Home Entertainment company Zee to Shut Down Channel to Allay CCI Concerns Over Sony Deal

Zee to Shut Down Channel to Allay CCI Concerns Over Sony Deal

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On Friday, Zee proposed to shut down a major general entertainment channel, with a massive 20-30% market share in the general entertainment channel space, in a submission to the Competition Commission of India (CCI ), two people with direct knowledge of the development said on condition of anonymity.

“Zee has agreed to shut down one of its major entertainment channels. The removal of this channel’s business from the scope of the merger will ensure a reduction in the combined entity’s overall market share in certain major regions. This can assure CCI that any monopolistic pricing power of the merged entity is limited and potential audience dominance is contained,” said one of the two on condition of anonymity.

The identity of the channel that Zee agreed to shut down could not be established.

A spokesperson for Zee declined to comment, while an email sent to Sony went unanswered.

This is the first time Zee and Sony have offered a structural remedy, the person said. About a fortnight ago, Sony-Zee submitted a set of “behavioural remedies” to CCI for the deal, which did not include structural changes such as shutting down all channel activity or selling off some channels for reduce the threat of competition.

The move is aimed at allaying CCI’s concern that India’s biggest media merger could give Zee-Sony unprecedented pricing power, which could hurt the prospects of other TV stations in the broadcast industry. Entertainment.

“After an ICC hearing on Thursday, Zee and Sony submitted their ‘remedy’ by filing a rejoinder on Friday (September 30) to the original merger petition that was filed with the ICC a few months ago” , said the first person. .

Subhash Chandra’s Zee merger with Sony Pictures will consolidate at least 92 television channels, including all sports and entertainment channels from both companies, and multiple video streaming platforms under one entity in which Sony will have a majority stake.

Both companies have obtained the approvals of the Securities and Exchange Board of India (Sebi), shareholders and the National Company Law Tribunal, Zee Entertainment and Culver Max Entertainment Pvt. Ltd (formerly Sony Pictures Networks India), but struggled to convince the antitrust regulator that the merger would not affect competition.

Both companies now expect to get the green signal from CCI as they have offered a structural remedy, according to the people quoted above. On September 29, Zee and Sony made a presentation before CCI to address the regulator’s concerns about market dominance.

At the meeting, Zee and Sony pledged not to abuse their dominant market position and to avoid charging above-average fees to advertisers or DTH providers for a certain period after the merger.

In August, CCI, through a notice to the two companies, said their “enormous market position” after the merger would give them “unprecedented bargaining power.”

The regulator was particularly concerned about the impact of the merger on advertiser fees and channel pricing, particularly in the Hindi-language segment.

Shares of Zee Entertainment rose 2.85% to 258.20 on BSE Friday.

In their first attempt to address antitrust concerns, Sony and Zee hinted that the merged entity was willing to offer mandatory price incentives and rebates to all channel distributors, such as broadcast satellite operators directly, on fair and non-discriminatory terms for a certain period after the transaction.

Additionally, Zee and Sony offered to create and operate “independent advertising verticals” for a fixed term.

The final structural remedy could save CCI from ordering a detailed investigation into the impact of the merger, which could delay approval for months.

In December, Sony and Zee Entertainment announced plans to merge their entertainment and sports TV channels, movie assets and video streaming platforms to create a broadcast giant in India to compete with Walt Disney Co.

While Sony is popular among viewers for its sports channels and hit reality shows like Kaun Banega Crorepati hosted by Amitabh Bachchan, Zee is a household TV name in India. It was established in 1992 under the Essel Group by Chandra, often called the “Father of Indian Television”.

In 2019, the founders of Zee had to offload their stake in the company to reduce their debts. And in 2021, with the company prone to a hostile takeover, the merger deal with Sony was struck when Zee’s promoters became embroiled in a board dispute with Invesco, the most major public shareholder of Zee Entertainment.

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