Zee-Sony Mega Merger Set To Revolutionise Indian OTT Space

In a significant development especially for the burgeoning Indian OTT space, Zee Entertainment Enterprises Ltd (ZEEL) board has approved the merger with Sony Pictures Networks India (SPNI) in line with its strategy of “achieving higher growth and profitability as a leading media and entertainment company across South Asia”

Sony will hold the majority stake (53%) in ZEEL, while Zee shareholders will retain 47% of the company. As Sony group will have the right to nominate majority directors on the board of the merged entity, Punit Goenka will continue to be the managing director and CEO of the merged entity.

The merger will mean that the combined entity will operate a network of 75 channels — Sony has 26 channels and Zee has 49 channels, creating a network of 26% viewership — 18% from Zee and 8% from Sony channels. After the merger announcement (on September 22, 2021) between Sony and Zee, ZEEL shares rose by 26% achieving a 52-week high.

A Paradigm Shift In The Indian OTT Space

Since the pandemic and the consequent national lockdown in March 2020, India has witnessed significant growth in the usage of OTT (over-the-top) platforms, emerging as a huge competition to the movie theatre as well as television industry.

Zee and Sony have not yet commented on the merger of their OTT platforms, Zee5 and SonyLiv, respectively. Yet, a possible merger is likely to disrupt the OTT space dominated by Disney+ Hotstar, Netflix and Amazon Prime Video, among several others.

SonyLiv, owned under the SPNI entity, had a paid subscriber base of 6.8 Mn in July 2021 along with 45 Mn monthly active users. Further, Zee5 currently has 72.6 Mn monthly active users and around 5 Mn paid subscribers. The possible combined entity will only be behind Netflix and Prime Video with 50% market share and Disney+Hotstar with 17% market share.

The overall OTT market in India is expected to grow at 21.8% CAGR, from INR 4,464 Cr in 2018 to INR 11,976 Cr in 2023, according to PwC’s Global Entertainment & Media Outlook 2019–2023. A September 2019 report by KPMG predicts that India will have more than 500 Mn online video subscribers by FY2023. This would make it the second-largest market after China.