The potential Sony-Zee merger, touted to be one of India’s largest media deals, is believed to be on the brink of total collapse. California-based Sony Pictures Entertainment has yet not agreed to the extension of the deadline, which expires on December 21. Zee, on its part, has not revealed as to why it needs more time. In its communication to the stock exchanges, the Subhash Chandra-founded company has simply sought more time to close the $10-billion mega deal.
So, why is this deal that has got all regulatory clearances still on tenterhooks? In a written response, Culver Max Media, said, “ZEE’s notice to the Bombay Stock Exchange and the National Stock Exchange of India dated December 17 is an acknowledgement that they will not be able to meet the December 21, 2023 deadline to close the SPNI/ZEE merger. The notice triggers an existing contractual provision in the deal that allows for both parties to discuss the possibility of extending the deadline. SPNI is required to start those conversations but has not yet agreed to a deadline extension. We look forward to hearing ZEE’s proposals and how they plan to complete the remaining critical closing conditions.”
Recap 2021: Announcement of the mega-deal
Back in December 2021, Sony Pictures announced the acquisition of ZEEL (ZEE Entertainment Enterprises Limited), followed by a subsequent merger with its Indian arm Culver Max Entertainment Pvt Ltd (formerly called Sony Pictures Networks India). This merger would have created an entertainment behemoth commanding a market share in the range of 25-28%. The big-ticket deal would have brought together more than 70 TV channels, two video streaming services (SonyLiv and Zee5) and two film studios (Sony Pictures Films India and Zee Studios). The Boston Consulting Group was appointed to oversee the integration process.
The Impact
According to Growthpal, an M&A deal sourcing platform this consolidation was expected to bring synergies in content creation, distribution networks, and technological advancements, offering a wider array of choices for consumers and potentially enhancing the competitiveness of both companies against other major players in the industry.A potential merger between Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India (SPNI) could yield several synergies that could benefit both entities. Some of these synergies might include:
Content Library and Creation: Combining their content libraries and production capabilities could result in diverse content across genres and languages. This expanded content library could cater to a wider audience and provide a competitive edge in content creation
Distribution and reach: Pooling their distribution networks and leveraging each other’s reach could amplify their audience base. This could enable them to negotiate better terms with cable and satellite operators and potentially strengthen their presence in both rural and urban markets.
Cost efficiencies: Consolidation often leads to cost synergies through streamlining operations, eliminating duplications, and reducing overheads. This might include shared infrastructure, reduced marketing expenses, and optimised production costs.
Technological advancements: The integration of technological resources and expertise might facilitate advancements in streaming services, innovative content delivery platforms, and enhanced user experiences. This could lead to the development of cutting-edge technologies for content consumption.
Monetisation opportunities: A larger combined entity could have more bargaining power with advertisers and subscription-based models. This could result in improved monetization strategies, potentially leading to increased revenue streams.
International expansion: Capitalising on Sony’s global presence and leveraging Zee’s experience in regional content, the merged entity might explore opportunities for international expansion, reaching out to a broader diaspora and global markets.
Diverse expertise and talent pool: Bringing together diverse talent pools from both companies could foster creative collaborations, innovation, and knowledge-sharing, enhancing overall productivity and quality of content,
Competitive positioning: The combined strengths in content, distribution, and technology could fortify the merged entity’s competitive position against other major players in the Indian media and entertainment industry.
Challenges = Roadblocks
However, in recent months the deal has faced multiple challenges due to regulatory approvals and non-agreement on the leadership of the combined entity.
In November 2023, reports suggested that Zee and Sony were locked in a showdown on who would head the merged entity. In 2021, it was agreed that Punit Goenka would be the CEO of the new entity. However, Sony is hesitant due to an ongoing Securities and Exchange Board of India (SEBI) investigation against Punit Goenka, as On August 14, SEBI barred Goenka from holding key managerial roles in Zee and its affiliates over allegations including facilitating fund movements out of Zee and their return through complex transactions, falsely portraying Zee’s receipt of dues. However, on October 30, the Securities Appellate Tribunal (SAT) lifted the ban on Punit Goenka, allowing him to resume his role in the planned merger with Sony Group’s Indian unit, stated Growthpal in its M&A report.
Due to recent developments and the request for a deadline extension from Zee, experts suggest that there may be another winner out of this entire saga. The proposed Reliance and Disney merger would have a whopping 43% market share and could have a monopolistic approach if the Zee-Sony merger falls through, the report noted.