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Zee Ent: The broadcasting pioneer - Views on News from Equitymaster
 
 
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  • Oct 3, 2007

    Zee Ent: The broadcasting pioneer

    Company overview
    Zee Entertainment Enterprises (ZEEL) is a broadcasting company with its operations spread across more than 10 countries worldwide including India, USA, Europe, Africa, Caribbean, Canada, Australia, Middle East and many South Asian countries. The operations of Zee can be classified into three main areas of

    • Content and Broadcasting, which includes production and aggregation of TV software and syndication.

    • Education business, which consists of distance learning programs and ground learning centers, and

    • Film production and distribution, consisting of production, acquisition and distribution of films, animation films and programs.

    Bouquet of channels:
    Its flagship television channel Zee TV, launched in 1992, was the first Hindi general entertainment satellite channel in India. Other television channels include Zee Cinema, the first Hindi cinema channel in India, Zee smile, a comedy channel, Zee Music, Zee Cafe, an English general entertainment channel, Zee Studio, an English Movie channel, Zee Trendz, a channel dedicated to fashion. Zee TV and Zee Cinema are the No. 2 and No. 3 channels in the country (across all Genres). The company is also present in the sports genre through its channel Zee Sports and Ten Sports and has offerings in news in regional languages (Alpha) as well. Besides advertisement revenues, ZEEL generates subscription revenue through its broadcasting operations in India and abroad or through broadcasting licenses.

    Demerger and acquisitions:
    The company demerged into three independent companies Zee News (News Broadcasting), WWIL (MSO operations) and Dish TV (DTH services) last year, to unlock value from its subsidiaries. Zee has also acquired a 50% stake with majority representation in the board of M/S Taj TV Ltd., Mauritius, the company, which owns ‘Ten Sports' channel. The acquisition of a stake in Ten Sports not only gives Zee a strong foothold in the arena of sports broadcasting but also strengthens its operations in the Middle East. The company has a 51% stake in ETC Networks Ltd, which runs a music and a Punjabi regional channel. ETC Networks was recently merged with Zee Interactive Learning Systems Ltd (ZILS).

    Domestic operations:
    The company derives most of its revenues from the broadcasting operations with the key revenue sources overall being advertisement (44%) and subscription (42%). The advertisement revenues are increasing due to the improved channel share and the buoyant growth of the Indian economy. Subscription revenues are expected to be the key growth driver going forward with the rollout of CAS and DTH services in India. Its flagship channel Zee TV is a leading general entertainment channel that provides a mixed bag of programs. Zee TV had on an average approximately 20 shows in the Top 100 across the GEC's in the first quarter of FY08. It has an average channel share of 34% within the general entertainment category.

    International operations:
    The company's broadcasting services reach out to more than 500 m people across the globe. ZEEL beams its channels to over 120 countries through various distribution platforms, and has entered into agreements with DTH and local cable operators in each of the countries in which its channels are distributed. Under these agreements, Zee generally receives subscription or licensing fees from these operators and it retains the advertising revenue it sells on its channels. Zee's principal broadcasting operations are, apart from India, in the USA, Canada, Caribbean, UK, Europe, Africa, Middle East and other parts of South Asia. It is offering 5 channels in the UK, 4 in the US, 2 in the Middle East, 2 in Asia pacific and 3 in Africa

    Zee Entertainment's subscribers
    (Nos. in '000s) Americas Europe Africa Asia Pac Total
    Paying Subscribers 527000 164000 63500 3875000 4629500
    Non paying subscribers 110000 36000 36000 10000000 10182000
    Source: Zee Entertainment Presentation Aug 07

    Future outlook:
    We believe that the rollout of CAS and DTH would help the company in increasing its subscription revenues. India's robust economic growth has an attractive proxy in its advertising industry. The ad spend is a mere 0.4% of the GDP compared to 1.4% in the U S. Advertising revenue of the television industry is projected to grow from Rs 66 bn in 2006 to Rs 123 bn by 2011. However, we also believe that ZEEL would face increased competition in the General entertainment space with the entry of NDTV, UTV, INX Media. Advertisement revenues may get fragmented and operating costs would increase leading to decline in profits.

     

     

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