The redrawing of the media map
Last week, two Indian broadcast majors, Sony and Zee, signed what was arguably one of the biggest media deals in India. If all goes well, in 90 days, Sony-zee will become a combined entity with a 28 per cent share of TV viewership, ~14,000 crore in revenue and a decent-sized film and OTT business. That is a big if given shareholder moves to oust current Zee Entertainment CEO Punit Goenka. Nevertheless, if the duo merge, Sony, which is part of the eponymous $82.5 billion giant, will put in $1.57 billion as investment into the new company. That means lots of money for technology (streaming) and content (sports, films and originals).
The deal is bound to egg Viacom18, Sun and even Disneystar to re-think their game. What they buy, who they ally with and how that shapes the ~1.3-trillion Indian media and entertainment market is the stuff that analysts and reporters such as this one, will be gainfully employed with.
But does the redrawing of the Indian media map really begin with this deal? Vivek Couto thinks it began with Rupert Murdoch. The executive director of Singapore-based Media Partners Asia reckons that when Murdoch began the process of selling Fox to Disney in 2017, he set in motion a chain of events that are redrawing the global media map. Its cascading effects are being felt in India since Star was owned by Fox. Across the developed world, broadcast firms are consolidating — through mergers or acquisitions — to build up scale. The idea is to take on the might of the techmedia giants — Google, Facebook, Apple — that are becoming increasingly dominant in the media and entertainment space.
This is where I differ with Couto. To my mind, it began with Netflix. Not when it was renting out DVDS in the 1990s; not even when it began streaming in 2010; but it was in 2013 when it commissioned and “aired” its first “original”. House of Cards was not just a huge success, it created a business in which Netflix is the benchmark, the context, of both consumer experience and revenues. At $25 billion in revenues and over 210 million subscribers, it is the world’s largest pay-driven OTT. (Youtube is the largest by users, at 1.86 billion of them). At the Oscars, Golden Globe or other awards, Netflix’ shows and films are big winners across categories. The best talent goes to Netflix, because it offers creative freedom, money and audiences. Even while Netflix rose, Apple got into TV, Amazon Prime Video started throwing money at shows and Google and Facebook ate away the audience for user-generated content. The big studios (Fox, Disney, Viacom) realised that the game was going to change.
Just like in publishing and music, a new set of companies would increasingly dominate films and TV as well. These include Apple (1.5 billion users, $274 billion revenue), Alphabet (parent of Google and Youtube, over 4 billion users, $183 billion revenue), Facebook (2.8 billion users, $86 billion revenue) and Amazon ($386 billion revenue). If the studios/broadcast majors were to sit in the same room as these firms and bid for the best content and technology, they needed scale. That is when the consolidation began. Murdoch happened to be the first to sell out.
Just when Murdoch was negotiating with Disney, Zee changed hands, thanks to a debt crisis in its holding firm, Essel Group. The promoters, Subhash Chandra and his family, now own just 4 per cent of the company he’s built. Zee, one of India’s largest broadcasters, is a cash-spewing wonder with a dominant hold over audiences across Hindi, Marathi, Tamil, Bangla and other languages. It was an asset waiting to be picked up. As of last week, it seems it has been spoken for.
The battle for dominance in entertainment video will be fought between five firms — Disneystar (part of the $60-billion The Walt Disney Company), Jio, owned by the $92-billion Reliance Industries, the $13-billion telecom giant Bharti Airtel, Google’s Youtube, Netflix, Amazon Prime Video and maybe a couple of others. Every broadcaster under ~10,000 crore in size is busy looking for a partner. Eventually many of the remaining firms are bound to merge if they want to survive in a market full of heavies.
Already there is talk of what Kalanithi Maran’s Sun Network will do. Just like Zee, the ~3,800-crore Sun is profitably well-placed. It has a 10 per cent share of TV viewership. Across languages, geographies and genres, Sun TV remains the most watched channel in India. It would complement the Sony-zee combination (if that comes about) or Viacom18. At one point, earlier in the millennium there was talk of a Sony-sun merger. Viacom18, on the other hand, is a Reliance company and can afford to wait things out.
For now, the redrawing will continue.