ZEE-SONY MERGER: WIN-WIN

BY Dr Annurag Batra

Russia finally invaded Ukraine on 22nd February, polarising the world into allies of the North Atlantic Treaty Organization (NATO) and its own traditional allies of the Soviet era like Belarus. The cacophony of opinions and views on Russia’s conflict with Ukraine, which has been aspiring for a NATO membership, just turned shriller. Even as media professionals landed in the war zone, rumours and unverified social media posts began to confuse the actual situation on the ground.
Polarisations are not only typical of geopolitics, where vested economic interests decide who takes which side. We have been witnessing polarisations in domestic politics on ethnic or racial lines ? not just in India ? but also in the world’s oldest democracy, the United States of America. And information wars are preceding real conflicts, and then escalating them. Years of cultural and ideological conditioning supplemented with incessant fake news has often fructified into hardline opinions and strategies.
India has abstained from the vote on the United Nations resolution on Russia, citing its traditional ties with Russia, as well as nations aligned with NATO. Geopolitical situations like the Russian aggression on Ukraine test the resolve of nations like India to remain non-aligned in a polarised world. India is obviously choosing to adhere to the doctrine of non-alignment, even as we champion peace.

The Tech Alignment
Beyond the war zone and here at home, India is in the midst of a deep technological acceleration and is aligned with the world – and in some cases even ahead of the curve – in digital adoption across every aspect of life and business. Let’s look at some interesting numbers:

• The US retail market is the largest in the world, where e-commerce made up 16 per cent of it till February 2020, 20 years since retail went digital. In just two years since then, the percentage of e-commerce in retail has jumped to between 26 per cent and 30 per cent. Imagine an acceleration of that kind in just two years since the pandemic struck.
• Let’s also look at India. The country had 10 million retail investors, which has swelled to over 25 million in the past few years, driven by new-age apps such as Zerodha. Technology IPOs have seen great success – at least at listing – driven by these investors. India has recovered faster than any country in the world post-pandemic and I am sure we will remain on target to be a $5 trillion economy before the decade is out.

The Zee-Sony Merger
If there are three words that describe the post-pandemic change in our professional and personal lives, they would be: Contactless, Collaboration and Compassion. India has embraced the 3C economy wholeheartedly – and we are seeing consolidation across the board driven by this new paradigm.
The media and entertainment sector is an important part of the creative economy. In my mind, the Zee-Sony merger is part of this move toward the 3C economy. The merger is a welcome development by all measures. Zee is a home-grown Indian company and its merger with a global heavyweight augurs well for the industry as it is bound to drive consolidation and growth while bringing in enhanced investment into the sector.
It is my hope that the merger will be approved by all stakeholders, policymakers and regulators, and withstand all legal challenges. This is essential if we have to grow the media and entertainment (M&E) industry. We need a broadminded approach across the legal, policy and regulatory framework to enable such a merger and acquisition (M&A) to pave the way for a lively and growth-oriented future for the industry.
I also have a clear view of another perspective here. My belief is that financial investors should not suddenly assume the mantle of strategic partners. If they want to see the creation of value for all stakeholders, they must continue to trust the management and board of the company while establishing appropriate checks, balances and governance controls. This is especially important if the management is always delivering spectacular returns. Strategic support and inputs would certainly assist the management but intervention, where none is required, is a surefire recipe for long-term disaster on the back of some misplaced desire for short-term satisfaction.

Need More Players in M&E
Interestingly, with the Indian Premier League (IPL) rights coming up for bidding ? Sony had these rights earlier but they are now held by Star (Disney India) ? big investments will be needed by multiple players to create a fair, competitive and lucrative field. The Zee-Sony combine will, to my mind, be best placed to be the top challenger in the mix.
The immense opportunities the combined entity will be able to create in terms of employment generation can be transformative for the entire creative ecosystem, which in turn will propel advertiser sentiment and spending.
India is the most conducive market for consolidation in the media and entertainment sector. With behemoths like Google and Facebook scaling up massively in India, we need larger players to take them on. The race for digital advertising will otherwise end up as a two-horse race with maybe one challenger, who may have the financial wherewithal. We need a strong counterbalance to the other bigger players to keep this market vibrant and competitive.
If we look at business in India, home-grown companies such as Amul, Tata, Bajaj and even Zee, have been synonymous with the country’s growth – and we must make every attempt to make sure that they continue to expand and contribute to the economy.
Family-driven companies deliver shareholder value. Empirical research has shown that family-run companies have delivered spectacular returns too. I am certain that the Zee-Sony consolidation led by Zee’s Punit Goenka will create even more value for all stakeholders. This merger will empower family-driven companies to be the anchor of India’s vibrant and fast-growing business environment, attracting foreign investments.
Home-grown Indian giants such as Zee have also contributed to the betterment of various socioeconomic indicators in the last three decades and to the betterment of the country across the board ? be it through employment generation, pioneering the sector, gigantic CSR efforts or their unflinching and deep support to the nation during the pandemic.

The M&E Space Now
If we closely look at the Indian media and entertainment sector, there are only two large players apart from Zee and Sony:

• Star-Disney backed by the might of Disney, which has taken the long-term view and deployed capital toward that goal.
• We also have Viacom where Mukesh Ambani will soon welcome Rupert Murdoch’s son James Murdoch along with his former CEO ? and now business partner ? Uday Shankar. A third big player (at the very least) is needed for democratising and levelling the playing field in the sector. Three big players would augur well for the Indian media and entertainment sector.
  
  While Gautam Adani’s impending entry into media may happen in 2022, Sanjiv Goenka has also been keen on media and entertainment for a long time and has been keen on growing his portfolio. Even as that happens, we need to preserve the Zee legacy and strengthen it by creating a strong Zee-led entity through this merger with Sony. In my view, till more large Indian business houses invest and create larger players in the sector, the prudent approach would be to encourage consolidation to create larger entities that can compete well and continue driving growth in the M&E sector.

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