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What makes ZEE-Sony combine a merger of colossal proportions

Even as news of the Zee Entertainment Enterprise Ltd (ZEEL) and Sony Pictures Network India (SPNI) merger deal settles in, industry experts are evaluating the media behemoth that the two media networks will create and the far-reaching implications for the M&E industry. The merger will see both companies combine their linear networks, digital assets, production operations and program libraries.

The combined entity will own 75 TV channels cutting across genres such as movies, music, GEC, sports, infotainment, kids, etc. It is estimated that this will be about 25-30% of the overall television viewership in the country. Consequently, the combined entity, with its increased clout across various genres, will have major channels in each genre, enabling them to enjoy a larger pie of the advertising market.

Under the terms of the non-binding Term Sheet, Sony Pictures Entertainment, the parent company of SPNI, will hold a majority stake in the combined company. Sony Pictures Entertainment will invest growth capital so that SPNI has a cash balance of approximately $1.575 billion at closing for use to enhance the combined company’s digital platforms across technology and content, ability to bid for broadcasting rights in the fast-growing sports landscape and pursue other growth opportunities.

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According to Karan Taurani, Senior Vice-President, Elara Capital, “Sony is estimated to grow at a lower CAGR of 10% (F20-24) on PAT (profit after tax), which translates into Rs 1,460 crore, whereas our estimate on ZEE is Rs 1,676 crore for FY24 (CAGR of 20%); the combined entity could have a PAT of around Rs 3,100 crore. We expect the PE multiples to be in the range of 16x-17x; execution on the digital business will drive further re-rating, however even on these valuations, there is a possibility of a 80-100% upside, at least.”

Taurani added that if the merger goes through, ZEE’s market cap will move to around Rs 45,000 crore, while the total market cap (including Sony - combined entity) will be around Rs 95,000 crore.

Currently, SPNI, with its reach across 167 countries, has a combined viewership of 700 million in India. ZEEL, on the other hand, is present in more than 173 countries, with a global reach of more than 1.3 billion people.

Considerable clout in HSM

Media analysts believe that the combined entity can play a dominant role in the Hindi-Speaking Markets (HSM), which is a major market for advertisers. The ZEE-Sony combine will be big enough to wield considerable clout with the advertisers and negotiate lucrative ad deals.

Sony, which hitherto relied on productions like ‘Kaun Banega Crorepati’, can take heart from the fact that ZEEL’s presence is spread over digital, movies, broadcasting, music, etc. It also has 260,000 hours of TV content and boasts of the largest Hindi film library, having rights to 4,800-plus movies cutting across languages. ZEEL enjoys a bigger viewership share than Sony, with its strength in movies and regional GECs. Sony, on the other hand, has a strong presence in sports and Hindi GECs. Media analysts see the merger bringing immense synergies between the two broadcasting majors.

Sports broadcasting

Along with Star India, Sony has a strong presence in sports broadcasting in the country. ZEE, on the other hand, currently doesn’t have a sports portfolio. The ZEE-Sony combine will be a strong proposition as broadcast partner for sports events, especially prime cricket properties such as Indian Premier League, ICC World Cup and other BCCI events.

Sports broadcasting in the country is poised to see some exciting and very competitive times ahead. While Star has dominated this field for long, with Sony as a strong contender, the likely entry of Viacom18, backed by Reliance’s might, will create a third party for sports broadcasting rights. So far, Viacom18 doesn’t have any sports portfolio.

Stronger OTT play

Both ZEE and Sony have a digital presence with OTT platforms ZEE5 and SonyLIV, respectively. Over the years, the two platforms have built up their own subscriber base. As per ZEE’s statement, ZEE5 had 6.1 million daily active users (DAUs) and 72.6 million monthly active users (MAUs) in FY2021. Meanwhile, as pr media reports, SonyLIV’s subscriber base jumped 700 per cent to reach 6.8 million total between June 2020 and June 2021. Also, in July 2021, SonyLIV initiated its global expansion by launching in Europe, the UK, Australia, Canada, etc. Post-merger, as a combined entity, it will be ranked third in the SVOD category with an estimated market share of 19%.

(Edited and Additional Inputs by Shanta Saikia.)


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