What the Sony/Zee merger tells us about the Indian market

Call My Agent: Bollywood

Marco Ferrarese explores what’s driving India’s $10bn merger between Sony and Zee Entertainment and how it highlights the potential of one of the world’s largest yet most underrated markets.

What happened in August in India, the world’s most populated country, marked the beginning of what many forecast to be a turning point in the history of Asia and the global TV industry.

In a deal nearly two years in the making, Japanese giant Sony Corporation confirmed its intention to merge with Zee Entertainment, India’s largest media group and owner of more than 70 local TV channels, a film studio and a huge catalogue of movies.

While the deal is yet to be formally closed (just today, reports suggested that Sony’s demands for a new CEO of the merged entity could further stall the process), a merger would drive another nail in the coffin of India’s linear broadcast industry in favour of subscription-based video-on-demand (SVOD) and over-the-top (OTT) streaming services.

“If you look at a country’s advancement, the entertainment field expands in the latter half of the development phase, and we’re seeing that now in India,” the CEO of Sony, Kenichiro Yoshida, said in an interview at the company’s headquarters in Tokyo.

Sony understands that India’s TV market can no longer be ignored: the South Asian nation is set to be the world’s third-largest SVOD market after the US and China with 180 million subscriptions expected by 2027, while a valuation of $15bn is predicted by 2030.

According to a 2020 survey by TV monitoring agency Broadcast Audience Research Council, 210 million Indian households own TV sets, a 6.9% increase from the 197 million surveyed in 2018. Even the reach of TV increased by 6.7%, from 836 million in 2018 to 892 million in 2020, and the numbers keep rising.

Made In Heaven

Cross-pollination & competition

The gestating merger has faced numerous hurdles including a painful approval process requiring several regulatory hurdles related to Zee’s shareholders to be overcome. While internal wranglings continue, the new Sony-Zee entity is set to have a $10bn potential, with the Japanese giant indirectly holding more than a 50% interest in the new conglomerate.

Catering to a diverse nation of 1.4 billion people, Sony hopes to replicate in India the huge commercial success it achieved in the US, offering TV shows, animation, films and video games that provide endless cross-pollination opportunities.

Yet a giant market still requires considerable skill to navigate. While Sony and Zee were trumpeting the good news about the merger, one of the company’s main local competitors, OTT streaming service Disney+ Hotstar (which is thus far India’s largest operator with 52.9 million paid subscribers as of 1 April 2023 or a 29% share of India’s 171 million streaming subscriber base), announced that an astounding 12.5 million memberships had been cancelled in the quarter ending June, having lost rights to Indian Premier League cricket.

This is a reminder that, albeit confident, Sony/Zee is entering a crowded and highly competitive space – think of Viacom18, owned by millionaire Mukesh Ambani, which in 2023 merged its two OTT platforms (JioCinema and Voot) and at the end of August secured digital and TV rights to India’s domestic cricket matches for the next five years.

While the market is huge, the impact of global streamers remains somewhat limited. US-based Netflix and Amazon opened Indian branches around 2016: Amazon Prime Video now has about 12.4 million subscribers and has announced investments of 20 billion rupees ($240m) for original Indian content. The streamer offers English content and has been available in six Indian languages since December 2018.

Meanwhile, Netflix in India has secured between 8 and 10 million paid subscribers, according to the Economic Times, despite prices that are rock bottom: a monthly mobile-only Netflix subscription comes in at 149 rupees ($1.79), while Amazon Prime Video starts from 179 rupees per month.

The Night Manager

Pandemic pivot

The crucial point that the Sony/Zee merger really highlights is the dynamic moment of transition that India’s TV and entertainment industry is experiencing, with OTT turning its traditional film-dominated model upside down.

Before the pandemic, billboards plastered with huge Bollywood movie posters were common in any medium to major Indian city. These days, those advertising spaces have progressively switched to promoting TV series, largely because of the rise of OTT streaming services during the lockdowns. This changed consumption patterns dramatically, helping younger generations access more international content, some of which made Bollywood productions look outdated and, consequently, not as fashionable.

Large financial investments in filmmaking shifted to producing episodic TV, especially in the fast-paced Hindi-language content industry, where demand for more drama series skyrocketed amidst a crowded and competitive field.

Scripted formats now have higher budgets compared to their earlier unscripted siblings such as India’s Got Talent, Voice Of India and Bigg Boss – all Hindi-language adaptations of UK and US shows.

There are now Indian versions of numerous western shows, ranging from Netflix’s Call My Agent: Bollywood (produced by Banijay Asia, the joint venture between Banijay and stalwart Indian film producer Deepak Dhar) for Netflix, and The Good Wife and The Night Manager on Disney+ Hotstar.

Adaptations are faster and easier to churn out as they rely on pre-existing formats that help sate the appetites of Indian streamers constantly hungry for new content. But adapting also creates a very inward-looking, limited market – there is little demand for localised Indian remakes (although there is interest from the Indian diaspora), especially when the original versions are still on air in other countries.

To get around this hurdle, there is a growing consensus that more truly original Indian content is required, especially unscripted formats, which can be standalone and perform better in international sales.

Competition & choice

Despite these challenges, India remains home to an incredibly diverse and engaging array of content, particularly scripted. Fierce competition has generated great choice, to such an extent that it may be difficult to navigate the veritable jungle of South Asian content for starters.

For those binging, Netflix and Amazon Prime Video are the most easily accessible international services: the latter has been behind well-received series such as Made In Heaven (2019), a nine-part series about the Delhi netizens who work tirelessly to put on the biggest, most ludicrous Indian weddings, and crime thriller Mirzapur (2018-2020), set in the mafia underbelly of the Indian state of Uttar Pradesh.

Netflix’s most notable Indian series remain Sacred Games and Leila from 2019, the latter a dystopian Indian original that’s slightly influenced by Hulu’s adaptation of The Handmaid’s Tale. Regarding non-fiction, Netflix’s reality TV series Indian Matchmaking (2020) investigates the hyperlocalised Indian tradition of arranged marriage through its modern connotations.

Suppose India will keep developing as an even bigger, stronger, booming economy by 2031, doubling its GDP as predicted by the Morgan Stanley Report 2023. In that case, even its OTT industry will keep refining, eschewing formats in favour of more thoughtful and unique local content.

“We have a lot of stories to tell, don’t ape the west,” said Aashish Singh, formerly with Netflix and currently a producer at Lyca Productions, at the latest Content Hub annual industry summit in Mumbai. “Play with your characters, play with your culture… the world is out there, wanting to watch.”