RIL’s calling off deal with Sony, a strategic re-think for digital focus?

Since Jio has become a content powerhouse, Reliance now sees more strategic value in keeping a controlling stake in it

e4m by Dipali Banka & Sonam Saini
Updated: Oct 6, 2020 9:37 AM
Sony Viacom

Until last month, the proposed merger between Reliance-owned Viacom18 and Sony Pictures Networks was on the cards and was likely to be announced mid-September. However, owing to a last-minute strategic re-think by Reliance Industries Limited, the deal has reportedly been called off.

In the last 5-6 months, RIL has strengthened its Jio business and its books through various stake sales and partnerships. The company is now in a strong position to further fortify its telecom business and control the content and distribution pipeline. And logically would not like to let go control of its content assets. In fact, it would like to invest more in its digital assets.

With this deal, Sony Pictures Network (SPN) would have been a majority shareholder with 51-55% interest. This would have further reduced Reliance’s share in the merged Sony-Viacom18 entity. Reliance now reportedly wants to focus on its digital operations and invest behind creating India's No.1 OTT destination as well.

The deal was initiated about a year and a half ago when Reliance was looking at boosting its content pipeline with the Sony tie-up. However, sources said Reliance was no longer keen on a deal especially after the introduction of the fire-to-home strategy that provides access to 12 OTT (over-the-top) streaming apps. “RIL’s balance sheet situation was different 9 months back. It is net debt free now. At this point in time content is very important for them. The deal would have given Sony an upper hand. Reliance would want to play on their own now,” said a media analyst.

The consolidation of Sony and Viacom18 made sense, not just from the synergy perspective but also in terms of simplifying the landscape. Regional strengths of Viacom18 and the kids’ genre were to give Sony a larger pan-India audience base and Sony’s distribution, cinema, and sports line-up would have provided a further fillip to Viacom18 channels. The combined entity after the merger — comprising SPN, Viacom18 and Jio Studios — would have been worth Rs 10,000 crore in revenues owning close to 60 TV channels, two video streaming services, three film studios and two digital content studios, making it an entertainment behemoth. An ideal marriage that would have given a strong competition to other two large entities in the space — Disney-Star and Zee.

There are speculations in the industry on whether renegotiation is still on the cards. “There could be two reasons to call off this deal. Firstly, it could be a negotiation tactic and they might come again back to the table. Secondly, it could be an afterthought that this deal was happening when the whole focus was on Jio, which has now become a huge content powerhouse, and they see more strategic value now in terms of keeping a controlling stake on this. It is off for some time but I think it will come back but now the percentage will change. They might look at the bigger share,” said an industry expert.

Besides television, synergies from the merger of OTT platforms — Sony LIV and Voot — would have brought in a complementary content portfolio resulting in a net increase of unique impressions for the platform, an important currency to draw more advertisers.

We reached out to Sony and Viacom18 but didn't get a response till the time of filing the story. 

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