After Sony’s India business pulled out of the merger, ZEE Entertainment Enterprises Limited (ZEEL) is now forced into finding another savior just when a bigger consolidation between Reliance Industries Ltd.–and Disney Star emerges to gobble up most revenue share from advertising.
“ZEEL’s linear TV is bound to face its challenges, and the digital business requires a significant amount of investment to maintain pace with growth rates,” Managing Partner Vivek Menon at NV Capital says, which notes that it is critical for them first to get this mix right.
Elara Capital Brokerage firm noted that ZEEL had shown sluggish performance in terms of growth and profitability over the past two years. “The predicted revenue growth has converged to 2.2% over the financial years FY20-FY24 due to losses in the OTT segment and lower linear TV growth rate, resulting in the EBITDA margin dipping to 10.
In addition, Disney Star had licensed out its TV rights for the 2024-27 ICC cricket tourneys to ZEEL in August of last year as part of a unique deal. Elara expects ZEEL to lose Rs 1,520 crore every year from FY20-24 and beyond due to the high costs of content that will reduce sports ad revenues, making cricket free available on other OTT platforms. The estimated cost of the bundled deal for Disney Star was around Rs 25,000 crore for TV+ digital from 2024-27.
These tournaments will start from the current calendar year. If ZEEL honors the contract, it is going to affect them because there is a very large amount of write-offs involved in this case. Alternately, if they do not honor Disney’s contract, then Zee suffers legally, as per Karan Taurani, who heads Elara Capital Media Analyst and Senior Vice President.
One of the puzzle’s missing pieces was sports for ZEEL, which Sony would have completed had their merger. Given the fact that it has just about Rs 600 crore in cash reserves, Taurani adds Zee’s sports strategy, especially for its digital platform, which looks thin.
Menon adds that the coming days would be full of stumbling blocks on different fronts between which they ought to find a backup plan in terms of white knight assurance.
The white knight was indeed Sony, when their largest shareholder, American firm Invesco, wanted the Goenka family gone. However, with Sony’s formal departure from these deals as well now, ZEEL is once again in the same position, except that it has to battle not only the Reliance-Disney merger but also litigations against Sony.
