Disney's $8.5 billion Reliance merger is a victory in the streaming wars in sports-crazy India.

• The Indian market is expected to attract more than 750 million viewers due to the merger.
• Mukesh Ambani, Asia's wealthiest man, will lead the venture and invest $1.4 billion in its growth strategy, with his wife, Nita Ambani, serving as chairperson.
• Disney obtained exclusive streaming rights to the Indian Premier League (IPL) in 2020 after acquiring Hotstar and Star TV channels in 2019.
• Cricketers from all over the world flock to the IPL, which is among the world's top cricket leagues.

The merger of an Indian conglomerate's media will return highly valuable cricket streaming rights to a U.S. firm in a country that is extremely passionate about the sport.

Disney announced on Wednesday that the companies will be merging their respective Star India and Viacom18 units into a newly created Star India joint venture, valued at roughly $8.5 billion on a post-money basis, excluding synergies.

The merger is predicted to attract over 750 million viewers in the expanding Indian market. Mukesh Ambani, Asia's wealthiest individual, will lead the venture and invest $1.4 billion in its growth plan, while his wife, Nita Ambani, will serve as chairperson.

Cricket fever

Disney obtained exclusive streaming rights to the Indian Premier League (IPL) in 2019 after acquiring Hotstar and Star TV channels. The IPL, one of the world's top cricket leagues, attracts top-notch players from all over the globe.

Disney lost the IPL rights to Ambani in 2022 for $2.6 billion, and as a result, Indian customers switched to Jio Cinema, Disney's streaming platform.

During the first three months of last year, Disney+ Hotstar lost 4.6 million customers in India.

Disney's streaming efforts in India could soon regain lost customers after the merger, which is crucial for the company's success in the world's most populous country.

Since losing the streaming rights to Indian Premier League cricket matches in 2022, Disney has been attempting to regain its footing in India, according to Jamie Lumley, senior analyst at Third Bridge, who spoke to CNBC via email.

Disney could benefit from forming a joint venture with Reliance, a prominent player in the Indian market, to share expenses and reduce competitive pressure.

Disney's decision to maintain its presence in India through this move indicates that the company sees potential in the market, a shift from earlier signals suggesting a possible exit through a sale.

Minimal earnings impact

Disney anticipates recording non-cash pretax impairment charges of between $1.8 billion and $2.4 billion in the current quarter, with approximately half of this amount resulting from a write-down of the net assets of Star India.

"Jason Ware, chief investment officer of Albion Financial Group, stated on CNBC's "Street Signs Asia" that the bigger picture is the developments in streaming."

"It seems that Disney is on track to achieve profitability in streaming by the end of 2024, as predicted six months ago. In fact, they may see it in the third quarter."

Over the past year, Disney has experienced subscriber losses in India and recently announced a $5.5 billion cost-cutting program that will lead to a global reduction of 7,000 employees.

With the merger, Disney is striving to retain subscribers in the lucrative Indian market while maintaining its financial stability.

According to Ken Leon, research director at CFRA Research, the JV will not negatively impact Disney's earnings as he stated that the merger was mutually beneficial for all parties involved.

I think Bob Iger made the right decisions here," Leon added, "Cricket is everything in India.

Mukesh Ambani, the chairman of Reliance Industries, has a stake in the parent company of Biz Focus Hub-18, which is CNBC's local India partner.