🤔 Is Zee Killing Off its Channel?
Zee’s merger with Sony is going to be super exciting to look out for. But it just may mean the death of an iconic TV channel.
After ages of matchmaking couples for the storylines of their TV shows, Sony Entertainment decided to do some matchmaking of its own.
It approached Zee with a proposal for a merger in 2021.
And though this proposal was far less romantic than the ones on Zee's shows, Zee gladly accepted it. Â
Why?
📜 Reasons for the Sony-Zee Merger
A big reason for Zee to agree to the merger was its massive debt (Rs. 1.98 billion).Â
The debt is a result of the Essel Group, Zee's parent and promoter company, diversifying its bets in the 2000s. The company invested in a number of sectors which tanked leaving behind a huge liability.Â
Though Essel Group has paid off most of this debt, it still has to pay off a significant amount.Â
With this debt on its head, it could have been difficult for Zee to invest in growth, but the merger solves that problem.
And investing in growth is really important for Zee and Sony right now because their viewership is going down thanks to OTT platforms' dominance in the market.Â
Zee's viewership fell by 55% in 2020 (yes, even during lockdowns it couldn't hold viewers' attention). Sony's viewership also fell but only by 11%.Â
Plus, Zee also faces strict competition from Star India, which has gotten way stronger after its 2017 merger with Disney. So, Zee probably decided to answer a merger with merger.
If the merger goes through Zee and Sony will have a 33% market share, which is much higher than the 29% market share that Star currently has.Â
Plus, the combined strength of their OTT platforms will also probably give tough competition to Disney+ Hotstar.Â
And Sony will also get a boost in ratings and a bigger market share thanks to this deal.Â
So, a win-win right?
Yes, but what's a love story (or a business merger) without twists and turns?
Enter: Invesco Group, a Zee shareholder.
🥊 The Invesco-Zee Feud
Invesco went all "I object" and didn't want the merger to go through. And it owned an 18% stake in the company. So, without its approval going ahead with the merger would be super difficult.
But why did Invesco want to be a vamp in this situation?
Simple, it wanted to remove Zee Group's CEO.Â
Reason? It was unhappy with the financial irregularities and corporate governance issues.
To be fair, these issues existed. Zee Group was flagged by regulators as well for giving CEO Punit Goenka a 46% salary hike which was much higher than what shareholders approved.
But after much fighting and accusations, Invesco has relented and agreed to the merger. It also doesn't mind Goenka holding on to the CEO position now.
What changed?
Well, according to the terms of the merger, Sony will hold a 52.93% stake while Zee will hold a 47.07%. And according to advisory firms, Sony's leadership has a strong chance to fix all of Zee's corporate governance issues.
This was probably good enough for Invesco.
But if you follow Zee and Sony serials, you probably know that there's still more twists left to this tale.Â
😥 The Competition Problem
Anytime a merger or acquisition is happening, the Competition Commission of India has a major role to play. It needs to check whether the deal would harm competitors or customers in any way.
And CCI feels this deal could do that.Â
After all, Zee+Sony would become the biggest entertainment group in India. And they could exploit this status by charging advertisers more and asking subscribers to pay a higher subscription fee.
Now, both Zee and Sony have pinky promised that they won't be doing this. They even claimed they would give pricing discounts to customers. But the CCI wasn't convinced.
So, Zee has decided to make a sacrifice and reportedly offered to shut down one of its major entertainment channels to ensure the new entity does not have too much power.
But this decision raises a host of other questions:
What channel will Zee shut down?
What will happen to the programs airing on that channel?
Will shutting down just one channel really make a difference? And most importantly…
Will this convince the CCI?
Guess we'll have to wait and watch.Â
⚡ In a line: Zee and Sony’s merger is no less exciting than their shows, with twists and turns but the latest trouble with the CCI may just require them to make a major sacrifice!
💡 Quick question: Will the Zee-Sony merger actually bring the companies at par with Disney Star?
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