ZEE Entertainment's recent announcement about its intention to divest 50 per cent of its equity stake to a strategic foreign partner may have led to its shares dipping by 4 per cent, but entertainment industry experts are busy speculating about who the potential global strategic partner could be. While US media company, Comcast, is the popular choice, a lot of them are betting on Alibaba too. The latter has a significant media empire in China and has invested in Indian businesses such as Paytm and Snapdeal, but is still evaluating when to make a big bang entry into the country. Comcast has also been evaluating the Indian market for a while, but has been sceptical of the India story. "These two companies are definitely waiting to enter India. I will also bet on Google," says a senior media industry M&A expert. There are murmurs of Sony Pictures Network (SPN) being in the race too. Zee had sold its sports offering, Ten Sports, to SPN in 2016.
Media industry experts believe that Zee's decision to divest stake to a global company is a smart move. Its idea of creating long-term value by transforming into a leading global media-tech player comes at a time when the broadcast business at large is beginning to show first signs of dip with advertising revenue getting impacted. Though the broadcasters may attribute the dip to demonetisation and GST, the telecom data revolution thanks to Reliance Jio has definitely impacted linear TV viewership. "TV business is shrinking. With 4G coming in, the dynamics of entertainment has changed. Zee has decided to divest keeping in mind the future, which is a great move," points out Girish Menon, Founder, Transaction Square.
The writing on the wall is quite clear that digital entertainment is the future and companies like Zee Entertainment which are primarily broadcast companies will surely need to evolve. "In order to become a strong digital force, ZEE will need a global partner with deep pockets. It will certainly not have the money power to do it on its own," explains the M&A expert. Apart from the fact that it is the most profitable Indian media company, why would a global conglomerate want to pick up stake in ZEE? "The biggest attraction would be its content library and the fact that it would give them access to the second biggest media market," says Menon. Apart from television, ZEE Entertainment has a presence in films and music. Its over the top platform, ZEE5, is among the top three OTT platforms.
A lot of the traditional media companies are looking at divesting even globally. In December last year, Rupert Murdoch announced that he was selling 21st Century Fox to Disney for over $70 billion. The deal includes its movie studios, TV productions and international businesses such as Star India. A bulk of these businesses have been on the decline and Murdoch has switched allegiance to the digital media as he has realised that is where the moolaah lies in the long run. Disney on the other hand, needs Fox's business to create a larger offering of movies, television shows and sports as it is building its own digital platform. Murdoch also sold his stake in European broadcast company, Sky TV to Comcast a couple of months ago.
Zee Entertainment's announcement of a possible divestment to a global partner may just be the beginning of the next round of consolidation in the Indian media and entertainment industry.