Storyboard | The Indian premier M&E league

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.

In a recent turn of events, Sony Pictures Networks India and Zee Entertainment Enterprises Ltd have entered into a non-binding term sheet to combine both companies’ linear networks, digital assets, production operations and program libraries. If the merger goes through, it will create an entity with 75 TV channels with a wide set of audiences, two video streaming services - ZEE5 and Sony LIV, two film studios and a digital content studio, which will allow it to better compete with the media-entertainment juggernaut Star and Disney India, and companies like Netflix.

The proposed merger could also significantly accelerate bigger shifts that are underway in the media and entertainment industry. Star and Disney+Hotstar had a strong foothold in both GECs (general entertainment channels) and sports, but the balance is shifting. Of late, Viacom18, the 51:49 joint venture between Mukesh Ambani-owned Network18 and ViacomCBS, has been making a bigger play in sports. It recently bagged the media telecast rights for the FIFA World Cup 2022 for an estimated Rs 450 crore. Soon, broadcast rights for the Indian Premier League (IPL) will be up for grabs. Star India, Viacom18, Sony Pictures, Amazon, and Facebook are all in the fray. Also among the big drivers of change in the M&E industry is the booming streaming space fuelled by pandemic-driven demand.

Ripe for consolidation

One of the immediate implications of these changing dynamics is what happens to smaller companies. As the big players gear up to battle to secure content and media rights for major properties like the IPL, what happens to smaller firms? Vanita Kohli Khandekar, a media and entertainment specialist, suspects “they will have to look for partners and scale up or ally with big players”.

Echoing this sentiment, a senior media agency executive says, on the condition of anonymity, “M&E industry will be a two to three player market including Viacom with the backing of Reliance, Star with Disney and now Zee-Sony. Individual fragmented players will not be able to sustain in this market which requires heavy investment in content which is being consumed in different formats by viewers.” He adds that “while there is a demand for a wide variety of content, the returns might not be so high at this moment. Therefore, consolidation is imminent. IPL bidding rights, for instance, will be out soon and it will go through the roof. It would be the big daddy’s game; only two to three players will be able to play it.”

Impact on advertisers

Most of the media and advertising industry experts Storyboard spoke to are optimistic about the outcome of the new dynamic. “This will have a positive impact as always economies of scale help in creating synergies and allow bigger and bolder investments in either bigger properties or sports programming which requires huge investments. This will also help advertisers to reach their audiences, as India is a very fragmented market,” says Shashi Sinha, CEO of IPG Mediabrands. “To illustrate, more than 80 percent of shows have less than 1 percent rating. If through the right investments and proper segmentation they can ensure consolidation of ratings, this will not only help advertisers get the required eyeballs but will also help the TV business retain its No. 1 position,” he adds.

Independent media consultant Harsha Joshi looks at the merger as a positive development for all stakeholders including advertisers. “Recently, the ad rates in television have been going down because of the increased shift in viewership towards digital. I expect a slight upside to happen in terms of viewership with this merger, and advertisers instead of dividing their budget among two broadcasters, can now sign bigger deals with the new entity.” At the end of day, though, for an advertiser it will “just be a channel which will be evaluated on the basis of incremental reach and genre,” she added.

Mohit Joshi, CEO, Havas Media Group India, says it's too early to talk about the proposed merger’s impact, “but we are hopeful that as the merger evolves it will create a positive impact as both are established brands”.

Client speak 

Shashank Srivastava, executive director, Maruti Suzuki India, shares his view with a caveat that these are just his initial observations as no one really knows how the whole deal will pan out eventually for stakeholders. “For the auto sector, especially for Maruti Suzuki India, we have high affinity for three genres as advertisers. They are GEC, sports and news. Since the vernacular and OTT space is also growing and we have a strong focus on both platforms, the merger comes as good news.” On GECs, the company already has both Sony and Zee in its media spends. “Last year, we spent Rs 32 crore on Sony and Rs 14 crore on Zee (in the GEC genre), and the merger will only simplify our investments in the genre… Additionally, since Zee has a strong vernacular presence in big to micro markets, we are hoping that the merger will add value to certain ad deals that are done keeping the vernacular markets in mind.”

If one looks at genres, “GEC and movies will be dominated by this combined entity in the Hindi language space. All in all, this is a great deal for Zee...,” says Rammohan Sundaram, country head and managing partner – Integrated Media, DDB Mudra Group.

Among the industry executives and experts Storyboard spoke to, Sam Balsara, chairman of Madison World, had a divergent point of view on recent developments. Specifically speaking about the impact of the proposed merger of SPN and Zee, he says that in a lot of ways it is “not good for marketing and not good for advertisers”. “It is going to lead to inflationary pressures with an inflation in advertising rates. And an increase in advertising rates is not good for overall growth of advertising.”