The merger of Zee Entertainment Enterprises (ZEE) and Sony Pictures Networks India (SPN) is in the final stages of stitching up, Punit Goenka, MD & CEO, ZEE confirmed at the APOS India Summit. He added that the consolidation is going to benefit the whole industry. "ZEE and Sony will form the largest media entertainment player in the country. Our revenues on a standalone basis combined will be close to $2 billion, and the capital that Sony is going to infuse in the merged entity ($1.575 billion) will give us the opportunity to invest in premium content, including sports. We will be able to generate great value for our stakeholders," he said.
“Before the pandemic, no one thought 40-50 million people would pay for content. "They may not be paying a great deal of money, but they are willing to pay. That number will exponentially grow. the Indian SVOD market will grow to 200 million in the next five years," he added.
Zee5, the OTT (over-the-top) platform owned by ZEE and SPN entity SonyLiv, too, is set to benefit from this merger. Experts say that an OTT space with a dozen-odd players like Disney+ Hotstar, Netflix, Amazon Prime Video, etc is going to benefit from consolidation. SonyLiv’s monthly active user (MAU) base is 45 million while Zee5 has 72.6 million MAUs. “We reiterate that any potential Sony-ZEEL merger may be a big re-rating trigger, led by TV segment synergies, as also catalyse strong ‘go to market’ strategy on digital. There is a big opportunity in terms of synergies as Sony is doing well in sports, mainstream GEC (general entertainment channels) whereas Zee has a strong recall on regional genre , which is less or absent for Sony; both have a very strong movie catalogue which can be used for OTT and TV offering,” Karan Taurani, Senior Vice President, Elara Capital said.
Zee5 is planning to expand its slate of Telugu and Tamil originals in the coming months and has also recently added Punjabi content to its platform. The platform has also announced that 30-40 per cent of its total content investment will be allocated to regional content. Zee5 also plans to launch a joint slate of over 30 originals and acquired content across Hindi, Tamil, Telugu and Punjabi through October-March. Today, around 50 per cent of its viewership comes from regional content. “Content wise, there’s a lot of synergy simply because we’re strong in Indian and regional languages and we do see cricket and English as a gap on our platform,” Manish Kalra, Chief Business Officer, Zee5 India told Business Today.
He said that consolidation is a natural phenomenon for the industry going forward. “Consolidation is a natural phenomenon when the industry is so fragmented and the consumers are evolving at a fast pace. Content licensing will be the first level of synergy which will start coming in and then platforms will see synergies with each other by virtue of the kind of consumers they have,” he said.
Zee5, he says, understands Indian content needs very well. “This is by virtue of content that we’ve created through TV and understanding of nuances and insights of our audience. Based on that, we’re investing in building relatable Indian content across languages and that’s going to be our strength and we want to scale leveraging content production capabilities as well as our ability to scale significantly across languages. That could be our differentiator going forward,” Kalra said.
According to Elara Capital, the merged entity may emerge as the second largest homegrown OTT after Disney+ in India. “Given the scale and depth of content, the combined entity will have a better bargaining power with the distributors - OEM, telcos and other platforms, that too will be a win -win rather than them going to market separately,” Taurani said. As per Elara’s initial estimates, Sony is estimate to grow at a lower CAGR of 10 per cent (F20-24) on PAT which translates into Rs 1,460 crore whereas our estimate on Zee is Rs 1,676 crore for FY24 (CAGR of 20 per cent); the combined entity could have a PAT of around Rs 3,100 crore.
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