Noorings: What Should Be Zee’s Next Option?

As the $10 billion merger deal with Sony (now Culver Max Entertainment) fails after nearly two years of deliberations, the big question in the face of looming competition and other challenges is, what next for Zee? The obvious answer for this India-born company seems to be from within India itself

Zee is credited with many firsts including being a pioneer of satellite television in India, the first to move to digitisation and direct-to-home and several such milestones. The ride has not been easy for this homegrown company in the face of competition and the move to merge with Sony was not on a whim. In fact, for both companies, this merger would not only have created a $10 billion entity that could wield the power to bring a clutter-breaking option for audiences in India but would have also laid the foundation for sustained growth in the future.

Unfortunately (or perhaps fortunately if Punit Goenka’s Ram Mandir posts are any indication), the deal that had begun to rear its head on December 22, 2021, was completely terminated on January 22, 2024. 

Why Zee Needs A Partner

The move would have helped Zee consolidate its position and also meet commitments such as the payment of $1.4 billion to Disney for the cricket rights purchase. As per reports, Zee already missed the $200 million cricket fee deadline to Disney this month and the reason cited was ‘cash crunch’.

After Zee reassured its commitment to the Sony merger deal, it managed to salvage some of the loss in its stock price last week but as the deal fell through media analysts state that the stock price may be impacted substantially. As per analyst Karan Taurani of Elara Capital, Zee’s share price could slip towards Rs 130 (including sports losses) or Rs 170 (no sports losses).

While these are some of the near-immediate outcomes, the last two-year period saw many larger changes in the Indian media landscape as well. The most noteworthy among these is Disney once again looking to dilute its stake in India and this time it is in the form of a proposed merger with Ambani's Reliance Industries by combining its Indian media businesses to form an entertainment giant. 

As the media and entertainment space in India sees digital leading the way, OTTs gaining traction and the like, and added to the concerns Zee faces, the media company must find its plan B immediately.

And the obvious option for the company will be in the form of another major, and perhaps taking a lesson from Disney, eyeing suitors from within India itself.

The Potential Suitors

Media ultimately is the only true direct-to-consumer and therefore serves as the conduit for many brands and businesses to engage and connect with consumers. Indian business conglomerates are looking at the media space seriously. Much credit can be given to Reliance Industries for bringing scale into the picture with its several big moves and investments. But even before this, there are examples of the likes of the Aditya Birla Group and more recently Adani Group that have invested in media.

While the jury on independent media is still out, Adani’s majority stake in NDTV can be considered as a move that benefitted both companies. Adani has a sense of what it takes for media companies in India to be profitable. Given its own rollercoaster ride in 2023, media also is one of the options that makes an attractive diversification option for a group such as Adani. Entertainment after all is stocks agnostic. This makes Adani the suitor with the highest potential for Zee.

The Aditya Birla Group, led by Chairman Kumar Mangalam Birla, too is a company to watch out for. Back in 2012, the group had acquired a stake in the India Today Group showing its early appetite for media. The group Aditya Birla Group of Companies also owns Applause Entertainment, a venture of the Aditya Birla Group of Companies, headed by Sameer Nair[1] is a media, content and IP creation studioInstudio headed by media veteran Sameer Nair. In April 2023, Mr Birla also returned to the Vodafone Idea Board as he said he sees ‘hope’ for the business. Content will be a major driver for all telecom companies as seen globally as well as with Reliance and Jio in India too. Zee will be an option worth consideration for the company.

On the same lines, Sunil Bharti Mittal can also be considered a contender in the equation. Airtel is taking several steps to rejuvenate itself and content has been on its offering as well with the likes of Airtel TV. Zee can provide a strong option with credibility and pedigree should Airtel wish to up the ante in this space that seems to be more and more dominated by the Ambanis.

One must also look at billionaire entrepreneur Sanjiv Goenka’s RPSG Group. The RP Sanjiv Goenka Group has interests in several sectors including sports, retail and media & entertainment. With Zee’s current assets and strength, a natural alignment can be forged between the two companies. 

A Long Road Travelled, A Longer Road Ahead

Under the leadership of Subhash Chandra whose vision changed the entertainment industry in India and who has reinvented himself in several avatars, and later the leadership team led by Punit Goenka, who even agreed to step down as CEO for the larger interest of the shareholders in the merger deal with Sony, Zee Entertainment Enterprises has been more than just a media company in India. With Dr Chandra, a fighter and a survivor at the helm, the group has come a long way competing with global players and maintaining a place of its own. The journey ahead seems to be once again filled with challenges. In a strict sense, Zee’s options are not plenty. But the group assured its stakeholders of its commitment indicating that a lot more will unfold in this space sooner than later.