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Business News/ Opinion / Views/  Will CCI concerns further delay Sony-Zee Entertainment merger?
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Will CCI concerns further delay Sony-Zee Entertainment merger?

Punit Goenka’s triumphant coup in securing ICC cricket’s TV rights was eclipsed

The good news was overshadowed by a Reuters report on the Competition Commission of India (CCI) raising concerns around ZEE’s proposed merger with Sony. (mint)Premium
The good news was overshadowed by a Reuters report on the Competition Commission of India (CCI) raising concerns around ZEE’s proposed merger with Sony. (mint)

Last week was particularly action-driven for the media and entertainment sector with Disney Star sub-licensing the television broadcast rights of the International Cricket Council’s men’s events to Zee Entertainment Enterprises (ZEE), deemed a masterstroke. Yet the good news was overshadowed by a Reuters report on the Competition Commission of India (CCI) raising concerns around ZEE’s proposed merger with Sony.

The report said the competition regulator noted that the merged entity could hurt competition with its “unparalleled bargaining power" and that a further investigation was merited. Suddenly, ZEE managing director and chief executive officer Punit Goenka’s triumphant coup in Dubai in securing ICC cricket’s TV rights was eclipsed by the CCI note. ZEE’s interest in entering the sports genre is well-known and the broadcaster had also participated in the Indian Premier League media rights bids. In May, the UAE’s T20 League signed a long-term global media rights deal with ZEE to exclusively air the cricket matches on its TV channels and its OTT platform ZEE5, in India and across the world.

For ICC events, Disney Star will continue to be the exclusive rights-holder for streaming all the tournaments on Disney+ Hotstar, while ZEE gets access to the ICC men’s games including the T20 World Cup in 2024 and 2026, the Champions Trophy (2025) and ICC Men’s Cricket World Cup (2027) along with U-19 events.

While television growth rates may be declining, the medium is still critical for the widely popular game of cricket in India. A report by GroupM ESP earlier this year said that in 2021 the sports ad expenditure on TV and digital was 6,018 crore, higher than the pre-covid 2019 numbers. Cricket remains the most popular sport accounting for 94% of the sports AdEx.

Disney Star won the IPL TV rights for 23,575 in June and is hedging its bet on cricket by getting ZEE to pay at least 40%-45% of the $3 billion it has shelled out for the ICC deal. ZEE is happy to grab a piece of cricket which it could later add to the sports portfolio of the merged entity with Sony. But the ICC cricket agreement may have riled competitors, media industry watchers said.

Last year, Sony Group Corp. had announced merging its India unit with Zee Entertainment Enterprises Ltd to combine their TV networks, digital assets, libraries and streaming platforms. Given the spotlight on CCI queries, ZEE maintains they are part of an ongoing dialogue with the regulator.

“For a merger of this type, the CCI is likely to look at the market share of the parties in the production and supply of films, and supply of TV channels," said Abdullah Hussain, partner, DSK Legal.

If the combined market share in some segments is high, it could suggest changes. “Remedies could be structural or behavioural. Antitrust authorities generally prefer structural remedies, but it all depends on the competition concerns identified," Hussain said.

Ritika Ganju, partner, Phoenix Legal agreed: “Structural remedies could be something like disinvestment, that is, you reorganize your entity so your market share comes down. Behavioural remedies could mean some dilution in exclusive deals and any anti-competitive behaviour. For instance, it could mean removing exclusivity in the distribution network."

Ganju said that CCI has, in the past, required structural or behavioural changes to be carried out and the approval has been granted subject these remedies being implemented.

Hussain said that normally, the parties are given a fixed period of time post approval, say, six months, within which they would have to implement any sale to a third party (assuming that’s a remedy). “This third-party sale would also need to be approved by the CCI," he explained.

Will this delay the ZEE-Sony merger? “Some time would be needed to hammer out the detailed terms of any remedy proposal," Hussain said. ZEE had earlier expected the clearances to come through by September-October but while that seems difficult, Ganju said the CCI is known for its speed and efficiency and was working throughout covid.

Karan Taurani, research analyst at Elara Capital said the only implication of the delay would be on the share price and valuation. “The upward movement of these will get delayed," he said.

Media experts said there’s no worry around the merger being blocked. “There is no ground for that. Even with their combined size they would be smaller than market leader Disney Star," said one, declining to be named.

But till it gets the nod, there’s tension in the air for Sony and ZEE.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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Published: 08 Sep 2022, 12:41 AM IST
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