Zee, Sony Unlikely To Take Off Flagship Channels To Meet CCI Conditions, Says Elara Capital

The conditional nod for the merger between Zee Entertainment Enterprises Ltd. and Sony Pictures Networks India Pvt. is unlikely to impact any of the flagship channels of the two broadcasters, according to Elara Capital.

The Competition Commission of India approved the amalgamation, according to a tweet by the regulator. The merger specifically involves combination of Zee Entertainment and Sony Group’s Bangla Entertainment Pvt. with Culver Max Entertainment Pvt., an indirect wholly owned subsidiary of Sony Group.

The regulatory nod is subject to the parties carrying out “modifications”.

While the CCI didn’t give details, Elara Capital cited media reports that the broadcasters may have to take certain channels off air to meet the conditions. The detailed order is awaited.

“Since there is no major overlap for the two entertainment majors, it is unlikely that any large flagship channel will be taken off air,” Karan Taurani, senior vice president and research analyst (media, consumer discretionary and internet) at Elara Capital, said in a note.

The two broadcasters hold three flagship Hindi entertainment channels—Zee TV, Sony Entertainment Television (SET) and Sony SAB—along with channels related to vernacular entertainment, films and more, as well as respective OTT platforms.

In terms of viewership share, Zee and Sony as a combined entity are below 40%, except the movie genre, where they hold more than 50%, Taurani said. Both companies will play off each other’s strengths in the advertising segment, he said.

According to Elara Capital, smaller channels catering to niche genres, like rural general entertainment and Bangla channels, are the ones that might be switched off basis each one’s strength. “For example, Sony may switch off its Bangla channel since it holds a minimal share. This in turn would not have a big impact on the overall revenue drivers and earnings.”

Any indication of a flagship urban GEC channel shutting down by either of the broadcasters is a big risk as that drives a reasonable portion of revenues due to higher pricing, Elara Capital said.