In a startling turnaround the Zee group has announced a curtailment of investments in the broadband project, syndication of programmes for its flagship channel Zee TV and restricting its portal Zeenext.com to offering streaming video (the group had plans for a horizontal portal earlier).
The group had plans to spend almost Rs 37 bn in capital expenditure. A large chunk of this was to be used to upgrade its Siticable network to a hybrid fiber coaxial (HFC) network in 26 cities. The group has whittled this capex plan to Rs 8 bn, with upgradation of the HFC network restricted to 8 cities.
Even earlier, the Zee’s management had admitted to increased competition in the broadcasting sector with new genres of programming including big prize money game shows posing a challenge. The flagship channel, which had 7 programmes among the top 10 programmes in the cable and satellite universe till the last quarter now has only 3 programmes among the top 10.
There have also been pressures on the advertisement rates, which have grown at a relatively slower pace in the last quarter. With programming costs only slated to go up in the future Zee would anyway be required to pump in more money in programming.
The announcement of restricting Zee’s capex also puts a question mark on the group’s plan to make Zee TV, the flagship channel, into pay channel. The rationale for converting Zee into a pay channel was that the enhanced revenue streams that would accrue after Zee TV goes pay would help the company meet the increased programming costs.
However, with Zee losing the 8.30 p.m. prime time slot to competition (read Star TV), it is quite possible that if Zee goes pay but its rivals Star TV and Sony continue to remain free–to–air, this move could mean a further loss of market share for Zee.
Zee’s stock quotes at Rs 283, down from its high of Rs 1,550 in February 2000.
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