Daybreak - All you need to know about the Sony-Zee merger

Episode Date: December 20, 2023

Two years ago, Sony’s India unit, Sony Pictures Networks, announced a merger with rival Zee Entertainment Enterprises Ltd. It was supposed to be the country’s biggest entertainment deal.�� The combined entity would own more than 70 TV channels, two video streaming services and two film studios. Ever since, Sony Liv’s subscriber base grew from 18 million to over 33 million.With good original stories and unique non-fiction shows, alongside a strong partnerships strategy, Sony has been able to close the gap on market leaders such as Hotstar. Zee meanwhile has a formidable arsenal of regional content.The combined strengths of the two platforms, Sony and Zee, could turn out to be a serious threat to other OTT giants. But much to their relief, as temporary as it maybe, the merger may not happen after all. Because Sony it is yet to agree to Zee’s 21st Dec merger deadline extension request.Tune in.Also in this episode: X's EU troubles continue Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcast, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor have been working on an ambitious new podcast. It's called Intermission.

We want to tell the Sita Ramancahans, my colleague. secret-source stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of

multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. In today's episode, I am going to catch you up on the Sony and Z merger. And later in the next segment,

I will give you a quick update about how things are not going very well for X or what we know as Twitter in Europe. Beginning with the Sony and Z merger. Ever since we started Daybreak a little more than a year ago, I've been keeping you posted about what is happening in the world of OTT in India. Whether it was how Reliance took away Disney Hot Stars' crown jewel, the IPL streaming rights, or what Reliance decided to do with it later. We even discussed how advertisers were feeling about the whole thing,

and most recently why Disney may want to hold on to Hot Star after all. And now there is some new drama. unfolding. You remember about two years ago, Sony India's unit, which is called Sony Picture Networks, had announced a merger with its rival Z Entertainment Enterprises Limited. It was supposed to be the country's biggest entertainment deal ever. The combined entity would own more than 70 TV channels, two video streaming services, which is Z5 and Sony Live, and two film studios. The $10 billion merger was expected to be complete by the end of this financial year. So while all our eyes had been focused on the biggies, hot star, Amazon, Netflix and Geo,

Sony Live had been quietly at work. It already boasts of an impressive stable of OTT content. Think Rocket Boys, Cam 1992, the Indian edition of Shark Tank and Master Chef even. Its subscriber base too is steadily rising. Meanwhile, Z-5, which is Z's OTT arm, though it does not have that kind of a subscriber base, you cannot ignore the range of original content it has been offering, especially in regional languages. So you can only imagine what would happen to the OTT space in India when the two joined forces. So it's not surprising that the big players were already sitting up and taking notice of this merger.

I mean, if I were a competitor, I would probably feel a bit nervous too, because this merger could change the whole dynamics or the entire status quo of the OTT space in India. But yesterday though, other OTT rivals probably breathe a big sigh of relief, even though it might be temporary for all we know. Turns out, the merger may not happen after all, because Sony is yet to agree to Z's 21st December merger deadline extension request. So today, I thought I'd give you a glimpse of what this deal would mean for the two parties if it came through.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 20th of December. How Hot Star has been losing subscribers and important partnerships because it no more has the rights for IPL, which was the most. money-making machine. At the same time, the entry of Geo Cinema caused even more upheaval in the

OTT sector. But while all of this was going on, Sony released a little truth bomb and it caught the attention of everyone in the OTT space. Sony Live's global subscriber base has almost doubled within a span of a year or so. And guess what? More than three-fourths of these subscriptions are from India alone. Suddenly, OTT executives are waking up to see that Sony Live has become a major player in the sector and that it has the potential to pose a serious threat to even the leading subscription video on-demand leaders like Amazon Prime and Disney Hot Star. An OTT executive told us that just a year ago, they didn't even feel the need to keep a track on Sony Life.

It was one of the sidekicks. but how the tables have turned now. Plus, the whole industry in general is shifting focus from making money through subscriptions towards advertising income. Look what Gio did with IPL. It's streaming the whole tournament for free. But still, subscriptions of course play an important part in the game. So how did Sony Live manage to take it to almost double in a little more than a year?

Stay tuned to find out. In 2021, which shows like Scam 1992, which was based on the life of Harshad Mehta, the mastermind behind a security scam, Sony Life positioned itself as a serious OTT contender. Also, the devastating second wave of COVID-19 was just about fading away and most people were still confined to their homes. So with the streaming rights for the Tokyo Olympics, everything seemed set for the platform to cement its space. place in the OTT industry. But Sony Live was bombarded with complaints about technical snags during the live streaming of the tournament.

Despite this, though, the platform has come a long way from the summer of 2021. It focused on original content and partnerships. Besides growing its subscriber base, Sony Live also successfully increased the number of monthly active users. And this, by the way, is taken as a good indicator of over. overall performance in the OTT sector. A former Z5 executive told us how Sony Live has improved as a product. And even though it still isn't anywhere close to Hot Star or Amazon Prime,

it has done really well in terms of working closely with production houses to build content, empower writers and directors to tell their original stories. The platform has been able to focus on great writing instead of spending money on big names or depending on huge budgets. Another OTT executive told us that with shows like Scam 1992, Good Luck, Rocket Boys and Maharani, Sony Live has been able to build a perception that it is a great place to tell stories.

Not just that. If you really think about it, some of its top shows actually made difficult subjects more accessible to the audience. Scam 1992 was about the stock market. Shark Tank is about the startup ecosystem. system. Rocket Boyce is literally about rocket science. Clearly, the audience seems to be appreciating this. But even great original content can only take one so far. Sony Live has also been

building partnerships to sell subscription bundles through telecom providers and internet service providers like Vodafone Idea, Airtel and Geofiber. They also do it through special offers on e-commerce and retail platforms like Flipcott and Chroma. Partnerships account for half or more than half of Sony Live subscriptions. But let us look at the kind of value that a partnership with Z could actually bring about for Sony Live. Sony Live has one of the strongest non-fiction lineups in the ecosystem. Example, the Kapil Sharma Show, Shark Tank, Kornbeniga Kuropati and Master Chef India.

Now, we also have to take into account at the same time. that executives across the country's most prominent OTT firms are saying that there is a limit to subscriber growth. Even Hot Star is stepping away from only focusing on premium users. And in this context, industry executives see Sony Life's success with ShockTang India, which is the Indian version of the popular US show where startups pitch their businesses as an important win. But as OTT platforms start checking spending on shows and stop mindless, chasing subscribers, Z5's lead is also going to benefit the combined entity. Z is well known for its strength in regional content.

The platform has a smaller subscriber base compared to Sony Live, but it has a greater success in cultivating an audience. And this is quite clear by its higher monthly active users throughout 2022. The relationships built through Z5's regional TV network have helped it get good content for cheap. Another senior OTT executive told us that for Z5, the target audience is not the bandra boy, but someone who is looking for content across multiple regional languages.

This audience may not want to pay for a subscription, but it is a growing and experimental audience. Both Sony Live and Z5 also benefit from their own TV content. So, whatever shape the merged entity takes, the industry executives are already waking up to its potential strength. But now, as I told you earlier, the whole deal is in a limbo. Because there is no word from Sony regarding the deadline extension that Z had requested, which by the way is tomorrow the 21st of December.

Also, I think it is important to note here that there was a bit of a deadlock between Z and Sony regarding who would head the merged entity. Z's CEO, Puneid Koenka, or Sony is MD for its India operations, NP Singh. When the merger was officially announced in December 2021, it was agreed that Goinca would lead the entity. But Sony later became iffy about the whole thing because of a regulatory investigation against Goinca.

Last week, Meta finally launched what many have been calling the Twitter killer in the EU, its Threads app. Even though the new platform has seen a big fall in active users since it launched in July this year, Zuckerberg is still insistent that the platform will eventually reach its goal of 1 billion users. And now that it is launched in the EU, it only means bad news for X. And like things couldn't get any worse for the Elon Musk-owned platform, earlier this week, European Commission announced that it is investigating X for allegedly breaking a EU law on misinformation. The law called the Digital Sucing, the law called the Digital

Services Act or DSA came into effect in August this year. It will basically apply to any digital operation which is active in the European Union. The idea is to force these companies to be legally accountable for everything from fake news to propaganda to online shopping scams and also child abuse. If found guilty, a company can be fined 6% of its global income or even face a ban from the European Union. The EU's commissioner in charge of enforcing this law posted on Twitter saying that the move was on the grounds of, and I'm quoting, suspected breach of obligations to counter illegal content and disinformation, suspected breach of transparency obligations and suspective deceptive design of user interface.

The deceptive design of user interface that he is talking about is about the blue tick mark, which Elon Musk decided to do. change and make available to anybody who pays for it. And that is all for today. Before I sign off, here is my question for you. Do you think it is fair to make the blue tick or the verified batch available to any user that pays for it? Send me your answers or thoughts on this at Snigda at the rate the ken.com. It is S&I-GDHA at the rate the hyphenken.com.

If you're listening to this on Spotify, you can also vote on the poll that I have added to the end of the show notes of this episode. Thank you for tuning in and I will catch you again on Friday. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snihda Sharma your host and today's episode was

edited by my colleague Rajiv Sien.