Viewership Landscape to Evolve Over Next Few Years Say Analyst
Prabhudas Lilladher note is on the heels of the announcement from Zee Entertainment Enterprises (ZEEL) that its board gave an in-principle approval for the merger between Sony Pictures Networks India (SPNI) and ZEEL. “The viewership landscape is likely to evolve in coming years and we expect higher spends on [the] digital side,” Prabhudas Lilladher said in its note on Thursday. In its announcement on September 22, 2021, Zee Entertainment Enterprises said that SPNI will infuse US$1.575 billion (approximately Rs 11,685 crores) into the merged entity for “use in pursuing other growth opportunities.” “The merger is in line with ZEEL’s strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia,” ZEEL said in its release. It was said that the ZEEL shareholders will hold 47.07% of the merged entity post the infusion of the growth capital from SPNI. Further, the remaining 52.93% of the merged entity will be held by SPNI shareholders. Zee Entertainment in an investor presentation in June highlighted that it has 49 channels across 11 Indian languages. Additionally, the company in its first quarter earnings release in August said that it has 17% TV network share across India. In comparison, Sony Group in its first quarter results highlighted that it has over 20 channels in India. The two companies also have their respective OTT apps namely Zee5 and SonyLIV, with Zee Entertainment in August highlighting that it has over 8.02 crores global monthly active users for its streaming platform. Prabhudas Lilladher said that the merged entity will have a cash balance of US$1.745 billion, roughly translating to Rs 12,946 crores. “Utilization of cash balance to grow the digital properties (makes the business future-proof) can turn out to be a key re-rating lever, in our view,” Prabhudas Lilladher said. However, Punit Goenka, chief executive officer at Zee Entertainment in an investor call on September 22, 2021, said that the companies have not finalized its strategies related to OTT platforms. “We have discussed several options with them (SPNI) on the tech side, especially when it comes to the gaming business and the gaming related to OTT,” Goenka said. “But no decision has been arrived at currently.”
Combined OTT Platform to Have ‘Better Bargaining Power” with Telecom Operators
Additionally, Goenka also said “there is a huge opportunity in India both on the digital side, linear side” and also on the sports business. “What [has] transpired in the last six to 12 months is the entire advent of the digital media, that is being seen on the back of the COVID pandemic that we have witnessed,” Goenka said. “And therefore the need for us to really invest more aggressively behind the digital platforms to capture viewership going forward. This is what has made us change our thought process and go out and look at these opportunities.” Dolat Capital, the financial firm engaged in the trading markets, in a note said that the “strategic benefits may unfold” if Zee and Sony merge their respective OTT platforms. “Both Zee and Sony can go to market together with their merged OTT offerings, which are slightly different in content,” Dolat Capital said in a note. “Sony is more into sports and mainstream shows, whereas Zee is into regional web series and hence the content strategy can augur well to create a platform, which have all of [the] offerings.” Dolat Capital said that the combined OTT platform can emerge as the “second largest homegrown OTT” platform in India after Disney+ Hotstar. Further, the firm said that the combined OTT platform can have a “better bargaining power with the distributors” including telecom operators due to the host of content available with these two companies.
