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.

Bloomberg News and India’s Economic Times said Sony had sent a termination notice to Zee and that a formal announcement was expected soon.

Sony cited conditions of the merger agreement not being met as the reason for the decision, according to the letter seen by Bloomberg.

The Japanese giant declined to comment when contacted by AFP.

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 billionaire Mukesh Ambani-led Reliance is negotiating a merger with Disney’s India unit, Bloomberg News reported.