Vantage | What Zee-Sony fallout means for Indian media landscape

Zee Entertainment, a media conglomerate, is in a race to the bottom. Zee operates television channels, streaming platforms, and production houses. But right now, it's in crisis, with a single-day drop of 31 per cent in the value of its shares. On Friday, Zee shares were flying high; it was almost Rs 244 per share, which is down to Rs 160.This happened because a multi-billion-dollar merger was called off. It all started in 2021. Zee and Sony announced a big move. As you know, Sony is a global media giant. The company is headquartered in Japan. Their Indian arm decided to merge with Zee.It was very big news. Both companies have a sizeable presence in India. So together, they had immense potential. The merger was valued at $10 billion. But on Monday, Sony scrapped it. Sony's official statement says a couple of things: First, merger conditions had not been met, and second, time ran out.They had to close the deal by January 21, but that date came and went, so Sony decided it was time to walk away. As it turns out, they are also suing Zee Entertainment. The claim is almost 90 million dollars in damages. Sony says Zee violated the merger terms. Of course, Zee denies this. They have hinted at legal action of their own.Now this much is in the public domain. But what was happening behind the scenes? A leadership tussle. That's what brought this deal down. There's a big question after every merger: Who will lead the new business entity?Here, the first plan was to appoint Punit Goenka. He's the managing director and CEO of Zee, and also the son of the company patriarch, Subhash Chandra. But last year, a bombshell dropped. India's market regulator, Sebi, began investigating the father-son duo. They suspected misuse of company funds.Basically, money was being siphoned off. Initial reports mentioned the amount to be Rs 200 crore, but the new number is much higher. Between Rs 800 and 1,000 crore, that is 120 million dollars. So last year, Sebi cracked down. They said Punit Goenka could not lead any listed company. That ban was later reversed, but Sony had seen enough. They wanted someone else to lead the merged entity. Someone without baggage.Which is why the merger talks broke down. Zee did propose some alternatives. But Sony did not like any of them, and that brings us to the present day.What does this falling-out mean for the Indian media landscape? Let's look at some numbers. Sony has 31 channels in India. Zee is said to have around 45. Both companies also have their own streaming platforms. Zee5 and Sony Liv. Sony Liv has around 12 million subscribers.Zee5 has around 7.5 million. So a merged entity would have been massive. Especially in the current context.The current size of India's streaming market is $1.2 billion; by the end of 2024, it is projected to be $1.4 billion. And by 2030, it can rise to $3.6 billion.So there is a lot of money to be made, which was the whole idea behind this deal. If the merger had gone through, a major cash infusion would have happened. The new entity would have had 1.5 billion dollars in the bank. Imagine what you could do with it: New and improved content, better interface, and more live sports events. All of that could have been possible. Other companies have also realised this potential, like Disney Hotstar and Viacom 18.Hotstar is the market leader in India. They have more than 42 million subscribers. Viacom 18 owns Jio Cinema. They own the media rights to the Indian Premier League. Also the Indian cricket team's bilateral matches. So the merger makes sense: Entertainment on one side, sports on the other.Sony and Zee also had similar plans to completely revamp their businesses to challenge the big boys of OTT. So it is clearly a setback for the Indian media space. More so for Zee5. They clearly needed an extra boost to find their mojo. It is also a bad look for India Inc. We keep talking about greater synergy between foreign firms and Indian ones, but for that, you need higher standards.You can't have promoters cooking books and siphoning money. You need transparency. You need good corporate practices. Unfortunately, Zee Entertainment failed that test; we can't afford more of these. We need global businesses to respect Indian firms. But, as they say, respect is earned.Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.Read all the Latest News, Trending News, Cricket News, Bollywood News,India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.