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NEW DELHI : A merger of Sony Pictures Networks and Viacom18 Media Pvt. Ltd is likely to be formally announced by mid-August, said three people familiar with the development.

The two companies will begin working together only by the end of 2021. Viacom18 is a 51:49 joint venture between Reliance-owned Network18 and US based Viacom Inc.

The deal, as a result of which Sony Pictures Networks (SPN) will own a majority stake in Viacom, is aimed at providing Reliance with greater control over the Indian entertainment ecosystem and helping it keep the content pipeline going for its distribution networks of DEN and Hathway, both cable service providers and its broadband and Internet service JioFiber.

Sony declined to comment on the deal while Viacom did not respond to Mint’s queries.

“It gives a lot more muscle to Reliance as a distribution-oriented company with this dedicated content pipeline behind them," said one of the people mentioned above. “Entertainment broadcast business is no longer core to RIL. Initially when they had started assembling content business, it was meant for customer acquisition for Jio and for increasing the data usage. RIL has realized that it can manage this with commercial relationships without owning the assets," said an executive at a large audit and consulting company declining to be named.

For SPN the proposed merger with Viacom18 will help Sony gain a much wider footprint in India’s entertainment space. Besides Hindi general entertainment channel, Viacom owns regional language and children’s channels where Sony isn’t strong. The Viacom roster includes channels such as Colors (Hindi, Tamil, Kannada, Marathi, Gujarati etc), MTV, Nickelodeon, among others. “Sony’s overall TV performance is very seasonal. Its marquee TV shows, like Kaun Banega Crorepati, for instance, come once a year," a media analyst said on condition of anonymity.

“If Sony merges its India entertainment business with Network18’s entertainment businesses, the merged entity may have 18-20% market share in overall viewership and about 45% share in Hindi GEC space," said the executive from the consulting company.

Sony’s earlier attempts to venture into the regional TV space failed when it sought to acquire stakes in both Eenadu TV and MAA TV, a bouquet of Telugu channels in 2013.

“Under the new tariff regime of the Telecom Regulatory Authority of India, broadcasters with diverse genres and regional channel portfolios have experienced improved adoption across channel bouquets, particularly in markets with strong affinity for regional and vernacular content," said Mihir Shah, vice-president at research firm Media Partners Asia. “In spite of having a strong presence in popular Hindi and sports segments, Sony lacks regional content. Historically, the company has been a potential acquirer of regional channel assets but launching new regional channels has proved to be challenging and entails higher gestation losses."

A partnership with RIL will not only fill critical gaps in Sony’s channel portfolio but Sony will also have an important ally to scale its sports business in the future, Shah added.

Besides television, the other synergy will be on the two video streaming platforms owned by Sony and Viacom18, SonyLIV and VOOT. Both, media experts say, will now be able to stand up to the might of American players such as Netflix and Amazon Prime Video as well as Disney+ Hotstar. The last mentioned is a key inspiration to the merger, proving how two media conglomerates can help both their consumer properties emerge stronger by coming together.

“One plus one in this business will always be bigger than two. Customers on both sides (SonyLIV and VOOT) are not comfortable paying right now because libraries on both sides are small. There are so many sitting on the fence saying both are not good enough for me," the first person mentioned above said.

Separately, the value generated through synergies between the JV partners will provide RIL a healthy exit. The proceeds raised could be redeployed by RIL to scale its Jio TV platform and create value.

“RIL’s aggressive strategy to gain access and control content by acquiring equity stakes in key domestic media assets has come under pressure. Following the TV18 Broadcast acquisition in 2014, the entity has failed to create meaningful investor value with its market cap appreciating a meagre 18% in six years. RIL now wants to recalibrate its strategy through staged exits from broadcast and content assets, opting instead for JV partnerships in order to strengthen its distribution businesses through Jio TV," Shah said.

SPN recorded a revenue of 6,224 crore in fiscal 2019, while Viacom18’s revenues stood at Rs. 3671.16 crore.

RIL is in the process of restructuring its media and distribution business. On 17 February, RIL announced a “scheme of arrangement", under which TV18 Broadcast, Hathway Cable & Datacom and Den Networks will merge into Network18 Media and Investments.

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