Television

Movies to boost Zee Telefilm's Q3 FY03 - SSB report

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MUMBAI: A Salomon Smith Barney report has stated that Zee Telefilm's 3QFY03 is likely to see a significant jump in revenues and profitability due to the accounting policy followed in amortization of movie costs. But, the report adds that this strategy is unlikely to engineer a long-term shift in viewer patterns.

Through its successful "Thursday Premier" prime time slot, Zee is generating revenues equivalent to approximately 100 percent of the movie cost in the first viewing while amortizing the cost over 60 months (or license period, whichever is lower). But, Zee Telefilms has had a bad 2QFY03 and will face a tough 4QFY03 due to the World Cup cricket 2003.

The report estimates that a mere 2x jump in viewer ratings could increase profits by over 100 percent in one year. However, given the huge gap between the leader (Star Plus) and Zee, this is unlikely to happen overnight.

The report also mentioned that Zee has over the past two years lost its core channel identity as a family channel - identified by both the masses and the classes. It adds that the frequent changes to its programming lineup (changes in the FPC), redefinition of its target audience and some poor content (Sawal Dus Crore Ka) have exacerbated the problem.

The report reasoned that if Zee had to rebuild goodwill, a strong channel driver program (such as Friends or Who Wants to be a Millionaire?) is needed. More importantly, to break Star's hegemony, attractive programming content across prime-time bands needs to be developed, it adds.

The report also claimed that Zee TV had acquired worldwide satellite broadcast rights for approximately 16 movie properties (cost approx Rs 300 million) to stem the tide of declining share and low ratings.

The report mentioned that the broadcast of these movies (every Thursday from 10 October 2002 to 23 January 2003 as per the current schedule) has been successful in generating significant advertiser interest and stemming the slide in ratings. At a recent AGM, Zee's chairman indicated that based on ad spot bookings, the cost of the movies (plus a small profit) was being recovered in the first showing.

The report also mentioned that this development gives Zee a significant cushion to invest in improving its content and enhancing the overall viewer experience. It also mentions that there have been some recent improvements in the quality of channel promotions and interstitials.

However, the report cautioned that the follow-through has to be an important element of Zee's movie strategy as the movie-based content was unlikely to effect a long-term shift in viewer habits for a general entertainment channel due to issues of cost and scarcity of supply of movie-based content.

The report also added that the rating points of advertisements aired during movie breaks compared to ads aired during top-rated TV serials indicate that it continues to be more cost effective to advertise on regular shows than on movies.

The report mentioned that a cola advertisement on Star Plus generated ratings of 11.61, the same advertisement when aired during Zee TV's Thursday movie slot generated ratings of only 3.57. Movie-based content strategies have been used in the past by all channels to either strengthen their brand (Star Plus 1999-2000) or increase visibility and connectivity (Sony) or to counter falling ratings (Zee TV 1999 and 2002).

The report also mentioned that a key metric to evaluate the success of the new movie strategy was related to the incremental viewer numbers the "Thursday Premier" strategy could generate for Zee's other prime time shows and how sustainable that is through the World Cup Cricket months of February and March 2003.

The report also saw a risk in advertising revenue growth in 4QFY03 as ad spends shift toward sports channels from general entertainment channels.

Zee's new movie strategy, while likely to yield strong revenue growth in 3QFY03, is unlikely to engineer a long-term shift in viewer patterns. Content that attracts viewers on a daily basis in SSB's view is the only strategy to retain viewers and attract advertiser interest.

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