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Eros International to up its game in Chinese market & digital biz post STX merger

The combined company expected to generate around $50 mn in run-rate operating synergies.

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MUMBAI: At a time when production houses across the world are grappling with losses, Eros International (Eros) has announced a merger with US-based STX Entertainment (STX) under a stock-for-stock agreement. In a rare deal, two content houses from Bollywood and Hollywood have joined hands aimed at serving a larger geographical footprint including the US, China and the Indian markets. While both the organisations had difficulties in the recent past, the deal may bring some relief thanks to their complementary nature. Eros International’s digital arm, Eros Now, is also positioned to benefit amidst the raging OTT war.

Although the timing of the deal may look odd, the talks began nearly six months ago. Eros International India CEO Pradeep Dwivedi terms the deal with STX Entertainment as a strategic fit.

In the interview with Indiantelevision.com, he dwells at length on the global content powerhouse the post-merger combined entity is set to create.

“What we really want to do is to take the best of Hollywood and Bollywood, combine these stories and create a big third leg in China. And the China leg is not just about distribution, it is actually about creation of content, leveraging the Chinese talent on the acting side, directing, photography, VFX, production, post production, music, sound, everything. So there's just tons of activity that is going to happen in China as a consequence of this merger, partly because some of our investors do have Chinese origins coming from Hong Kong,” Dwivedi explains the rationale.

He also explains the complementary nature of the two entities making it a win-win deal. While STX has Tencent and Alibaba films as partners on the production side, Eros has a huge distribution model in China including partnerships with Shanghai Film Corporation and China Film Distribution Corporation.

“So at the base level, STX continues to make some movies for the US market, Eros continues to make movies for the Indian market, which becomes almost 60- 70 per cent of our production output. About 20-25 per cent production output will be Indo-US collaboration that Adam Fogelson and I will jointly collaborate and work out as to what we want to do on that. Then there is another 10 per cent layer on top of that which will be all the Chinese movies that we want to make,” he adds.

Moreover, STX does not have an OTT play but will be able to leverage Eros’s existing OTT play. Until now, the former has been selling some content to a few platforms like Amazon and Netflix.

The advantage of the deal is that it allows deciding whatever STX content is getting produced afresh will be on Eros Now or be offered to other platforms. The content can be monetised through Eros Now’s subscriber base first and will also help to increase the subscriber base. On the other hand, the content can be monetised from outside deals as well. “That's really one of the advantages that we have on the OTT side coming from this merger,” he highlights.

“If you look at just the sheer size of the markets that we're addressing with the joint venture, today India already has around 140 crore people. America has another population of 38 crore roughly, and then you add China’s 140 crore on top of that. So what we are ending up with is close to 300 crore of people in the world, which is the potential market between these three countries alone, and I'm not counting other markets like Europe. It's essentially half the population of the world which typically will be covered by the footprint of what we are doing right now,” he points out.

Dwivedi also assures that there will not be any significant impact on manpower. Manpower costs as well as percentage of overall cost base are not outside the industry. While the combined company is expected to generate approximately $50 million in run-rate operating synergies, he says it will come largely on account of financing integrations and process integration.

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