Sony-Zee and the new media reality

The Sony-Zee merger reflects the new dynamics of an era where content, competition, and distribution are increasingly dominated by big tech

By the end of September this year, India will have a new media player. The Rs 14,851 crore (or $1.8 billion in FY23 revenues) Sony-Zee will be India’s fourth-largest media company behind Google, Meta and Disney-Star. The exact name of the “merged co”, as it is referred to internally, is yet to be decided.

The National Company Law Tribunal (NCLT) passed an order last week allowing the merger. It has been cleared by the Competition Commission of India, and the two main stock exchanges. The NCLT order states unequivocally that the Securities and Exchange Board of India (Sebi) order against (now former) Zee managing director Punit Goenka should have no bearing on the merger. “The scheme of merger was duly approved by 99.997 per cent shareholders of Zee.”

The entertainment arm of the $86 billion (Rs 6.66 trillion) Sony Corp, housed in Culver City, California, had announced a merger with Mumbai-based Zee Entertainment in December 2021. Its torturous route to fruition, however, has been more in the news than what the merger could do.

With close to 80 channels between them and a commanding 27 per cent of total television viewership, Sony-Zee will be a dominant player in the largest segment of India’s Rs 2.1 trillion media and entertainment business — broadcasting. In 2022, broadcasters earned Rs 70,900 crore in ad and pay revenues, according to the Ficci-EY report.

Unlike Sony, Zee has a strong presence across Hindi, Marathi, Tamil, Telugu, and other Indian languages, and a global footprint (170 countries, 41 channels). But it lacks sports and kids programming that Sony and its 26 channels have, along with a strong urban connect. Both of them have a good film business (Piku, Gadar, Raazi, etc), streaming services (Zee5, SonyLIV) with strong numbers and shows/films such as Scam 1992, Rocket Boys, and Sirf Ek Banda Kaafi Hai. How these are eventually merged remains a question mark.

The other big question is, who will run the business since Mr Goenka, who was the consensus candidate for the CEO-ship of the “merged co”, is out for at least eight months going by a Sebi order on Monday? Much of this is internal to the company.

Its formation is another chapter (of the India leg) in the redrawing of the global media map. It began 10 years ago, when Netflix commissioned and “aired” its first “original” House of Cards. At $32 billion (Rs 2.36 trillion) in revenues and over 232 million subscribers currently, Netflix now is the benchmark for streaming success.

In the decade since Netflix “happened”, two things have become clear. Streaming is wonderful for consumers, but it needs way more scale and revenue if it has to make sense as a business for the studios and as a source of income for creators. The glut of superb shows and films that we have been watching is, largely, subsidised by investors or other profitable businesses. Streaming is leading television and film studios down the same path that the internet led publishing and music. They are giving away loads of good stories, shows and films to lure users to platforms they don’t own. As a result, studios, production houses and broadcasters have no control over the revenue or the audience.

Publishers across the world have been left with peanuts while Google and Meta have walked away with anywhere from 50 to 70 per cent of all digital advertising, depending on which market you are talking about. Spotify, Apple Music, and Amazon Music get over 60 per cent of all music subscription revenue. In both cases, platforms claim they share revenues. But in both cases, publishers and music creators do not make what they made in the physical era. Where then is all the growth and money going? Note this is a key point of contention in the ongoing Writers Guild of America strike.

That is the second point. With streaming, social media, short videos, and a dozen other online trends taking off, the internet’s ubiquity in our lives has reached a different level. Chatting, meeting people, gaming, watching video, music, reading, attending prayer meetings — there are very few forms of human activity that don’t happen online. If all media is an extension of some human faculty, as Marshall McLuhan says, then the online world is now an extension of our memories, our consciousness, our self-image and very often, self-worth.

And each of these are being monetised by some gigantic tech platform or the other. Meta (with Instagram, Facebook, WhatsApp), Google (with YouTube), Netflix (video), Spotify (audio), Tik Tok (video) and so on. 

It is these “big tech” firms that now own audiences that were the source of revenue for studios, publishers and broadcasters. Unlike distributors of yore, they have both technology and capital, at a scale that studios cannot even begin to match. Think of it. Google is $280 billion (Rs 20.70 trillion) in revenue, Apple is $395 billion (Rs 29.2 trillion). For perspective — the largest traditional media company, Comcast, is less than half of any of these at $121 billion (Rs 8.9 trillion) in revenue in 2022. More importantly, they are global. If their engines don’t display your song, or film, or short video, there is no way your story can make it online.

In this new market where big tech owns audiences, distribution, capital, and technology, what can publishers, broadcasters or studios do?

Ally, consolidate, build up size — for now. That is what almost every major media firm has been doing since 2017 when Rupert Murdoch made the first move and started the process of selling the entertainment assets of Fox to Disney. Since then there has been a wave of mergers and sell-offs (big and small) globally and in India too. As a result of the Fox-Disney deal, Star became a part of Disney. Viacom18 has partially exited India and the company is now owned by Reliance and a clutch of other investors. PVR Cinemas merged with Inox. Sony-Zee is part of the same trajectory. JioCinema, owned by one of the largest telecom operators, has been throwing money at every story, show, film, or sports property in its bid for scale.

As artificial intelligence gets thrown into this mixture, expect the redrawing to get faster.

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