Business Standard

ZEE sells Ten Sports to Sony for $385 mn

With this sale, Zee has essentially exited the sports broadcast business, making the Indian market a duopoly between SPN and Star India

Punit Goenka

Urvi Malvania Mumbai
Marking the second largest deal in media and entertainment in recent times, Sony Pictures Networks India (SPN) has bought media firm Zee Entertainment Enterprises (ZEEL)-owned Ten Sports bouquet of channels for $385 million (approximately Rs 2,600 crore) in an all-cash deal.

With this, SPN has cemented itself as a strong competitor to Star India, increasing its bouquet strength to nine channels in the country. Star India operates eight sports channels under the Star Sports brand.

“The board of directors of the company approved the sale and transfer of the ‘sports broadcasting business’ of the company...to SPN and its affiliates at an aggregate all-cash consideration of $385 million,” ZEEL said.

Sports broadcasting business accounted for Rs 631 crore revenue in the company’s consolidated revenue and net loss of Rs 37.20 crore for FY16. ZEEL had bought Ten Sports from Dubai-based Abdul Rahman Bukhatir’s Taj Group in 2006.

“We have maintained that sports is one of the three pillars of our business and we have been investing significantly in acquiring properties that support this strategy. The sports properties that Ten has - whether it’s the five cricket boards, World Wrestling Entertainment (WWE) or the various tennis events — complement our strategy and so, the acquisition made perfect sense to us,” says N P Singh, chief executive officer, SPN India.

In India, SPN now has access to Ten 1, Ten 1 HD, Ten 2, Ten 3, and Ten Golf HD from the acquired bouquet, in addition to four channels from its own bouquet – Sony Six, Sony Six HD, Sony ESPN, and Sony ESPN HD.

Andy Kaplan, president, Worldwide Networks, Sony Pictures Television, added, “India has been a strong driver of Sony Pictures’ growing networks business for two decades, and sports continue to play a significant role in that growth. The acquisition of Ten Sports, following the launch of Sony ESPN channels, will mean that our Indian networks would reach over 800 million viewers and broadcast many of the most popular and prestigious sporting events in the world.”

ZEE sells Ten Sports to Sony for $385 mn
 
With all eyes on the media rights for the Indian Premier League (IPL), which may be up for grabs next year, SPN would want to beef up the sports portfolio. The five sports channels can be easily rebranded and repackaged in time for the 2017 edition of the Twenty20 league. With these, the SPN sports cluster will have at least nine channels across standard and high definition feeds, giving competition to and, in fact, surpassing Star India’s bouquet of eight channels. More channels will not only mean more advertising inventory on a big-ticket property like the IPL, it will also give SPN the bandwidth to experiment with multi-language feeds, a strategy the network started with the FIFA World Cup in 2014.

Also, the acquisition means that SPN India will be able to enter international markets like Maldives, Singapore, Hong Kong, West Asia and the Caribbean in sports broadcasting. These are markets where Ten enjoys a strong presence.

ZEEL had been present in the sports broadcast business for almost a decade before it decided to pull the plug on the business. It had bought 50 per cent stake in Ten Sports at an enterprise value of $114 million (Rs 800 crore) in 2006 and completely acquired it in 2010. The company has lost around Rs 660 crore in sports business from FY10-16, according to analyst reports. Among its marquee sports properties are WWE and cricket rights of West Indies, South Africa, Pakistan, Sri Lanka and Zimbabwe.  “The non-compete clause is for four years. So, for now, we have exited the sports business. The focus will be to develop verticals across broadcast, live events, digital, films and international business. Part of the process will be deployed towards growing the digital business as of now. We will continue to make investments and when the time comes,” says Punit Goenka, managing director & CEO, ZEEL.

He adds, “Exiting the sports business will not have much impact on our presence in the international markets where Ten had a strong presence. The channels are not bundled there and we have other channels in those markets.”

Vinit Karnik, head, business, ESP Properties, says, “The Sony Pictures Networks India and Ten Sports deal will surely boost Sony’s domestic and international sports portfolio. This is great news from a sporting industry standpoint in India. The acquisition will strengthen SPN’s offering for viewers of cricket, football, WWE etc, complementing their existing portfolio. Additionally, the deal will also bring exciting sporting action such as English Football League Cup, Moto GP, Tour de France, Golfing Tournaments and rights to major sporting events such as the Commonwealth Games and Asian Games to Sony. This will help them build a robust distribution network base as well!”

According to research firm Religare, the sale is above-expected deal valuations of 4x sales. “The sale is positive as (1) the sports business is loss making (FY17E EBITDA loss: Rs 1 bn), and (2) it will boost margins and expand ROEs to mid-to-high 20s (assuming a bulk of proceeds is returned to shareholders). While there will be some reinvestments from this inflow, we do expect Zee to return large part of the cash,” the firm said in its report.

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First Published: Sep 01 2016 | 12:50 AM IST

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