'We will keep aside Rs 10 bn for organic or inorganic growth opportunities' : Zeel MD and CEO Punit Goenka

Punit Goenka is in control of the media empire that patriarch Subhash Chandra built assiduously over almost two decades. He is quick to take decisions, is unruffled by temporary ups and downs, and believes in continuity.

The elder son of Chandra digs deep into the Zee culture, has his own ways of finding solutions and does not hesitate to bet on sports as he takes up the responsibility of shaping Zee‘s broadcasting business.

"I have learnt a lot from my dad. He is no more hands-on. See, he has not called me for over an hour (during the interview). I have my own style," says Goenka, a grin on his face.

Soft-spoken and shy, Goenka is a people‘s man. He backs his senior team, even when certain decisions do not work in the short run.

In an environment of raunchy reality TV shows, he believes in clean content and explains that Zee TV, the flagship channel, is designed for family viewing.

Goenka crafts strategies that focus on profitability; he hardly plays to the gallery.

Under his leadership, Zee ended its 12-year-old rivalry with Star to float a joint venture distribution company named Media Pro Enterprise India. The aim of the JV: to pave the path for consolidation and hasten the need for digitisation in the sector.

In an interview with‘s Sibabrata Das, Zee Entertainment Enterprises Ltd managing director and CEO Goenka talks about the lack of opportunity in the marketplace to make the right purchase, the need to bet on sports broadcasting and to stick to profitability in a high-cost environment.


Zeel is sitting on a cash pile of Rs 14 billion (as of 30 June 2011). Are you looking at acquisition opportunities?

There is nothing that is available today that is fitting our criteria; we see no opportunity in the marketplace for us to make the right purchase. Even in the southern states, we are taking the organic route and patiently building our businesses there.

As a company philosophy, we have decided to keep aside a cash of Rs 10 billion at any stage for organic or inorganic growth opportunities.

But isn‘t this the right time for consolidation in the industry?

Every two years we think the time has arrived for the industry to consolidate. But then something happens and there are more launches. Last time, it was the private equity firms; before that, we had the international strategic investors.

However, for the benefit of the industry, consolidation is the answer. The sector is sized at Rs 300 billion and there are 500 television channels in the country earning an average ARPU (average revenue per user) of $3. That is why we have become an unprofitable industry.

In a drive to consolidate and digitise the industry, Star India and Zee Group recently ended their 12-year divorce to create a distribution company. Has the joint venture been able to shake up the pay-TV market?

It has been three months since the merged entity got formally rolling (on 1 July). Although we have started billing as a joint entity, there are old individual contracts that have yet to run their full cycle. We have over 5000 contracts with cable TV networks individually. So the impact will be felt when we start inking new contracts. There will be no major revenue upside in the short run. The deal will have a deeper impact after 18 months of implementation.

How deep in terms of percentage growth?

Both Star India and Zeel are seeing single-digit growth in subscription revenue from cable TV networks. Our domestic subscription income from cable rose 16 per cent (Rs 3.88 billion) in FY’11, but that included sports. By pooling together the resources of both the partners, we hope to post strong growth and address various anomalies of the analogue market including piracy.

A large part of the deal plays out in analogue cable. In case of DTH, both of us are in any case growing independently.

Given our growth trajectory and contracts, the sports business should break-even in two years. In the worst case scenario, we should be able to turn it around by the middle of FY‘14‘

How painful has been the integration process?

We have had to let go 20-25 per cent of the combined workforce. Some of them, however, have been absorbed inside the network.

Media analysts say Zeel’s share price will get a boost if the sports broadcasting business is hived off and capital raised by offloading equity. Has any investment bank got the mandate to hunt for an investor for the sports business?

We have no capital-raising plans. Zeel will continue to fund the sports business till it turns around. We have taken a long term call and sports broadcasting is a strategic business for us.

When do you expect the sports business to turn around?

Given our growth trajectory and contracts, the sports business should break-even in two years. In the worst case scenario, we should be able to turn it around by the middle of FY’14.

Zeel‘s sports losses for FY‘11 stood at Rs 2.08 billion on a revenue of Rs 4.4 billion (excluding a one-time revenue gain of Rs 700 million as one-time fee for the pre-mature termination of rights for AIFF). So what will drive this to profitability?

Subscription revenue will drive the business to profitability while advertising will be event-led.

Ad revenue is heavily dependent on cricket. And within that segment, it is India cricket. While advertising revenue is cyclical, subscription income is consistent throughout the year.

Zeel has bagged the eight-year Cricket South Africa (CSA) television rights for $180 million. Considering that the earlier five-year rights went for $75 million, isn’t the new price tag on the higher side?

The price is in our comfort zone. It is an inflationary rise and has been one of the most valuable boards for us. By having one of the strategic boards under our belt for a longer term, we are under less pressure.

We get to learn from sources that the Zimbabwe board rights have been retained for $20 million (earlier it had gone for $6 million for four years). But Zeel will be able to give its sports business maximum firepower when it is able to retain the telecast rights for the other three boards – Sri Lanka, Pakistan and West Indies. So will you bid aggressively?

We have not yet signed with the Zimbabwe board, so I can’t comment on that. The other three boards are up for renewal during FY’12 and FY’13. We have done our calculations and will not bid recklessly for these rights. There are boards outside these which are also coming up for grabs.

When is the golf channel getting launched ?

We are awaiting government approval. We are ready to launch the golf channel within 60 days of obtaining the regulatory clearances.

Will Comcast be a partner for the channel?

Earlier Taj Television (which Zeel later acquired) had some sort of an agreement with Comcast for the golf channel. We have decided that we will do it ourselves and completely own it.

When are you launching a full-fledged HD channel in sports?

We are launching Ten Sports in HD format later this month. This will be a full-fledged HD channel and will have varied content from the other channels. So we will have four sports channels (Ten Cricket, Ten Action+ and Ten Sports already exist) by this month-end. We have acquired a slew of properties across different sports such as football and tennis. This has enabled us to launch three different channels and post strong subscription growth.

Are there other HD launches planned?

Zee TV, Zee Cinema and Zee Studio will be launched in HD format soon.

Zeel has posted a measly 0.5 per cent ad growth in the fiscal first-quarter. Do you see the market improving?

On the ad front, we have had a flat first quarter and do not expect to post double-digit growth this fiscal. But we will have a high single-digit growth.

Subscription revenues will continue to have a similar growth trajectory, both on analogue cable and DTH. Our international revenues should stay flat.

International subscription income actually de-grew two per cent in FY’11. Do you have any plans to fix the international business?

The problem is with UK and Europe; the wobbly economy there is affecting our subscriber numbers. We have launched a hybrid channel, Zee Café, in the UK to arrest our degrowth in that market. The content, aimed at the South Asian diaspora, includes cricket and regional fiction shows sub-titled in English.

In the other markets like the US, We are seeing growth.

Is your localisation strategy working?

Zee Aflam has seen reasonable growth and has reached break-even status within three years of operations. But operating in free-to-air markets (FTA) means the channel can grow only at limited speed.

The other experiment we have carried out is in Russia. The audiences there love Bollywood, soaps and dramas. However, it is early days yet.

We are also planning to launch in 3-4 other markets.

Zee TV has slipped to fourth position as Sony Entertainment Television rejuvenated on the back of its big-ticket game show Kaun Banega Crorepati (KBC). Will you change the programming strategy and bring in celebrity-backed reality shows?

There has been a streak of bad launches but it has not convinced us enough to believe that we need to change our content strategy. We are relaunching these slots.

A large part of a particular channel‘s growth still comes from one show. A reality show may bring in spikes but we will wait to see what happens after that concludes. We will not take to celebrity-based reality shows unless we feel that we have a concept that needs to engage them. We are happy with our homegrown formats.

Our prime competitor is Star. And as a network, we are in close competition.

We will be increasing original hours of content on Zee TV from 28 hours to 33 hours per week. There has been some delay in that because we have had a few bad launches and we want to first fix those slots. We have also had a slowdown in the ad market

Will you increase the programming hours of Zee TV as you fight back to regain market share?

We will be increasing our original hours of content from 28 to 33 hours per week. There has been some delay in that because we have had a few bad launches and we want to first fix those slots. We have also had a slowdown in the advertising market.

Zee has kept away from purchasing big movie titles. Will that affect Zee Cinema when Viacom18 launches its movie channel?

With movie acquisition costs touching the roof, we have reduced the number of big title purchases. But we have maintained our 30 per cent share in the genre due to the extensive reach the channel enjoys; we have also wisely worked on our library content. We control 2800 movies.

Big titles give rating spikes but they are first run on GECs rather than on movie channels. The Hindi movie channel genre has become cluttered and unprofitable due to high acquisition costs. But we have stayed profitable.

Star Gold has reduced ad inventory on the channel by 33 per cent and is showing six fresh movies a day. Will you follow suit?

Such a move has to be compensated with an increase in ad rates. In the current market scenario, this may not be easy. But we are working on reducing the ad time on the channel. And don’t forget that Zee Cinema was the first channel to show five fresh movies a day.
Sun TV is under attack from the Jayalalithaa government. With the launch of the state-owned Arasu cable, will you make aggressive investments in the Tamil Nadu market?

With Zee Tamizh, we have a foot in that market. Arasu has got presence in some pockets of the state. It is still early days and we have to wait and see how the market gets impacted. But if we get more distribution, we will get more aggressive.

Isn’t Zee under attack from Star in the Bengali and Marathi regional language markets?

The growth of Star has only expanded the market. In the southern region, we have fortified our position in Telugu and Kannada. Going beyond the Marathi and Bengali and the southern belt, there is no distinct language difference and Hindi still rules. Bhojpuri, for instance, has not met with much success yet. The Punjabi market can see growth once TAM (the television ratings agency) starts reporting Punjab as an independent market. Now it is clubbed with Haryana, Chandigarh and Himachal Pradesh; there is no clear weightage in that market.

Regional news, on the other hand, is easily doable.

Isn’t the news genre too cluttered?

The industry can support 6-7 national channels. With so much of fragmentation, the way forward is serious news.

There should be more stringent norms in this genre as entertainment is also passing as news. We have positioned ourselves as a serious news channel and are seeing decent growth. Unlike other players, we also have a strong pay revenue from our news business.

It is the regional markets that are getting cluttered. The Andhra market, for instance, has seen too many launches. Some national news broadcasters are also having issue over cost structures.

Will you launch an English general news and business news channel or you feel the balance sheet of Zee News Ltd has to further strengthen before you go in for these high-cost launches?

The balance sheet can support these launches. But strategically, we will focus on Hindi and regional news channels. Yes, we have two critical genres left. But we will first fill up the regional space.
Are you looking at expanding through the franchise route?

We will take the franchise route only if editorial content is with us. After all, that is what impacts our brand.
When you started, you were part of the Agrani satellite project. Do you still nurture the ambition of owning a satellite?

Agrani was a good project but the policies were not supportive. Banks also had no clue how satellite funding works. Owning a satellite doesn’t make sense now; it is more feasible to lease transponder space on a satellite.

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