The consistent surge in subscription revenues for the past few quarters at Zee Entertainment Enterprises Ltd. (ZEEL) might have come as a surprise to its competitors and stock market analysts, but for the ZEEL top brass, it’s an affirmation of their strategic goal set many years ago. Their subscription revenues surpassed advertising revenues consecutively in the last two quarters assuring ZEEL management that their long-term goal of achieving 70 percent of total revenues from subscriptions is not far off now.
Subscription revenues made up 51 percent of ZEEL’s total revenues in April-June quarter. That’s an 11 percent jump compared to the same period last year. Its peers now see ZEEL carving out a new business model for the broadcast industry.
Traditionally, broadcasters in India have relied almost entirely on advertising revenues to shore up their numbers. That’s not without reason: Before DTH and digital cable arrived on the scene, subscription revenues came entirely from the unorganised analogue cable industry where under-declaration of subscribers has always been de rigueur. Even though India has about 72 million analogue cable homes today, broadcasters get paid for only five to six million of them. “Six to 7 percent is the national average for declaration of paid cable homes in India,” concurs Atul Das, executive vice president, corporate strategy and business development, ZEEL.
Hence, most Indian broadcasters have focussed on the programming mix and on launching multiple channels to attract more advertising. But ZEEL additionally worked quietly towards increasing its paid subscription base.
Subhash Chandra, chairman at ZEEL, was among the first broadcasters to turn pay in the 1990s. He also became the first to install equipment at the cable operators’ end to know just who were watching his channels. In 1995, the ZEE group entered the cable distribution business by launching Siti Cable (now called Wire and Wireless India Ltd.). In 2004, it launched a DTH company, Dish TV, in an attempt to control the entire value chain of content production, broadcast and distribution.
All these efforts are now paying off, especially when advertising revenues have slumped in the current economic environment. Domestic DTH subscribers of the Zee bouquet of channels alone contributed Rs. 46 crore to the company’s subscription revenue last quarter, an increase of 88 percent over the same period last year.
“Our pursuit of increasing subscription revenues helps us de-risk from the vagaries of economy,” says Das. “Over the next few years, our business model would undergo a shift in favour of subscription-led model,” says Subhash Chandra in the company’s latest financial statement.
A few years ago, ZEEL acquired a 50 percent stake in Taj TV group which owns Ten Sports channel, giving it telecast rights for cricket matches across Sri Lanka, West Indies, Africa, Pakistan and Zimbabwe. This has given the upper hand to Zee when it negotiates with cable operators for carrying the bouquet of its channels and also when it wants to bundle new channels with the existing offerings.
The company set up international distribution of its channels in the UK, the US and the Gulf countries to cater to the Indian diaspora. This move earned it significant forex revenues.
While other broadcasters merely relied upon local agents to distribute their channels abroad, ZEEL set up its own office in foreign markets, sent teams from India and customised its programming to local needs. According to a research report by Centrum Broking, ZEEL is the only broadcaster today present in 167 countries. All international subscribers are fully paid with no scope for under declaration, hence any revenue accrued here adds to the bottom line directly.
The company’s international operation focus has now also inspired some of its competitors. According to sources in the analyst community, SUN TV feels it’s a model to learn from.
Focus on Profits
Although much focus has been laid on subscription, this has not come at the cost of advertising revenue or attention to programming. Strategic moves have been made in the area of core programming to keep operational costs down and yet maintain high TRP (Television Rating Points) for programmes. For instance, ZEEL opted out of buying expensive Bollywood films to air during prime time and instead launched fiction shows that attract audiences for a longer period of time.
“We would rather invest in programmes that lend consistent TRP every week than buy ourselves a one-off uptick in the overall points tally,” says Das.
Operational efficiency has been brought about by focussing on cost control, stricter performance evaluation of staff and many other measures that directly affect the bottom line. “Cost control is in the DNA of our company and we are not in the TRP race if it comes at the cost of profits. We would be happy to be No. 2 in TRP but No.1 in profits. Our foremost aim is to become the most profitable broadcaster,” says Das.
Yet still, Zee TV, its flagship channel, was the highest viewed channel in India in the last week of June 2009 and continues to remain in the top tier of general entertainment channels of the nation.
Few realise that a sustained effort by ZEEL on its subscription numbers shall leave a positive rub-off on its advertising revenues in the near future. Because when more and more paid subscribers opt for the ZEEL bouquet of channels, it lends a vital tool at the hands of ZEEL advertising sales team — assured viewership. And that’s exactly what every advertiser and media planner looks for while choosing the optimal media option for product promotions. Eventually, it will also help ZEEL increase its advertising rates and grab a bigger share of the television advertising market.
(This story appears in the 14 August, 2009 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)