More than a white knight: What to read in the Sony-Zee deal on the impending disruptions

Both Sony and Zee combined become the largest network in the country with complementary assets.

What comes across to him as really significant is that both Sony and Zee combined become the largest network in the country with complementary assets.
What comes across to him as really significant is that both Sony and Zee combined become the largest network in the country with complementary assets.

The immediate reaction within the entertainment industry to the deal announced on Wednesday, December 22 nd to merge Zee Entertainment Enterprises with and into Sony Pictures Networks India was that Zee had perhaps finally found a white knight it needed and a merger where Punit Goenka, its MD & CEO gets to play an even bigger role of leading the combined company as its managing director & CEO. This is even as the majority of the board of directors of the combined company will be nominated by the Sony Group and will include the current Sony Pictures Networks India managing director and CEO N.P. Singh.

However, talk to experts who have tried to dig deeper and there may be reason to believe that the deal may be a sign of industry waking up to the impending disruptions. “My instant reaction was: Has Indian television woken up to the disruptions and finally beginning to prepare for it?” says Prakash Bagri, Associate Professor, marketing at the Indian School of Business (ISB).

What comes across to him as really significant is that both Sony and Zee combined become the largest network in the country with complementary assets. “Sony has strengths in sports, Zee has a strong regional presence coupled with a strong cable business with Dish TV, which would be a useful addition for Sony. What may be common is the general entertainment space,” he says.

But here again, he points out: “Sony has lot many live formats – shows and contests programmes like the KBC or the Indian Idol – whereas Zee is strong with its sitcoms. So, from overall television network standpoint this seems to be a good story and gives them both the heft and the power required to invest a bit stronger in this market.”

But then what could be the other triggers? The apparent answer is the emergence of OTT (Over the top), which, very simply, is streaming service where in content is delivered over the internet and what that could eventually do to television (where content is typically delivered using cable connection). It is all the more crucial in an Indian context where delivery of content (using the internet) means a reach on the mobile phones and given its huge penetration in India, is a market that is hard to ignore.

The OTT allows access to not just international players like Netflix and Amazon Prime Video but also to several existing and emerging niche regional players like Hoichoi in Bengal for instance. “This would be the biggest worry to anybody in the home entertainment space and with biggest studios in the world dropping into the space, it (OTT) is really becoming a very big play,” says Professor Bagri, who has also been an architect behind the drafting of India’s digital vision document in 2007 and in an earlier avatar in the corporate world helped build a billion dollar business among other things.

In the context of the Sony-Zee deal, what may be worth watching may be how the combine responds to the disruptions triggered by the OTT and how they invest and establish significant presence in this space and get to pool their strengths and complimentary assets to leverage the digital and OTT space.

What may work in their favour at the moment is the huge library of assets that each brings to the table and with the merger now gets to “bring in synergies and hit the ground running while armed with a stronger play in terms of investible funds.” Also, he says, since Sony is an international network and as Indian diaspora becomes increasingly important, the two entities combined could reach out to the diaspora in a far more lucrative manner.

On the challenges ahead, he says, “what may need to be watched is how they handle the integration of the creative minds and make the transition seamless.”

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