The combined entity, in which Sony shareholders will have 52.93 percent stake and Zee shareholders will own 47.07 percent, will trigger changes such as consolidation in the entertainment and OTT space in India.
When the merger between Zee Entertainment Enterprises (ZEEL) and Sony Pictures Networks India (SPNI) was announced, Zee MD and CEO Punit Goenka had said it would bring tremendous synergies between the two companies that will exponentially grow business and the sector.
Analysts tracking the broadcasting space agree. They say consolidation is the need of the hour.
While Vivek Menon, Co-founder of NV Capital, a media and entertainment financing group, said the consolidation looks value-accretive, Karan Taurani, Senior Vice-President, Elara Capital, said consolidation is a big positive, especially when growth rates in the TV industry, including advertising and subscription revenue, has converged due to the shift to digital and uncertainty towards NTO (New Tariff Order) 2.0.
“The broadcasting industry has seen a huge transition -- from double-digit ad revenue growth towards high-single ad revenue growth. Also, it has moved from double-digit subscription revenue growth to high single-digit growth,” he said.
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Consolidation, he added, will lead to both players capitalising on each other’s strengths and compete with the market leader Star & Disney.
Top TV players
If we look at the broadcasting industry in India, while the current market leader, in terms of viewership, is Star & Disney (18.6 percent), after the merger of Zee and SPNI, the combined entity will have a share of 26.7 percent, according to Broadcast Audience Research Council (BARC) data.
“After these two groups, the third and fourth place -- in terms of viewership and revenues -- would be contested between Sun TV Network and Viacom18. As per a recent BARC viewership data, Sun TV is third, followed by Viacom at fourth. Post the big four, it is a long tail where the smaller regional network plays a role," said Menon.
Sun TV has a viewership share of 10.4 percent whereas the Viacom18 group has 8.6 percent.
Nitin Mukhi, Associate Director, RBSA Advisors, pointed out where the top channels stand in each genre.
The Hindi general entertainment channel (GEC) is the top genre on TV, in terms of viewership. The combined share of Zee-Sony will command a share of 51 percent, as of Q1 FY22 data.
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Viewership share of the top seven channels in the Hindi GEC genre includes Star Plus (26.9 percent), Colors (15.1 percent), Zee TV (12.9 percent), Sony TV (12.7 percent), Sony SAB (22.1 percent), SAB TV (3.3 percent) and Life OK (7 percent), according to an analysis by RBSA, BARC and Kotak Institutional Research.
In Hindi movies, which is another top-performing genre, the combined Zee-Sony entity will have a viewership share of 63 percent, said Mukhi.
In terms of revenue share, Star & Disney is ahead with 18.4 percent, as of FY20. The combined entity of Zee (10.4 percent) and Sony (7.7), post-merger, will have a share of 18.1 percent during the same period, pointed out Taurani.
Other players, including TV18 Broadcast, Sun TV and TV Today, have a share of 6.7 percent, 4.4 percent and 1.1 percent, respectively, as of FY20, said Taurani.
When it comes to advertising revenue market share, Star & Disney takes the top position with a share of 30.2 percent. Taking the second spot is Zee-Sony, with a combined share of 28.4 percent, with Zee having a 17.9 percent share and Sony 10.5 percent.
TV18 takes the third spot, with a 12.8 percent advertising revenue market share, followed by Sun TV at 5.1 percent.
According to Taurani, the merged entity will catalyse more content offerings in many genres, given the minimal overlapping.
“Nonetheless, concerns over the converging growth rates on the ad and subscription revenue fronts may linger. But the merged entity can marginally offset such an effect by leveraging ZEEL’s enhanced presence and distribution strategy in the global and domestic markets, and better bargaining power with distributors, especially when consumers are prone to selective viewing on NTO 2.0," he said.
The merged Zee-Sony entity is a serious contender to replace market leader Star & Disney in the medium- to long-term.
Over-the-top online players
While in the TV space, the Zee-Sony combine has a stronghold, digital could be a concern, considering the market share for the combined entity is low in the digital media segment.
In terms of monthly active users (MAUs), Mukhi pointed out that Disney+Hotstar leads with 130-140 million on the non-cricketing front. MAUs are 30-50 percent higher when the platform streams key cricketing events like the Indian Premier League (IPL).
Compare this to Sony LIV, which has around 35-40 million MAUS. ZEE5 has 25-30 million MAUs.
“SPN-ZEEL has a combined revenue market share of just 6.1 percent in the digital media space in India, which is dominated by revenues from advertising-supported video-on-demand (AVOD)," pointed out Taurani.
If we look at the AVOD market share, YouTube takes the lead with 38 percent, followed by Disney+Hotstar (18 percent), MX Player (7 percent), Sony LIV (3.4 percent) and ZEE5 (2.4 percent).
"About 80 percent digital media revenues are AVOD-based. Larger aggregators YouTube, MX Player and sports-led platforms, like Disney+Hotstar, have a bigger presence with around 55 percent market share for all three players," said Taurani.
On the subscription video on-demand (SVOD) side, Disney+Hotstar has a market share of 26.3 percent, followed by Netflix at 25.3 percent, and ZEE5 at 13.2 percent. Then comes Sun NXT, which is the video-streaming platform run by Sun TV Network, at 10.5 percent, YouTube at 9.5 percent and Sony LIV at 5.8 percent.
As a combined entity, Zee-Sony can take the third spot in the SVOD market with a combined market share of 19 percent.
This is why the two platforms will have to focus on adding more large-scale web series, differentiated sports content offerings, and short-form content.
“This may aid viewership spike and trigger better conversion as also increase ad spends on the platform. It is crucial for broadcaster OTTs to have many large franchise-led series offerings. This may aid customer retention in the medium- to long-term," said Taurani.