights of ICC tournaments,  Karan Taurani, SVP, Elara Capital estimated annual losses of approximately Rs 15.2 billion due to the same in FY25 and beyond, due to hefty content cost,  lower sports ad revenue and cricket content being available free on OTT.

Taurani said, “ZEE may not fulfil its commitment on the same (has a cash balance of mere Rs 6 billion, vs a potential contractual obligation of Rs 40 billion per year) as it was a strategic decision which could reap benefits due to Zee-Sony merger. There could be a negative impact of a penalty/legal proceedings for Zee; however, PAT will see a positive impact due to the absence of sports losses in FY25 and beyond.