The collapse is a blow to both firms’ hopes of better competing with streaming rivals such as Disney, Amazon and Netflix in the booming entertainment market of 1.4 billion people.
The Japanese firm said in a statement that on Monday it “issued a notice terminating the definitive (merger) agreements” by the two companies and that “closing conditions … were not satisfied”.
The merger was agreed in 2021, with Zee chief executive Punit Goenka saying the new outfit would be worth close to US$10 billion with annual revenues approaching US$2 billion.
But closing the deal has been problematic, most recently because Sony reportedly did not want Goenka – who is facing a regulatory probe – to run the combined entity.
In addition, Sony had become concerned about slumping profits at Zee since 2021, a source at the Japanese firm who declined to be named told AFP last week.
India’s entertainment market, worth tens of billions of dollars, is already one of the world’s biggest, while smartphone adoption is forecast to expand further in the coming years.
A collapsed deal will leave Sony and Zee more vulnerable at a time when Reliance (RIL) is negotiating a merger with Disney’s India unit, Bloomberg News reported.
RIL is owned by Mukesh Ambani, India and Asia’s richest person.
Vivekanand Subbaraman, a media analyst at Ambit Capital, said that Zee would now have to “go back to the drawing board” and would be short of capital.
“Sony was going to infuse US$1.3 billion into the merger… Also, from an opportunity standpoint, it wasn’t just TV. It was also digital where Zee was struggling,” Subbaraman told AFP before Monday’s announcement.
He added that Sony LIV, the Japanese firm’s streaming service, had been “more successful” and was a “bigger business” than Zee’s Zee5.
“With reports of the RIL-Disney merger, the competitive landscape and overall market condition looks very different now than before,” Subbaraman added.
Sony said in its statement that it had “engaged in discussions in good faith” to extend a deadline to close the deal but that the discussion period “has expired without an agreement”.
It added that it “does not anticipate any material impact on its consolidated financial results as a result” of the termination.
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