ZEEL to enter into fixed fee deals with DPOs till TRAI tariff order is implemented

MUMBAI: ZEEL will do fixed fee deals with distribution platform operators (DPOs) till the time Telecom Regulatory Authority of India’s (TRAI) tariff order, which is currently sub-judice, is implemented.

Fixed fee deals ensure that most of the channels of a broadcaster are carried in the base pack of the DPO which will ensure higher reach for channels. For a broadcaster, having a wide reach is very important for maintaining viewership share which in turn helps in securing the ad revenue. The DPOs pay a fixed fee for carrying all the channels of a broadcaster.

The media conglomerate expects its subscription revenue for FY18 to be in low teens. Its subscription revenue had dropped 15.5% to Rs 501.7 crore during the quarter ended 31 December primarily on account of sale of sports business.

ZEEL had also benefitted from early closure of content contracts with distributors, resulting in a high base in Q3 FY17. The company has asserted that the subscription revenue growth is on track despite the short-term blip.

“It is again linked to the uncertainty around the TRAI tariff order and therefore, until the implementation of that, it is pretty much fixed fee deals that are being entered into,” ZEEL MD and CEO Punit Goenka told analysts, when asked about the subscription revenue growth for FY18.

Goenka also said that the monetisation from the digital addressable system (DAS) Phase II and IV will be lower compared to Phase I and II as the monetisation in the last phases is lower compared to the first two phases.

He also said that the subscription revenue will see a spike as and when contracts get concluded.

“On the subscription revenue, yes, as and when we close out the contracts with the distribution partners we will see a bump up in the subscription revenue for domestic business. Our overall annual number guidance should not change, it should remain in the low teens as we have already spoken about,” he noted.

Talking about the 26% domestic ad revenue growth, Goenka said that the growth happened due to the increase in content hours.

“The number of hours that we have increased has had an impact on the ad revenue growth and the only exceptional thing was preponement of Zee Cine Awards,” he said.

Talking about the programming hours, Goenka said that the programming hours has seen an across its bouquet of channels. The programming hours on Zee TV is 32 hours a week which will remain the case till Q4 FY18. The company will look at increasing programming hours on Zee TV further.

“We are already in the midst of planning what our plan is going to be for next year. So if it makes financial sense for us to take from 32 to 35, we will obviously do that. So it is not something that we have fixed at any given point in time. For example, Tamil will move significantly in terms of number of hours next year,” he stated.

Goenka also informed that the free to air (FTA) ad market is almost reaching close to Rs. 2,000 crore. However, the FTA ad market is just 5-6% of the total ad pie.

Queried about the competition in Tamil market with the impending entry of Colors Tamil, Goenka said that only top 3 players make money while the ones below that lose money.

“It is a general rule that I keep talking about that the top two players make money, the third guy breaks even and the fourth guy loses money. That is the order generally that operates in our business. And I expect the same order will prevail even in Tamil Nadu,” he averred.

Goenka also noted that Colors Tamil is not the fourth player there are many more channels that haven’t got noticed.

On ZEE5, Goenka said that the video on demand (VoD) platform will launch in February with enviable breadth of content.

“On Zee5, our strategy is purely content driven, and the breadth of content that we want to offer will be our differentiator compared to anybody else out there. Yes, we will have original content on day one on Zee5. And also, in the application itself we are trying to build in certain features which may not be available on the current OTT platforms,” he stated.

The company will also look at acquiring exclusive digital rights of movies as it wants to be the owner of exclusive content.

“In terms of exclusivity on content, movie content for digital, I think that strategy is going to play out as we speak. I think right now we want to have exclusive content for our digital platform, not just movies but even on television shows. But that is something that we will have to answer as we go along,” Goenka said.

He also pointed out that the movie production business complements the company’s broadcast and digital business.

“On the movie business, if you look at historically, we are buyers of almost 50% of rights that we buy through our various divisions, whether it is satellite, digital, music or overseas etc. I think from that perspective, it was a natural extension for us to get into film production business as well because the risks are that much lower for us and it complements our broadcasting and digital business directly,” he added.

The company had spent Rs 40 crore on 25 years celebration and the network rebranding/ “So, towards the 25-year activity, we have close to Rs. 40 crores that has been spent on the brand refresh and the 25-year celebrations,” Goenka said.

With consumption on TV showing a stupendous growth, Goenka believes that the “digital consumption is all incremental given that 93-94% of our country is still single TV households”.