The week saw two leading business papers running contrasting stories on the much-talked about Sony-Zee merger. While one speculated that Sony has initiated talks with Disney to acquire its India business (Star India) since the merger agreement with Zee is taking too long, and may not happen. A day later, a rival publication claimed that the merger may conclude next month.

Amidst conflicting speculations, e4m tried to gather some clarity on the subject by speaking to senior industry observers. Most of the experts we spoke to believe that Sony's talks with Disney to acquire Star India may just be the former’s strategy to expedite the process with Zee. This could be because despite an approval to go ahead with the merger, things at Zee’s end are moving at a snail’s pace, say experts. The Sony-Zee merger was expected to be completed by the end of September 2023, but the deadline was pushed back due to some legal cases that Zee is facing.

A senior TV executive, speaking off the record about Sony’s talks with Disney, claimed that “there must have been some initial conversations only to put pressure on Zee to expedite the process."

Moreover, experts believe that the talks between Sony and Disney do not hold much merit until there is a CCI approval.  "Mergers are very complicated and time consuming. Sony has already spent close to two years on the process with Zee. It cannot afford to start another process afresh," said an industry leader on the condition of anonymity. Besides, they will require CCI permission as these two companies together have a much higher market share and will require more capital to be infused.

According to a report by Elara Capital, the Zee-Sony merger received NCLT approval without any conditions on August 10, 2023. Since then, the company has been working on closing precedents (CPs) of the merger. Industry experts expect that the merged company listing could happen by December 2023. However, if it gets pushed beyond December 2023, there are high chances that Sony may advance talks with Disney, say the experts.

According to Karan Taurani, SVP, Elara Capital, in terms of synergies and presence across genres, there is a wider overlap for Sony and Disney as they both cater to urban audiences. He however said, “The CCI may not provide clearance for the merger of the two, or may ask Sony-Disney to shut down some channels as the two together will have a much larger share in the TV ad market (45%). The ad market share of Zee-Sony TV is 25%.”

For the merger of Zee and Sony, both the companies had offered to shut down three of their dominant channels. The proposal to shut down the channels was offered as a remedy by Zee and Sony to allay the CCI's concerns over the domination of the merged entity in certain markets.

Meanwhile, another industry expert feels that the union of Sony and Disney could be a better fit in some genres. “For instance, Star has a strong presence in regional markets whereas Sony has presence only in two regional markets-- Bangla and Marathi,” he mentioned.

“However, in the case of sports, both the networks have a strong presence on linear TV. Sony owns 10 TV sports channels whereas Disney Star has around 15 TV sports channels.  In the current scenario, if a merger happens, it will be difficult to monetize the existing channels and the two may have to shut down multiple channels in some genres. The number of channels that will be shut down will be higher in the case of the merger of Sony and Disney, compared to Sony and Zee.”

The journey of the merger began in December 2021 with Zee’s Board of Directors considering and approving the Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013 (Scheme), whereby the Company and Bangla Entertainment Private Limited, an affiliate of Culver Max Entertainment Pvt Ltd (formerly known as Sony Pictures Networks India Private Limited), shall merge in Culver Max Entertainment Pvt Ltd.

Meanwhile, ever since the news of possible sale of Disney's India business surfaced, names of several other big companies, including Reliance Industries Ltd, Blackstone, Adani Group, and Sun TV, have cropped up as potential buyers.