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ZEE Entertainment: Getting there?
Mar 28, 2007

A few years ago, the stock market fortunes of Indiaís largest listed media company- Zee Telefilms Ltd witnessed a heavy decline and while there were some macro reasons behind the same, the company was not doing well fundamentally either. The cable business as well as the programming business had started showing poor performance. Rivals had started nibbling away at its market share. The reputation of the business also went down as it ran through many CEOs. Zee TV, the first Hindi satellite broadcaster had its plate of problems full and did not seem in a position to cope up with the challenges. Further, despite being a pioneer of DTH (direct-to-home) service, it was not appreciated and was ignored. Today, broadcasting, cable, DTH, sports, regional languages and every other business seem to have stabilized and are steadily moving ahead. Advertising revenues had shown 43 per cent YoY growth in FY06. From No. 3 in the Hindi general entertainment stakes, Zee TV is now a clear No. 2, ahead of Sony. What more, the management is even confident of breaking Starís six-year long dominance in the prime time space.

Zee has shown its aggressiveness through various joint ventures and acquisitions. Leading ones were the acquisition of stake in ETC and joint venture with Turner. Essel Group is now in the process of demerging Zee Telefilms Ltd and unlock significant value in the process. This will create four separately listed companies: Zee Telefilms (broadcasting and international), Wire and Wireless India (WWIL, cable), Dish TV (DTH) and Zee News (ZNL, news and regional channels). The companies thus formed, will require capital raising of about Rs 15 bn in the next five years. No major capex is however planned for the content business.

As far as the broadcasting business is concerned, Zee currently has 23 channels across genres operating as a network and as per its recent presentation, it has gained the No.1 position in three prime time slots. Zee Cinema continues to be the numero uno movie channel. Much of its success could be attributed to the managementís efforts at understanding the consumer behavior in depth and actually implementing it. Another change in focus made by Zee was to consolidate prime time in Zee Cafť, Zee Trendz and Zee Studio and surpass rivals. These developments bode well for the company, especially in light of the intensifying competition.

The approach in the business house had also changed from being cost-centric to investment-centric. The focus on investing in people and programming has worked well. We however think that the biggest challenge in front of Zee is to maintain stability. Attrition is a huge problem in the media industry and Zee is no exception. While the initial signs are positive, it remains to be seen whether the restructuring and a new found approach is here to stay for the longer term. It will be interesting to see to what extent this reflects in the bottomline growth of the company.

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