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ZEEL's Punit Goenka on TRAI tariff order impact, FY20 outlook and ZEE5 growth

The broadcasting industry faced four to six per cent channel reach drop due to MSOs revolts.

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MUMBAI: The implementation of the new TRAI tariff order has gone about rather smoothly except for a few errant MSOs, here and there, who have caused a four to six per cent drop in the broadcast industry’s channel reach. Zee Entertainment Enterprises Ltd (ZEEL) also was impacted and hopes to recover quickly in the coming months.

“As an industry, the reach drop has been about four-six per cent (point), different for different genres. For us, in the Hindi genre, we have seen slightly more than the industry drop. But we are confident that in the coming months we will recover this and therefore things should go back to normal,” Zee Entertainment MD and CEO Punit Goenka commented in an earnings call after Q4 results.

Although the new TRAI tariff order rules have made deals simpler, some MSOs are willing to do backdoor deals while most are falling in line. However, ZEEL has shut the backdoor option completely. Even if some MSOs want to put pressure by not including ZEEL channels in the base pack or a-la-carte, the company will not indulge their side deals.

Goenka also added that ZEEL is working with MSOs and DTH companies for joint marketing to the consumers. In the cases where MSOs aren’t agreeing, ZEEL is doing the marketing itself. He added that the industry will have to wait for two to three months to see how the tariff order has changed the game.

“I will only use an example that all the DTH companies have used our pricing and placed us in the bundle that they think is best from the consumer perspective. That gives me the confidence that my pricing is bang on. It’s only errant MSOs who are trying to make additional money because they were paying us lesser than what we deserved, other ones were acting difficult, but which through our content pool and marketing efforts from a B2C basis, I’m pretty confident that we will get it back from them,” he commented on ZEEL’s channel pricing.

While TRAI is considering floating a consultation paper to adjust broadcasting tariffs, Goenka holds the view that any more disruption will have an upheaval effect not only from the industry side also from the consumers’ side. If the clause of 15 per cent capping gets include, it will lead to litigation.

Goenka predicted low double-digit growth in advertising in FY 20 and also added that ZEEL expects to beat the industry growth. On the subscription side, ZEEL’s guidance of low teens still stands but that may be revisited at the end of Q1.

“We are clear that we will be producing a minimum of 72 original series plus movies that have already been factored into our plan. And my guidance for 30%+ margins, factors in all the losses that we intend to incur,” he said about his estimation of ZEE5.

While he was asked why ZEEL is not licensing some of its old content to other platforms for funding direct-to-consumer business, he made it clear that ZEEL would rather have the content on its platform. As ZEEL has made substantial advances of around Rs 690 crore to content producers, this money for content creation is in the right strategy, for not just ZEE5, but cuts across all of its businesses.

When asked about the slowdown in the growth of ZEE5, he commented, “I do not agree that the growth has been slowing down because keep in mind Q4 also has the impact of exams etc. which we have not witnessed in ZEE5, this is the first time we have seen Q4. Important will be to see what happens in Q2 after the IPL and World Cup etc. have passed.”

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