Home / Companies / News /  Zee to shut channel to allay CCI concerns over Sony deal

MUMBAI : Zee Entertainment Enterprises Ltd and Sony Pictures Networks India have offered fresh concessions, including a proposal to shut down a major entertainment channel, to ease competition concerns and secure the antitrust regulator’s approval for their $10 billion merger.

On Friday, Zee offered to shut down a major general entertainment channel, with a massive 20-30% market share in the general entertainment channel space, in a submission to the Competition Commission of India (CCI), two people with direct knowledge of the development said on the condition of anonymity.

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“Zee has agreed to shut one of its dominant entertainment channels. Removing the business of this channel from the scope of the merger will ensure that the merged entity’s overall market share is pruned in certain major regions. This may assure CCI that any monopolistic pricing power of the merged entity is curbed and the potential viewership dominance is kept under check," one of the two people said on the condition of anonymity.

The identity of the channel that Zee has agreed to shut down could not be ascertained.

A spokesperson for Zee declined to comment, while an email sent to Sony remained unanswered.

This is the first time Zee and Sony have offered a structural remedy, the person said. About a fortnight ago, Sony-Zee submitted to CCI a set of “behavioural remedies" to the deal, which did not include structural changes such as shutting down any channel business or selling certain channels to reduce the threat of competition.

The move aims to alleviate CCI’s concern that India’s largest media merger may give Zee-Sony unprecedented pricing power, which may hurt the prospects of other TV channels in the entertainment broadcasting industry.

“After a hearing before CCI on Thursday, Zee and Sony have submitted their “remedy" through the filing of a rejoinder on Friday (30 September) to the original merger application that was filed with CCI a few months ago," said the first person.

The merger of Subhash Chandra’s Zee with Sony Pictures will combine at least 92 TV channels, including all sports and entertainment channels of the two companies, and several video streaming platforms under a single entity in which Sony will have a majority stake.

The two companies have secured approvals from the Securities and Exchange Board of India (Sebi), shareholders and the National Company Law Tribunal, Zee Entertainment and Culver Max Entertainment Pvt. Ltd (formerly Sony Pictures Networks India), but have struggled to assuage the antitrust regulator that the merger wouldn’t affect competition.

The two companies now expect to get CCI’s green signal as they have offered a structural remedy, according to the people cited above. On 29 September, Zee and Sony made a presentation before CCI to address the regulator’s concern over market dominance.

In the meeting, Zee and Sony pledged not to abuse their market dominance and avoid charging higher-than-average fees from advertisers or DTH providers for a certain period after the merger.

In August, CCI, through a notice to the two companies, said that their “humongous market position’’ after the merger would allow them to enjoy “unparalleled bargaining power’’.

The regulator was particularly concerned about the impact of the merger on advertisers’ fees and channel pricing, especially in the Hindi language segment.

Shares of Zee Entertainment rose 2.85% to 258.20 on BSE on Friday.

In their earlier attempt to address antitrust concerns, Sony and Zee suggested that the merged entity was open to offering mandatory pricing incentives and discounts to all channel distributors, such as direct-to-home satellite operators, on fair and non-discriminatory terms for a certain period after the deal.

In addition, Zee and Sony proposed creating and operating “independent advertising verticals" for a specific time.

The latest structural remedy may avert CCI ordering a detailed investigation of the impact of the merger, which may delay approval by many months.

In December, Sony and Zee Entertainment announced plans to merge their entertainment and sports television channels, film assets and video streaming platforms to create a broadcasting behemoth in India to compete with Walt Disney Co.

While Sony is popular among viewers for its sports channels and superhit reality shows such as Amitabh Bachchan-hosted Kaun Banega Crorepati, Zee is a household TV name in India. It was set up in 1992 under Essel Group by Chandra, often termed the “Father of Indian Television".

In 2019, Zee’s founders had to offload their stake in the company to curb debts. And in 2021, while the company was prone to a hostile takeover, the merger deal with Sony was struck when Zee promoters were embroiled in a boardroom conflict with Invesco, the largest public shareholder in Zee Entertainment.

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ABOUT THE AUTHOR

Anirudh Laskar

Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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