Zee must change its strategy to stay afloat following the collapse of the merger plan with Sony

The breakdown of the planned $10-billion merger with Sony’s unit has increased the pressure on Zee Entertainment, one of India’s most popular TV networks. Now, Zee must explore new partnerships or focus on areas like digital entertainment to revive its fortunes.

A Zee-Sony India merger was anticipated to create a media powerhouse in the world’s most populous nation, boasting 90-plus channels across sports, entertainment, and news segments. India’s antitrust body had once acknowledged the potential for “unparalleled bargaining power” with Sony’s global reach.

Despite NCLT approving merger and paving the way for a $10 billion media giant, the Japanese company recently scrapped the deal after two years of negotiations. Sony cited unmet terms in the merger agreement and is seeking $90 million in termination fees through arbitration. Zee, however, denies any lapses and has initiated a legal counter-challenge.

The collapse of the merger is a setback for both , as it could have strengthened their positions in India’s $28-billion media and entertainment industry, especially amidst ongoing merger talks between rivals Reliance and Walt Disney for their India media assets.

The cancellation of the merger and the ensuing legal battle with Sony are expected to significantly impact, intensifying its existing challenges in terms of regulation, business, and finance, according to analysts and industry executives familiar with its situation.

Zee advertising revenues have declined to $488 million for the 2022-23 year, down from approximately $600 million five years ago. Additionally, cash reserves have decreased from $116 million to $86 million during the same period.

Zee informed Indian stock exchanges that Sony is requesting $90 million in termination fees, alleging breaches of their merger agreement and seeking emergency interim relief through arbitration.

Zee refuted all claims by Sony, expressing its intent to take legal action. Sony stated that specific “closing conditions” for the merger were unmet, despite “good faith discussions” with Zee. The companies couldn’t agree on an extension by the January 21 deadline.

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