The antitrust body, Competition Commission of India’s initial review, will not risk the merger of Zee Entertainment Enterprises and Sony Pictures Network India, say analysts. CCI’s report rocked Zee’s share price, noting that the merger which will create a $10-billion TV enterprise will potentially hurt competition. However, analysts note that the combined market share for Zee Sony, albeit substantial, is still not enough to warrant the rejection of the merger on grounds of market competition. However, the data also indicates that the merged entity will be the largest broadcaster in India be viewership and ranking of general entertainment channels of the merged entity will be elevated to one in urban and rural geographies.
In its 21-page notice, the CCI said its initial review shows the proposed deal would place the combined entity in a “strong position” with around 92 channels in India, also citing Sony’s global revenue of $86 billion and assets of $211 billion.
“Such apparently humongous market position would enable the combined entity to enjoy an unparalleled bargaining power,” said the CCI in its notice, adding the combined entity could increase the price of channel packages
However, on the counter, Karan Taurani of Elara Capital notes: “Zee-Sony as a combined entity will command an ad revenue share of 28 per cent; which is much below the threshold of 40 per cent, which means there is a low likelihood of an issue on this.”
As per Tuarani across various genres too, Zee and Sony have minimal overlap; further, across genres, they have a viewership share of less than 40 per cent (except for the movie genre wherein it is 53 per cent). For the Marathi genre, viewership share is 45 per cent primarily due to Zee being a market leader there even before the merger.
However, estimates by Elara Securities also conclude that the combined group-wise viewership share of the merged entity will spike to 26.7 per cent, thus beating the market leader Star (18.6 per cent) by a large margin.
Channel rankings may also improve for the merged entity to rank #1 in Hindi GEC (Urban and Rural), Hindi Movies (Urban and Rural) as well as Bangla categories. In Tamil, Telegu, Marathi and Kannada- rankings will remain the same. On the digital front, the broadcaster is really behind market leaders with a market share of 6.1 per cent as per the estimates by Elara Securities.
While experts note that the risk to the merger is low, CCI’s note is likely going to delay the merger. CCI shared its initial review with the broadcasters on August 3. Sony and Zee had 30 days from that period to respond to the probe.