Rs 2.1 trillion media landscape to hot up after Sony-Zee divorce

More consolidation on cards as players bulk up to fight Google, Meta and other tech-media giants

Who will buy Zee Entertainment Enterprises? Who will ally with Sony, or Culver Max Entertainment? These are the first questions that popped up as the Sony-Zee merger, signed in December 2021, broke on the eve of its scheduled consummation.

The more important question is, what will it mean for India’s Rs 2.1 trillion media and entertainment business that is becoming a deathbed for foreign media companies?
 

Media reports say Disney is on the verge of inking a deal giving majority stake to Reliance Industries (JioCinema, Viacom18). This is after 30 years in India. Paramount Global has already given up its majority stake in Viacom18 to Reliance.

If the failure of the deal with Zee means Sony will give up on its broadcast business in India, there will be no global entertainment firm left in the country.
 

Then there is talk of litigation – by Zee against Sony and by Zee’s shareholders against Zee.
 

Sony and Zee declined to speak for this story, as did a number of media executives.
 

The coming together of Disney-Star and Reliance Industries will create a behemoth. Take the broadcast, digital and studio assets of Disney-Star: Star Plus and 70 other channels, the largest pay-streaming app Disney+Hotstar, and movies such as Neerja and Brahmastra. Combine them with Network18’s 58 news and entertainment and digital brands (Colors, Moneycontrol) and films (Drishyam 2, OMG2) and you have a media conglomerate that would have a 32 per cent share of all television (TV) viewership in India.
 

If all the streaming brands this duo owns — Voot, JioCinema, and Disney+Hotstar — are merged, the resulting streaming service will be at 316 million unique visitors (see chart). That is very close to the India reach of the world’s largest streaming app, Google’s YouTube.
 

“This level of consolidation does not exist even in the US,” says an analyst from Asia. Yet, consolidation is what the business needs. If Sony, Zee, Disney, or any other media firm has to take on the might of the tech-media majors that dominate both the global business and the Indian one, scale is critical.

The real drama in media
 

That brings this to the real conundrum facing traditional media companies globally: The stagnation in their main business and the flow of audiences and revenues to Google and Meta. Google, with revenue of $278 billion in the financial year ending September 2023, uses search and YouTube as the glue to keep audiences. The $127 billion Meta uses socialising to keep them coming to its brands — WhatsApp, Facebook, and Instagram. For the $554 billion Amazon, its video business is a carrot to get people to buy more things on Amazon.

In this club of $100 billion-plus businesses, how do legacy media companies fit? Fox’s Rupert Mudoch was among the first to realise there was no way he could take on Netflix, let alone Google or Meta. In 2018, he sold his entertainment business to Disney for just over $71 billion. This triggered a wave of consolidation that continues to this day. Disney, Paramount, and even Sony are dictated by the American (and Japanese) stock markets that create far more value than the Indian one, points out an industry insider. The choice, then, is clear – cut your losses and run.

The ones who stay back and fight need both scale as well as size.
 

The merged Zee-Sony would have had 24 per cent of the TV audience in India, a tad more than the current leader Disney-Star’s 22 per cent. Unlike Sony, Zee has a strong presence across Hindi, Marathi, Tamil, Telugu, and other Indian languages. It also has a global footprint with 35 channels in 170 countries. It lacks sports and kids programming, which Sony and its 27 channels have.
 

Both have strong film businesses and over-the-top (OTT) platforms. Of the two, Zee has a stronger broadcast business, while Sony has a more robust digital one. At 33 million subscribers (direct and indirect), SonyLIV is the second largest pay streaming service after Disney+Hotstar (38 million). It brings in roughly a third of Culver Max’s India topline.

Without the heft that the merged entity would have had, Sony and Zee, in isolation, can become easy pickings. Unless they leverage their digital businesses quickly.

Who can buy whom?
 

Google, Meta, Reliance Industries, Disney-Star, Sony, and Zee are among the top 10 media companies in India (see chart). Add the Adani group and Airtel to the mix. Now factor in two foreign media players that have had ambitions of entering the India market: The $121 billion Comcast and John Malone’s $7.2 billion Liberty Global. Google and Meta are unlikely buyers of legacy media firms. They already control audiences and have a 70 per cent share of revenues in digital, which is the present and future of media. The $89 billion Sony has been incredibly patient with Zee’s seemingly endless legal issues. Yet the deal did not work out. This suggests no foreign company is likely to be interested in Zee, say analysts.
 

Though Airtel has music streaming platform Wynk, video app Xstream, and a DTH (direct-to-home) business, it has never expressed an ambition to be in content.

Any buyer for Zee, therefore, has to come from this set consisting of Reliance, Adani, and Disney-Star. You could plot all of them on a sheet of paper and draw arrows going every which way, because at this point, they are all probably talking to one other.