Sony-Zee merger: Will it impact the pay-TV market?

As per industry watchers, the combined network will have a strong presence across genres but the merger is unlikely to have major ramifications on the pay-TV industry. Read on to know why

by Javed Farooqui
Published - October 17, 2022
5 minutes To Read
Sony-Zee merger: Will it impact the pay-TV market?

The coming together of Culvert Max Entertainment (formerly Sony Pictures Networks India) and Zee Entertainment Enterprises Limited (ZEEL) is unlikely to have any major ramifications for the pay-TV industry, which is facing the dual challenge of a shrinking universe and a decline in Average Revenue Per User (ARPU), industry experts shared.

The Telecom Regulatory Authority of India's (TRAI) New Tariff Order (NTO) regime, where everything from channel/bouquet rates to carriage fees is regulated, will ensure that no single broadcaster can take undue advantage of their scale and size, they pointed out.


In the pre-NTO regime, most of the deals between broadcasters and distribution platform operators (DPOs) were done on the basis of negotiations. By virtue of their viewership market share, the powerful networks managed to extract higher subscription revenue growth from the DPOs during the deal renewal stage. Under NTO, the pricing is uniform for all platforms with the discounts and commissions offered by the broadcasters to the DPOs being capped at 35%.


That said, some experts feel that the Sony-Zee merged entity will be a force to reckon with in the pay-TV ecosystem. The network will have a strong presence in the Hindi general entertainment and movie genres besides sports and regional markets, they added. They also believe the merged entity will help Sony-Zee to increase the penetration of their channels and get a higher subscription revenue growth.

As of March 2022, Sony-Zee had a combined viewership market share of 24.8%, excluding sports.

A senior distribution executive with a leading TV broadcast network said the merger of Sony-Zee will give benefits of scale to the merged entity. "The merged entity can easily get a 15% growth over their existing subscription revenue base. The Sony-Zee bouquet will become extremely powerful, which will also help them to drive the reach of all their channels," the executive claimed.

As per the FY22 financials of both Sony and Zee, the combined subscription revenue of the two firms stood at Rs 5951.3 crore. In the previous fiscal, the combined subscription revenue of Sony-Zee was Rs 5728 crore.

He further stated that the merged entity will also enjoy cost benefits when it comes to content investments. "Earlier, both companies were acquiring movie rights separately. Now they will go as a single company so they will have better bargaining power. Likewise, they will get cost benefits in terms of investments in fiction shows," the executive said.

A veteran TV distribution professional said that the market power will shift to Zee-Sony because they are too big and nobody can survive without them across the markets. "They will take their pound of flesh but they cannot be completely unreasonable because of the tariff order. There was a time when MediaPro (erstwhile Star-Zee distribution JV) was so powerful that they used to get the growth that they demanded from the DPOs. Cut to today, the DPOs know their worst case so they can still manage but earlier they couldn't have managed such a huge merger," he added.

He also noted that a 15% subscription revenue growth for the merged entity in the current market will be an uphill task. "The pay-TV market is collapsing so where will the growth come from? As the overall pie shrinks, the DPOs are also under pressure. They will be dropping others and not Sony-Zee. So that is one advantage that the merged entity will enjoy. They will also gain in getting better penetration for their channels but I don't think money will have a major change," the veteran TV distribution professional stated.

An experienced media professional noted that Sony-Zee will become a formidable player but the gain from the distribution segment will not be very high since the pricing is regulated and the relationship between broadcasters and DPOs is clearly defined. "The merger would have helped Zee-Sony in a growth market but the linear business is going through a very serious crisis," he stated.

He pointed out that the over-regulation of the broadcast industry has made the industry uncompetitive vis-a-vis DD Free Dish and OTT platforms. "TRAI should have a forbearance policy for broadcast tariff because DD Free Dish and OTT are unregulated. How can the regulator have different policies for different platforms? TRAI should either come up with a platform-neutral content pricing or have tariff forbearance for all the platforms," he averred.

A TV distribution executive with a leading network concurred with the view that the Sony-Zee merger will not have a dramatic impact on the pay-TV market because the broadcast industry is in a state of flux due to NTO 2.0. "Even if this was an open market somebody will still have to shed a bit more to give that extra pound of flesh to Sony-Zee," he added.

The executive believes that the strength of the two networks will help Sony-Zee to face headwinds in the linear business. "The merger will make Sony-Zee a powerful bouquet with a presence across all the key genres including entertainment and sports. Sony never had a strong regional presence while Zee didn't have sports. The coming together of the two will help in plugging the gaps. The acquisition of ICC TV rights by Zee will help the merged entity to strengthen their sports offering," he expounded.

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