Punit Goenka expects revenue synergies from Sony-Zee merger

The Zee-Sony merger will bring revenue synergies of 3-4%, said Zee Entertainment Enterprises Limited (ZEEL) chief Punit Goenka. He was speaking at the ZEEL’s Q2 FY23 earnings call.
It may be recalled that the Competition Commission of India (CCI) has approved the Sony-Zee merger. The ZEEL shareholders have also approved merger.

Goenka told analysts that the company will derive synergy from ad revenue. However, he added, the subscription revenue synergies will be dependent on the likely amendments to be brought by TRAI on NTO.
Goenka informed that the merger will be finished within this fiscal. He said that as of now, synergy is primarily driven by international markets, digital business, and advertising.

He said it is difficult to give a final date on merger completion. “We are working with a target that it should be completed within this financial year and this is something that we are grappling with on a daily basis because these regulatory approvals are required,” he said.
According to him, ZEEL could grow its advertising revenue sequentially in Q2 despite the macroeconomic headwinds. He said the company remains hopeful of a steady recovery in the advertising environment during the second half of the fiscal given some of the green shoots due to a good monsoon and the onset of the festive season.

He said that the sports business is a key focus area for the company. According to him, the company has sharpened its strategic vision to build the sports business for the company. “The strategic licensing agreement inked with Disney Star makes Zee the exclusive TV destination for all ICC events starting in 2024. Going forward all our investment decisions to make the sports segment a compelling value proposition for the company will continue to be taken with a prudent approach," he stated.

Goenka added that ZEEL will not need to launch sports channels as the merged entity will have a “formidable sports network. “In the unlikely event that the merger does not take place, we will have to launch sports channels," he informed.

According to analysis by Elara Capital, Zee5 is currently the highest rated OTT app, due to significant improvement in rating & user experience. Ratings increased in play store as well as in iOS. The primary spend in Zee5 is toward tech, content and marketing.

The company released 10 movies (four in Hindi and six regional) in the quarter. Z has a strong pipeline for H2FY23. It is restudying the movie portfolio and strategy. Management may rejig capital allocation within movies (less toward Hindi and more toward regional). Reduction toward movies will not happen, and only change in content allocation will take place.

Zee5 sees good growth across segments; it is gaining in usage, stickiness with the highest-ever viewership. The next couple of quarters losses will be like Q2, and then it will hit a plateau and fall, said the analyst firm.