Media groups Sony and Zee have voluntarily agreed to sell three Hindi channels – Big Magic, Zee Action and Zee Classic – to address potential competition concerns arising from their proposed mega-merger deal. They submitted their proposal to the Competition Commission of India (CCI), which approved the deal, subject to certain modifications, on 4 October. More than three weeks after giving the nod to the transaction, the regulator published its detailed 58-page order on Wednesday.
Both groups have agreed to divest Big Magic, a Hindi general entertainment channel, as well as Zee Action and Zee Classic, Hindi movie channels, according to the order. They voluntarily agreed to modify the proposed agreement after the CCI prima-facie considered that the agreement was likely to cause an appreciable adverse effect on competition. When contacted, a Zee Entertainment Enterprises Limited (ZEEL) spokesperson declined to comment. There was no immediate comment from Sony.
Channels must be sold within a specified time or “first sale period”. However, in the version of the order that was made public, the CCI did not disclose this period. Trades exceeding a certain threshold mandatorily require the approval of the CCI, which seeks to ensure fair competition in the market. On October 4, the CCI said it had approved the proposed Zee-Sony merger deal that was announced in September last year. To ensure fair competition in the relevant markets, the regulator has also mandated various requirements to be met by the concerned buyer before purchasing the three channels.
One of the conditions is that the buyer must not be “Star India Private Limited or Viacom18 Media Private Limited (including their respective affiliates)”. The buyer should be independent of, and not affiliated with, the resulting entity and its affiliates. It also should not be a former or current employee or director (or the spouse or child of such employee or director), according to the order. Among other conditions, the buyer should have the financial resources, expertise and incentives to maintain and develop the divestiture as a viable and active competitor of the parties and/or the resulting entity in the relevant market.
The buyer is “unlikely to raise any prima facie competition concerns or risk that execution of the order will be delayed and, in particular, must be reasonably expected to obtain all necessary approvals from the relevant regulatory authorities for the acquisitions and operation of the divested business,” the order said. Sales business refers to three channel sales. The regulator said that in case the channels are not sold in the first sales period, a sales agency will be appointed to sell them.
The parties and/or the resulting entity (as the case may be) will not acquire any interest or the ability to exercise any influence (through holding shares, amending the articles of incorporation or exercising affirmative rights or the right to appoint directors on the board of directors of the approved purchaser) for a period of 5 years from the date of sale of the business being sold acquires a divestiture business or otherwise), for all or part of the divestiture business,” the order said.
The CCI also noted that in the event the parties fail to comply with the proposed voluntary arrangements, the proposed combination will be deemed to have caused an appreciable adverse effect on competition in India. Karan Taurani, media industry analyst and senior vice president at Elara Capital, said the three channels are very small in terms of total revenue. “As per our assessment, the ad revenue contribution from these channels combined would be much less than 5 percent and therefore the overall impact on revenue would be minimal… further, these channels are part of GECs (including urban GECs) and the film genre that contributes approximately 24 percent and 5 percent of advertising (advertisement) spend for the television industry,” he said.
GEC refers to the General Entertainment Channel. He also said that Zee-Sony and Star will continue to dominate the TV advertising segment as both players will have a market share of 27 percent each in advertising revenue. On October 4, the CCI said it had approved the “merger of Zee Entertainment Enterprises Limited (ZEEL) and Bangla Entertainment Private Limited (BEPL) with Culver Max Entertainment Private Limited (CME), subject to certain modifications”.
CME was formerly known as Sony Pictures Networks India Pvt Ltd (SPNI). ZEEL said in September 2021 that it had entered into a non-binding term sheet with SPNI to combine their linear networks, digital assets, production operations and programming libraries.
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