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Zee Ent.: SWOT Analysis - Views on News from Equitymaster
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  • Oct 10, 2007

    Zee Ent.: SWOT Analysis

    In the previous article we had a look at the demerger process of the erstwhile entity Zee Telefilms and the value unlocked from it. In this article we shall do a SWOT analysis of Zee Entertainment.


    • High viewership ratings: The channels of Zee Entertainment provide good content to the viewers and consequently enjoy high TRP ratings. Its flagship channel Zee TV (a general entertainment channel) had on an average approximately 20 shows in the Top 50 and 30 shows in the Top 100 across the GEC in the first quarter of FY08. It has an average channel share of 34%. The gap between Zee TV and the broadcasting leader Star Plus has been narrowing considerably with the improvement in the gross rating points (GRPs) of the latter. This has enabled the company to hike ad rates leading to a 31% YoY increase in advertisement rates. This also increases its bargaining power with the MSOs and DTH players.

    • Complete bouquet of channels: Zee Entertainment offers a complete bouquet of channels to the viewers and MSOs and the DTH players. Besides its flagship channel 'Zee TV' which is a general entertainment channel, the company has offerings in news, comedy, music, sports and fashion. Further the other group company Zee News has a basket of regional channels and news channels. All these channels enjoy high viewership ratings, which make it necessary for the MSOs and the DTH players to offer them. Other broadcasters such as TV 18, NDTV are at present not offering a complete bouquet of channels, which reduces their bargaining power with the MSOs and the DTH players.

    • High subscription revenues: Zee enjoys high subscription revenues from international as well as domestic subscribers. It is one of the few broadcasters enjoying such high subscription revenues, which cushions it from any slowdown in advertisement revenues. The company's broadcasting services reach out to more than 500 m people across the globe. The company beams its channels to over 120 countries through various distribution platforms. Zee generally receives subscription or licensing fees from the local cable operators and the DTH 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.


    • Lagging behind Star Plus: Its flagship channel 'Zee TV' is the number two channel lagging behind Star Plus though the gap between the two has narrowed down considerably. In the 10 pm to 11 pm slot Zee' s TRPs are less than that of Star Plus while Zee is the clear leader in the 5.00 pm to 8.30 pm time slot and 9 pm to 10 pm time slot. Zee is finding it difficult to garner more viewership ratings in the 10 pm to 11 pm time slot as Star's programmes telecast at this time are very popular. In the media industry the leader gets a disproportionate share of revenues and thus the there is a wide gap between the ad rates of Star Plus and Zee TV.

    • Problem of attrition: The attrition rate in the company has increased. NDTV, UTV, INX Media, TV 18- Viacom combine are planning to enter the Hindi General Entertainment space. Ashvini Yardi, Senior Vice President (Programming), resigned to join competitor Viacom TV 18 combine.

    • Increase in operating costs: The content costs are increasing which is reflected by the fact that Balaji's realizations per hour are increasing even though its TRPs are falling. Besides this the employee costs are also increasing.


    • Benefit from the robust growth of the Entertainment and Media sector: The future of the entertainment industry will be decided on the interplay of a number of factors like consumerism, advertising spend, content, pricing, technology and regulation. According to the FICCI-PWC report on the entertainment and media industry it is estimated that the entertainment and the media industry is set to grow at a CAGR of 18% to reach an estimated size of Rs 1 trillion in 2011. The television industry revenues are expected to grow from the present size of Rs 191 bn to Rs 519 bn by 2011, implying a 22% CAGR over the next five years.

    • Digitisation (rollout of CAS and DTH) means that cable penetration will increase from 70 m homes in 2006 to around 113 m homes by 2011. Subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years. Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. 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. Thus Zee Entertainment has the opportunity to benefit from the projected robust growth of the media and entertainment industry.


    • Slowdown in India's economic growth: Any slowdown in India's economic growth will reduce the demand for the advertiser's products, which may lead to a cut in their ad budgets. This will have a negative impact on its advertising revenues.

    • Increased competition: The Hindi General Entertainment space will become very competitive with the entry of the TV 18 group, UTV, NDTV, INX Media. All these players though initially would make losses but are adequately funded and have a good management team at the helm to cause a potential dent in Zee's market share. A fall in Zee's TRP's will lead to a decline in its advertisement and subscription revenues.

    • Slow rollout of CAS: The government may delay the rollout of CAS. The consumers may show some hesitation in opting for paid channels and many viewers may opt only for FTA channels. Both these factors may cause a dent in the subscription revenues of Zee TV.

    • Declining viewership and revenue share of GEC channels: Zee Entertainment derives majority of its revenues and profits from the flagship channel 'Zee TV' which is a general entertainment channel. However the viewership and revenue share of GEC channels are seen on a declining trend while that of niche channels is increasing.

    % Share of viewership Share of revenues
    Channel genre 2003 2004 2005 2003 2004 2005
    GEC 42 33 34 53 47 39
    Regional 42 41 36 16 20 24
    Niches 16 26 30 31 33 37
    English Entetainment 2 2 1 3 5 4
    Child infotainment 2 3 4 1 2 3
    Hindi movies 4 5 8 7 4 6
    Music/ Lifestyle 1 2 2 2 2 3
    News 2 5 7 13 10 12
    Sports 5 9 8 5 10 9
    Total 100 100 100 100 100 100

    Source: PWC report on Indian Media and Entertainment Industry 2006



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