Zee Telefilms

TELEVISION BROADCASTING
INDUSTRY

PGDBM - MARKETING

Done by:
Deepti Bhatia – 5
Scherezade Kotwal- 21
Divya Singh - 44
Pooja Teckchandani – 46
Poonam Tolat – 48
INDEX
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Introduction………………………………………………………………….. 3
Indian television broadcasting industry………………………………… 5
External analysis……………………………………………………………. 6
- Pest analysis…………………………………………………………. 6
- Porters five force 11
analysis……………………………………………. 14
- Swot (gec industry)…………………………………………………… 15
- General entertainment 29
channels…………………………………….. 30
- Advertising in the gec industry………………………………………. 31
- Key success 34
factors…………………………………………………... 36
- Driving forces of the industry…………………………………………
- Strategic groups……………………………………………………….
- What the competitor is doing?.......................................................
Internal analysis…………………………………………………................. 37
- Zee telefilms…………………………………………………………… 37
- Various businesses of zee…………………………………………… 39
- Current strategies adopted by zee………………………………….. 45
- Growth drivers for zee………………………………………………... 54
- Issues facing 64
zee……………………………………………………… 65
- Competitive 71
analysis………………………………………………….. 72
- Swot –
zee……………………………………………………………...
- Future outlook………………………………………………………….
Bibliography……………………………………………………………......... 73

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INTRODUCTION:

Entertainment and Media Industry

The Indian Entertainment and Media Industry has out-performed the Indian
economy and is one of the fastest growing sectors in India. It is rising on the back
of economic growth and rising income levels that India has been experiencing in
the past years. This is significantly benefiting the entertainment and media
industry in India as this is a cyclically sensitive industry and it grows faster when
the economy is expanding. An added boost to the entertainment and media
industry in India is from the demographic point of view where the consumer
spending is rising due to increasing disposable incomes on account of sustained
Rising
%a ge of Increa se in Changing
growth in income young
levels an reduction of personal income
income s pending tax over the last
levels patterns
decade. population

Consumerisation of
Urban India

Increa se in Increa se in Ris ing

num ber of spending aspiration
working powers levels
urbans

Consumption of
Lifestyle Items

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Projected growth rates of the E&M Industry

15
13
11
10
10 9
8
7

0
2004 2005 2006 2007 2008 2009

The current size of the industry as a whole is estimated at US$ 7 billion in

2004 and is expected to grow at a CAGR of 14 per cent to US$ 13 billion by
2009. The Filmed Entertainment and Television segment dominate the industry
India: E&M Industry Constituents
followed by the Print, Radio and the Music segment.

1%
22%
1%
18%
Films
41% Print
50% Music
TV
Radio
38%
26%
2%

1%

Source: PricewaterhouseCoopers Global Entertainment &

Media Outlook
2005-2009

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Inner circle represents shares in 2004 and outer circle represents projected
shares in 2009.

INDIAN TELEVISION BROADCASTING INDUSTRY

The Indian Television Market is on the threshold of a major technological change.
New distribution technologies - such as digital cable, DTH and IPTV – are
planning to hit the market soon and broadcasters and cable operators are
voluntarily opting for addressable cable systems. In fact, all spheres of the
Industry – content, broadcasting, distribution and regulation – are witnessing
technological changes. The Telecom Regulatory Authority (TRAI), which was
appointed as the regulator for the Industry in 2004, has already begun putting
major policy framework in place. In 2005, the government also announced the
Downlinking Policy with the objective of laying down guidelines to regulate
channels beamed into India from outside India. On the content side, the trend of
interactive and niche programming gained further impetus. Broadcasters
launched increasing number of niche channels in order to draw more eyeballs.
Globally, TN on mobile grew by leaps and bounds. And India was no exception to
the rule. TV – enabled mobile handsets are gaining popularity in India.
Broadcasters are tying up with telecom providers – like Bharti, Hutch and
Reliance Infocomm – to provide their channels on mobile handsets. In fact,
Times Now, a news and current affairs channel from Times Group, was first
launched on Reliance mobiles and then on regular television sets.

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EXTERNAL ANALYSIS:

PEST Analysis:
Political

• Conditional Access System.

In 2003, an attempt was made to introduce CAS. As per CAS, the Indian home
would receive two sets of channels:

1. FTA channels - a basic bouquet of channels for which the customer would
pay a flat amount, the pricing for which may be regulated by the Government as
required;

2. Pay channels - for which the customer would pay an amount fixed by the
channel/bouquet owner. All pay channels would be routed through an
addressable system. In the midst of the debate, CAS was finally implemented in
Chennai and in some parts of Delhi. While there were few takers for CAS in
Chennai, many cable operators in South Delhi did not even supply their
subscribers with the required STBs.

To resolve the potential deadlock, the Government of India has brought all
broadcasting platforms under the regulatory ambit of the TRAI and CAS has
been de-notified, pending a clearer regulatory direction from TRAI.

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Views on CAS based services

INTRODUCE 64%
0%
13%
NOT 23%
23%
INTRODUCE
64%
NEUTRAL 0%

NOT 13%
SPECIFIED

Fig 3.2
Source: Industry estimates & PwC Analysis

• The government is planning to pass a bill of the broadcasting services

regulation bill and this bill will cater to regulating the television industry.
The proposed bill will have various implications:

CLAUSE IMPACT

Voluntary CAS Lets the government off the hook on

implementing CAS

Cross-media restrictions Valuation and investment

dampener,several M&A’s will be
undone

Cable and DTH operators limited to Kills any chance of consolidation in

specified number of sunscribers cable,creates incentive to
underdeclare.The mess in cable will
increase

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Formation of Broadcasting regulatory Puts private industry completely under

authority of India (BRAI) government control.

The public service broadcaster could Doordarshan and AIR can own any
be exempt from all provisions amount of media and appropriate any
content from private channels.Cable
operators have toaompulsorily carry
five and not 3 DD channels.

Economic

• TV Production
100% subject to the following conditions:
• All future laws on broadcasting and no claim of privilege or protection by
virtue of approval accorded.
• Not undertaking any broadcasting from Indian soil without Government
approval

• Cable Networks
• FDI limit up to 49 per cent inclusive of both FDI and Portfolio Investment.
Companies with a minimum 51 per cent paid up share capital held by
Indian citizens are eligible for providing cable TV services under the Cable
Television Network Rules, 1994.

• Direct To Home
• Maximum 49 per cent foreign equity including FDI/ NRI/FII. Within the
foreign equity, FDI component should not exceed 20 per cent

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Social

• The government plans to use TV channels to spread social messages as

the reach of this medium is the most compared to the other mediums. For
eg: For a 30 mins serial 13 mins are allotted for ads but now out of these
13 mins 3 mins will be allotted for social ads.

Technological

• Direct to Home Broadcasting

- The Government of India in January 2001 decided to permit Direct

to Home television service in the Ku Band in India, thereby
withdrawing the previous prohibition on the reception and
distribution of television signal in the Ku band.

- DTH enables a television broadcaster to deliver broadcast signals

directly to individual customers using a satellite dish, without
passing through intermediary local cable operators, Broadcasters
use satellites to beam digitally compressed signals that subscribers
receive with a dish. A set top receiver is then used to decode and
decompress the signals received.

- The quality of television signals distributed using the DTH platform

is generally significantly superior to the present form of distribution
through cable. In addition, given that DTH would be accessible
even in remote areas where the cable network's limitations may
make the system expensive or technically unacceptable, more
subscribers will have access to channels and programming through
DTH.

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The principal sources of revenue for television networks are advertisement and
subscription. During the year, share of advertisement in the broadcast industry in
India was higher than that of subscription. In most economies, particularly those
with well developed C&S markets, subscription revenues account for a greater
share of the revenue pie than advertisement revenues. Presently we have two
players in this arena Dish Tv owned by Zee and Tata Sky (partnership between
tata’s and star).

• IPTV is basically a technology that provides television signals via phone

lines rather than through the traditional cable or DTH ( Direct to Home)
route. How and in what form consumers accept IPTV will decide will
determine how the Rs 12,000-odd crore pay TV market will get split
between cable, DTH and IPTV operators. Thus the emergence of IP-TV
poses a substantial threat to DTH providers like ZEE.

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PORTER’S FIVE FORCE ANALYSIS

a. Rivalry

• Growth rate: Size of industry estimated at Rs. 13.8 bn ,Revenue from 43

channels Rs 10.6 bn ,Export of television software Rs. 4.7 mn

• Estimated growth rate over next 5 years 14% CAGR (Ibef foundation)

• Competition of three types:

o Brand competition
o Industry competition
o Form competition .

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BUSINESS FIXED COSTS VARIABLE COSTS

Business News High Low

Entertainment Low High

b. Barriers to entry

• Direct To Home (DTH) introduced. Only Indian companies with a

maximum equity, (including EDI / NRI / OCB / FII) of 49 percent would be
eligible to obtain the license.

• Under the Cable Television Networks (Regulation) Act 1995, foreign

equity participation in cable operating companies is restricted to 49
percent.

c. Threat of Substitute
Performance Trade off with substitute
Cost of Entertainment in IndiaWithout-CAS
Amount a user pays (Rs.)24-hour TV w/>50-100 channels per
DVD rental :125month 150-250
VCD rental :30-80With-CAS
Movie ticket in a metro area for threeSet Top Box Purchase / Deposit 2,000-
hours :25-150 3,500
Music cassette :25-125 24-hour TV w/>50-100 channels per
Radio :free of cost month 180-330
Internet : cheap & easily accessible
(Source: Morgan Stanley Research)

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d. Buyer Power

Advent of DTH technology:

• Dish TV-Zee Telefilms
• Space TV: Star TV and Tata’s

The alliances formed:

• Zee Bouquet
Zee TV, Zee Cinema, Zee News, Zee Music, Zee Business, Zee
Studio, Zee Trendz, Zee Café, Zee Marathi, Zee Punjabi, Zee Bangla,
Zee Gujarati, Zee Telugu, Zee Smile, Zee Premiere, Zee Classic, Zee
Action, Zee Jaagran, ETC, ETC Punjabi, CNN, HBO, Cartoon Network,
CNBC, CNBC Awaaz, Reality TV

• Star
Star Plus, Star Movies, Star Gold, Star News, Star World, Star One,
Star Utsav, Channel [V], National Geographic, Star Ananda, the
History Channel, A1, Vijay TV, Disney, Toon Disney

• Sony One Alliance

Sony TV, Max, AXN, Discovery, Animal Planet, NDTV India, NDTV
24x7, NDTV Profit, MTV, Nickelodeon, Animax, SAB TV, Discovery
Travel & Living, Ten Sports

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SWOT ANALYSIS FOR THE GENERAL ENTERTAINMENT

INDUSTRY

Strengths
• Third largest television market in the world
• Total No. of TV households over 119 mn
• Total No. of TV channels over 350
• Pay Revenues - primary growth driver for subscription revenues
• Growth in number of TV households
• Low penetration of multi-channel colour TVs in rural areas
• Growth in the television software segment
• India has become a major exporter of programming with 4,000 hours of
television shows and 1,600 Bollywood movies

Weakness

• Low switching costs for the consumers.

• DTH you need clearance from the government
• The declining trends of TV viewer ship among youth & house wives.
• Industry needs is an independent body which could be set up under or by
the Indian Broadcasting Foundation (IBF )

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 Time Spent to TV Viewing per day index to
2002
Zee Telefilms
102

100

98

96

94

92

90

88

86

84
2002 2003 2004 2005 2006

Opportunities

• Estimated growth rate of TV industry on an overall basis for next 5 years

18% CAGR
• Pay Revenues - primary growth driver for subscription revenues
• Growth in number of TV households
• Low penetration of multi-channel colour TVs in rural areas
• Subscription revenues will drive the growth in the television segment in the
next five years. As the market matures, premium subscriptions for value-
added services will drive the growth in subscription revenues.
• Increasing the number of C&S homes.
• Major expansion in distribution platforms

a. Demand for content

Today, there are over 300 channels, which are beamed into the Indian skies
and most of such channels are available to all C&S connected homes.
However, this has not discouraged the investor who still believes that there is

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room for more, keeping in consideration the potential to reach the large
number of eyeballs, which no other medium can capture. As a result, around
50 new channels are being added each year. This has given rise to the
serious demand for content for these 24-hour channels. Television
broadcasting companies are continually scouting for content software
companies and due to this imbalance, the programming costs are rising in an
un-proportionate manner. This is a potential opportunity which still needs to
be tapped to its fullest.

b. Regional programming
It is another segment, which needs to be evaluated closely for the
opportunities that it presents. Most of the content on satellite channels today
is either in Hindi or English. When all channels of Star TV went into exclusive
Hindi programming two years back, the demand for local language content
was proved beyond doubt. This aspect now needs to dwell further into
vernacular languages and not just the southern languages where companies
have already started their investments.

c. Dubbed Foreign Content

It is yet another genre where content is limited. If one were to analyze the Top
10 movies in 2004 that were shown on television, three amongst those were
English movies dubbed in Hindi. Further, most satellite channels that have
foreign content have dubbed their programmes in Hindi.

Examples of these include:

• Both channels of Disney (The Walt Disney Group) in India only show
dubbed Hindi programming on a 24-hour basis

• On weekends, the programming of a leading Hindi Film Channel include

only dubbed Hollywood films

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• ESPN-Star Sports, the leading sports channel in India has a dual

Hindi feed to tap the local markets

Balaji Telefilms is the leading producer of content in Indian television segment

with the maximum number of programs in the Top 50 programs of the week for
the last four years. Based on the potential for television content, Star TV had
picked up a 26 per cent stake in the company in early 2005.

Threats

• Excise duty of 16% levied on set-top boxes and customs duty of 15%
brought down to 'nil'
• Content regulation: It was the first time in 2004 that the need for content
regulation was also felt. The I & B ministry is planning to setup a separate
regulator to monitor content on TV channels. How the regulator would be
constituted and what kind of monitoring mechanism would be in place, is
yet to be finalized. Hence a comprehensive media policy is what the
industry needs.
• GEC1 (Star Plus/Zee TV/Sony TV) has fallen from 29.7% in 2004 to
27.7% in 2005 and further to 27% in Jan-Feb 2006.
• Shakeout in the news channel genre
• On One major cricket match / news event is sufficient to bring a drop in
TRP’s of the mass entertainment channels

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GENERAL ENTERTAINMENT CHANNELS

Introduction
‘To really know where you are and where you are going, you should know where
you come from’. The genesis of the Hindi mass entertainment channel would
then take us back to ‘Hum Log’ and ‘Buniyaad’, which took the country by storm
and were some of the earliest successes of the mass- entertainment genre or
rather the beginning of it in India. Then came what was arguably the biggest TRP
chartbuster of all time, Ramayan followed by a dose of Mahabharata
which ensured our generation knew the mythology arguably well. The costume
and wig renting business was further kept alive by historicals like Tipu Sultan.
However, subsequently it has been private C&S television that has set the
agenda. There was the era of Banegi Apni Baat, the eon of ‘Tara’(it refused to
end) and subsequently ‘Amaanat’ on Zee TV, followed by subtler themes like
Saans and Sailaab.
And the next thing we know, it’s the year 2000 and KBC is the new acronym for a
successful comeback, not only for the channel but for the host as well. Then of
course came in the Balaji ‘K’ series that have endured even till the ultimate game
show started airing its sequel. And lately we have seen all the reality shows that
promised to find the best singer, pop-star, movie star, dancer, roadie and what
not!
So while content remains king on the general entertainment channels; the
search is also constantly on for the next big concept cutting across all SECs
and markets (read – a foreign channel source for ‘Indian inspiration’). And with
new avenues for entertainment, not to mention other niche channels eating into
their pie, the task seems to be getting tougher. At the end of the day, the focus is
to bring in the moolah and the audiences. ‘So what could the next big thing be?
And, where does the buck stop?’ – You ask. The point is – it doesn’t. The buck
starts here. Let’s hope the learning from our past helps us to crystal gaze the
future.

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Strategy and the idiot box

In the ad-hoc world of Hindi mass entertainment channels, is there really any
strategy, an order and method in this chaos. More often than not, most
successes are attributed to a trial and error or a ‘gut’ feel in the Indian industry,
but a closer look shows the chaotic order that governs the way the channels are
run. The strategies adopted by the channels till date and beyond may be
summed up if looked through the lens of the Ansoff matrix:

Product Current Products New Products

Market

Current Markets Market Penetration Product

Development

New Markets Market Development Diversification

If we follow Handoff’s framework for product-market expansion in detecting

intensive growth, we could cover almost all ground in terms of strategies
followed by Hindi mass entertainment channels starting from the industry’s
nascent days when market penetration was the primary objective to the present
scenario and what may be expected in the near and distant future where
diversification would add up on the agenda. However, what is described
here is more in a broad sense and the complete dimension of strategy is
only reflected when one looks at programming as well as promotions in this
genre. These are subsequently covered in the paper.

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Market penetration strategies

Under this approach which involves the channels initiative to garner greater
share their current markets with their current products, The channels primarily
concentrated on increased promotion both to the viewers and the potential
advertisers. Moreover, what is noticeable here is the vicious cycle described in
the adjoining figure. Star Plus, who is the clear market-leader, has managed
to get itself into this warp where everything works for the other aspects of
programming and revenue generation through promotions.

Market development strategies

Post the stage of penetration; channels have followed the strategy of going
to new markets with their existing programming as well as expanding the
current market base. Case in point being Zee’s initial foray into the markets
abroad.

Product development strategies

Once the reach was established and widened, channels went in for better
programming. A significant trend in this aspect is the adaptation of
successful international programs to the Indian audiences; be it the various
reality TV shows or the game contests.

Diversification or Integrative growth

A number of channels are adopting this route by venturing into providing
last mile cable connectivity to the audiences through DTH; point in case being
Star Plus (with Tata) & Zee TV.

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In retrospect, sometimes the strategies have been wrong, sometimes the

execution or both, but the game ultimately rests on the channels resources and
capabilities which can make it or as we have seen in the case of Zee – break it. It
may be too soon to write Zee off, but the fact remains that it was once the market
leader and innovator. Today, all it can come up with, it seems, is knee-jerk
reactions (Sawal Das Crore ka) and adaptations of competitors’ successes. In
summation, strategy definitely has a major play in success – the chaos has to
have an order.

Programming for the masses

If you are one who believes that the faults with channels lies in their
programming with lack of innovation and maybe you could teach them a thing or
too about what works – consider this - channels buy an estimated 60,000-plus
hours of original programmes every year. Now factor in news broadcasters,
who account for half, maybe more, of this figure and who make their own
software. That leaves 6,000 producers fighting over about 25,000 hours or,
roughly, four hours per producer. Is it a surprise then that most producers are
slaves to formula programming? Or that ‘innovation’ is a forgotten word?
However, this is not to justify the disasters channels come up with from time to
time, but rather to give that dimension, before we discuss this aspect, of what
works and of how the cog moves in the Indian television industry.

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In our attempt to organise the current market players under the ambit of
programming – we found it to be largely in tandem with their current market
shares (as it should be) and categorised them into the Market-Leader, the
Market-Challenger, the Market-Follower and the Market-Nicher. Our
classification and the reasons behind the anointing are as under (figures in
brackets are market shares in the Hindi speaking markets):

1. Star Plus – the Market-Leader (17.41%): Clearly the leader in the market,
Star Plus has lately been low on innovation in terms of new genres of
programming but initially it started the trend of innovation in programming by
experimenting with a number of genres and having struck the right formula, it
stuck to the same. It has been able to sustain its leadership by
understanding the pulse of the market, high-decibel promotions as well as
maintenance of long term strategic relationship with its content providers
(Star Plus has a stake in Balaji Telefilms).

2. Sony – the Market-Challenger (5.05%): The role of the challenger is to

innovate and keep the leader on its toes; a role that Sony has been able to play
so well. Be it Indian Idol or Jassi, Sony has made sure that Star Plus is always
kept guessing what its next move would be?

3. Zee – the Market-Follower (4.49%): Zee started off as a leader in the market,
but over the years there has been a decline; primarily on account of low
innovation as well as lack of clear leadership. This follower strategy has not paid
off for Zee and it has been desperately trying out new programming formats to
turn the tide.

4. Sahara – the Market-Follower (2.3%): Sahara has been the unfortunate

among the lot; having tried a number of innovative program formats (primarily
using high-budget Bollywood stars), it has not been able to carve out a niche for

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itself in the market and has as a result settled for going with the tide rather than
against it.

5. Sab TV – the Market-Nicher (0.49%): Sab TV has successfully created a

niche for itself as the Indian comedy channel through programs like Wah! Wah! &
Office Office. Also, it has experimented with a number of show formats
including Smruti Malhotra’s Diiil Se… to current affairs programs in the 10pm
time slot. The channel has positioned itself well with the audience; although
major experimentation with the programming may backfire for Sab.

However, apart from the above, another task we undertook was to analyse the
programming of each of the aforementioned players with respect to (channel-
wise weekly schedules were analysed):

The Prime-time slot programming

By this we mean that programming and its innovation or formulation is merely

dependent on the prime-time slots available with the channel. So the
programming approach is ‘first what slot do we want it for’ and then ‘what is
appropriate’.

Though such instances have thankfully reduced due to increased competition,

its existence in programming is undeniable.

Another version of the same, though more logical is the weekend v/s weekday
programming. A key characteristic of which, is complete reliance on Hindi Films
to boost night prime time ratings on weekends. Zee took it a step further and
introduced Thursday Night movie premiers to boost its ratings which was fairly
successful.

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March -2006

Wk of 26/2 Wk of 5/3 Wk of 12/3 Wk of 19/3

Channel Share % Share % Share % Share %
Star tv 56.7 46.8 43.4 49.1
SONY 12.9 20.3 22.1 17.2
Star one 14.7 17 15.7 `4.8
Zee Tv 8.8 10.4 11.4 11.6
Sahara One 4.9 4.1 5.1 5.3
Sab tv 1.7 1.5 2.2 2.1
Source: Tam Research

Strategic programming (to counter or consider the competition’s

programming)

This approach is primarily when programming formulated as a strategic move to

either counter the competitor or bypass his programming strength. For instance,
Sawal Dus Crore Ka was primarily intended to counter KBC head on. On the
other hand, Sony placed Jassi in the 9:30 pm slot so as not to compete against
Star’s ‘Kasautii’ (8:30 pm), Zee’s ‘Astitva’ (9:00 pm) and Star’s ‘Kahani
Ghar Ghar Ki’ (10:00 pm)

Innovation and risk taking abilities in programming

It would be simplest to explain this by way of Star’s example of innovation and

risk-taking by way of introducing the saas-bahu saga with ‘KSBKBT’ etc. and
later they formed a completely new time slot by airing it at 10:30 pm.

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Marketing and Promotions

For the channels, marketing and promotions takes place at two levels:

1. Promoting to the consumer for viewer-ship

The Adoption Process

As per the stages of adoption, it is only a mere 2.5% of consumers who would be
willing to innovate with their consumption patterns. Going by that, any new
program could expect only a small number of viewers to switch in; however,
with channels spending on promotion of their programs through billboards
as well as radio & print apart from TV, the idea is to bring about a shift in the
adoption process and tapping the early adopters to convert to innovators. The
primary insight in this aspect can be highlighted from the example of Star Plus’
KBC – 2.

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Increase in reach & Time spent on KBC 2

30 38
35 36
25
34
20 32
15 30
15
24 28
10 26
29
24
5
22
0 20
2000 2005
Reach % Time spent per viewer

As per a Eikona PR Track study (to understand the impact of PR/Word-of-mouth

on KBC2 viewer ship); of the total 95594 ccms (column centimeters) of editorial
coverage that got generated on Hindi mass entertainment channels and its
respective programs, Star Plus cornered a major pie of 39138 ccms (about 42
per cent).

Clearly, this can be attributed to the impact of on-air promos.

2. Promoting to advertisers/marketers for advertising revenue.

With the increase in overall promotion budgets, it is not unusual to hear of

program-launch parties announcing the entry of a channel into a high-budget
program. Also, the increased size and frequency of advertising on media-
specific sites like agencyfaqs.com & exchange4media.com as well media

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supplements like Brand Equity / Brand Reporter is a harbinger of the increased

spends on luring the advertiser to make the program his promotion vehicle.

To sum up, given the current scenario, we see the Hindi mass entertainment
channels need to evolve in preparation of future competitive challenges; where it
will shift from brand to form competition.

• Brand Competition:

Clearly, there is a great deal of competition that is brewing amongst these

channels with each one fighting to get the eyeballs on their show.

• Industry Competition:

The second level of competition too is evident in the current scenario. One major
cricket match / news event is sufficient to bring a drop in TRP’s of the mass
entertainment channels. Also, regional & niche channels are proving to be major
competitors.

• Form Competition:

This is where we think the competition is heading – Form Competition. With a

large number of consumers moving to different entertainment sources, channels
will have to mature to fight against the same.

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As of now, generic competition seems a far cry.

Star Sports
Aastha
NDTV
SetMax
HBO
Discovery
AXN
Star World
Cartoon Network
CNBC
Regional Channels
Local Cable Channel
Others
Star Plus
Sony TV
Ze e TV
Sahara TV
SAB
Mobile Internet DTH
IP-TV FM Radio PDA
Multimedia PC Films
Music
Press
Home Video-DVD/VCD
Gaming
Multiplexes
Others

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ADVERTISING IN THE GENERAL ENTERTAINMENT CHANNEL

GENRE

FMCG brands have a higher reliance on 'General Entertainment' genre

as seen from the figure above.

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KEY SUCCESS FACTORS

• Programming in the television industry is one of the important factors on

which the success of the program and the channels depends .Star plus
drives on the success of “K” serials.
• The distribution of the channels is also important as DTH has come into
the picture and the role of cable operators would change in the time to
come.
• The amount of advertising revenues that a channel can command on the
weight of its programs and reach. Most of the times it’s the popularity of
the programs bring in the advertising revenue.
• The subscriber base manifests the reach of the channel especially in a
country like India where major population resides in the rural areas. The
subscriber base of Doordarshan is the higest giving it the highest reach in
terme of number of households.

THE MAJOR DRIVING FORCES INFLUENCING THE

BROADCASTING INDUSTRY

30
 Zee Telefilms

Three sides to a coin!!

Its true – and ‘Sholay’ aficionados would agree – that a coin indeed has three
sides. For the future of the Hindi mass entertainment genre, there are three
major factors that would influence the competitive scenario; they are Delivery
deployment (Heads!), Content Innovation (Tails!) and Government
intervention (On the edge!). This is not to say that these are the only factors, but
based on our analysis above, we narrowed down from other factors such
as GDP growth, globalisation, demographic and social trends, channel
proliferation, broadband penetration etc. These are important too, but we have
more or less accounted for each one through a factor, for example –
instead of broadband penetration as a standalone factor, we want to say that
delivery deployment whether it be through broadband, DTH, CAS or through
telephone lines would influence the competitive scenario in the future.
Digital mayhem
Selection Great
Expectations
Overboard
Broad Choice

Try TRAI
Delivery
Content domination
Innovation Narrow
Choice

Divergent Convergent
Delivery Deployment

Degree of Government Intervention

In our framework of the future competitive scenario of Hindi Mass entertainment

channels we have the four quadrants formed by a combination of ‘Content

31
 Zee Telefilms

Innovation’ on the Y axis with the varying degrees of ‘Broad’ or ‘Narrow’

choice, ‘Delivery Deployment’ with the varying degrees of
‘Divergent’ and ‘Convergent’ and the level of government intervention determined
by the size of the circles. Based on extreme possibilities we came up the ideal
scenario of ‘Great Expectations’ which would encompass the best of all worlds.
The key aspects of each state are described in a tabulated manner below:

Selection Try Trai Delivery Digital Great

Overboard Domination Mayhem Expectations
Low delivery Divergent Convergent Convergent In stark contrast
domination delivery delivery delivery to these extreme
states, Great
High Content Narrow Narrow Broad choice
Expectations
Innovation Choice choice
provides a view
Moderate High Moderate Low Govt.
of the future that
Government Government Govt. intervention
is both grounded
intervention; Intervention intervention
in reality and
focus on
primed for
protectionism
radical
-Regional New Players Existing Consumer Transformation.
channels Stifled business created It
prosper models content; incorporates key
protected; everything is elements of
major digital; Free each
companies content extreme state
dominate but
in a modulated
fashion.

32
 Zee Telefilms

STRATEGIC GROUPS

33
 Zee Telefilms

No of Channels
26 15 14

No of regional 5 2 0
channels
Cable distribution Reach of 6.7 m Reach of 2.5m
HHs HH’s Nil

Global reach 1,132,000 subs small Small

Turnover

Co
nt
Star, Sony,
en High
Zee, star
t
one
34
 Zee Telefilms

Sab,
Zoom Sahara

Low

Low High

Variety in Product Line

WHAT THE COMPETITOR IS DOING?

• According to Peter Mukherjee “Today 100 per cent of my business comes

from TV. In the next three years, one-third should come from other
businesses.” This one-third could come from a combination of mobile
entertainment, Internet, outdoor, specialised magazines, licensed

35
 Zee Telefilms

merchandising, home video and retail locations. It could also come from
film studios or television production studios within retail locations. The idea
is to have, over 10 years, as diversified a media pie as possible either by
building these businesses or by acquiring them.

• Each of these businesses — outdoor, Internet, film studios, cafes — has

margins of anywhere between 30 per cent and 50 per cent. “Each can
become a Rs 500 crore-1,000-crore business,” as said by Mr.Peter
Mukherjee.

• Then there is licensed merchandising — something that has not quite

worked in India — that Star is taking a close look at. So far it has created
KBC games or books but mostly for gifting. Now it is looking at tying up
with licensees who have the retail muscle to sell these. Nach Baliye and
Remix, two popular shows on Star One, already had a home video and a
music album release, respectively

INTERNAL ANALYSIS
ZEE TELEFILMS

Zee Telefilms (ZTL) was incorporated in the year 1982. ZTL is the content
supplier and space selling agent for Zee's broadcasting entities, film
production and distribution, Access and Education Business.

36
 Zee Telefilms

………………………………….

Zee is the largest vertically integrated Media and Entertainment Company in

India, which serves more than 120 countries and reaches more than 300
million viewers across the globe in seven different languages. The company
has built a valuable portfolio of television programming assets including Zee TV,
Zee Cinema, Zee Music, Zee News and the regional programming portfolio.
During 2005 the company has launched Zee Sports, Zee Smile, Zee Telugu, Zee
Business, Zee Kashmir (a one hour slot on Zee Punjabi). These network
channels are now available on India's first Direct to Home platform, Dish TV.

Zee is

• The largest producer and aggregator of Hindi programming in the world,

with more than 30,000 hours of original programming in the library.

• One of the most popular entertainment brands in India. It was ranked as

the ninth most popular brand within a decade of its launch.

• The largest MSO in India with an estimated reach of 6.5 million

households

• One of the largest Indian multiple distribution platforms with an estimated

reach of 350 million viewers in over 120 countries globally including USA,
Canada, Europe, Africa, the Middle East, South East Asia, Australia and
New Zealand.

Zee has many firsts to its credit

• First listed media company in India.

37
 Zee Telefilms

• First to launch a Hindi general entertainment channel in India - Zee TV.

• First to launch a Hindi cinema channel in India - Zee Cinema.
• First to launch a 24 hour Hindi News Channel in India - Zee News.
• First to set up MSO operations at a national level – Siticable.
• First to corporatise the Hindi film industry – Gadar.
• First to launch a regional bouquet of channels - Zee Marathi, Zee Punjabi,
• Zee Bangla, Zee Gujarati.

Zee Telefilms Limited is India's first and one of the largest vertically integrated
media & entertainment companies with its operations spread across more than
10 countries worldwide including, India, USA, UK/Europe, Africa, Caribbean,
Canada, Australia, Middle East and many South Asian countries. The Company
was formed in 1982. It had its IPO in 1993 and is currently listed at the Calcutta,
Mumbai and National Stock Exchanges in India. From fiscal 1995 through fiscal
2005 advertisement revenues increased from Rs.1,497 million to Rs. 5,698
million. Zee employs over 2,200 people.

VARIOUS BUSINESSES OF ZEE

1. Content & Broadcasting Content business

Comprises various entertainment and information software related activities

including ideation, development and creation of television programs and

38
 Zee Telefilms

acquisition of film rights for television. Zee provides television programming

for 16 national and 6 regional language channels.

a. Broadcasting - Domestic Operations

Zee Network broadcasts 22 channels in the Indian subcontinent and

several channels worldwide and reaches more than 300 million people
across 120 countries. Its Zee brand is one of the most popular
entertainment brands in India. Zee TV, its flagship television channel
that was launched in 1992, was the first Hindi general entertainment
satellite channel in India. Its other television channels include Zee
Cinema, the first Hindi Cinema channel in India, Zee News, the first 24
hour Hindi news channel in India, as well as Zee Music, Zee Cafe, Zee
Studio, Zee Trendz, Zee Marathi, Zee Bangla, Zee Punjabi, Zee
Gujarati, etc Hindi and etc Channel Punjabi. There are also 4 other 24-
Hour dedicated movie channels, Zee Premier, Zee Action, Zee Classic
and Zee Select apart from a comedy channel Zee Smile and a
religious channel Zee Jagran. Among channels launched during the
year were a Hindi Business channel - Zee Business and a Telugu
General Entertainment channel Zee Telugu. Zee has also very recently
launched a sports channel `Zee Sports'

b. Broadcasting - International Operations

Zee generates subscription revenue through the licensing of the

broadcasting rights of its channels abroad. The Company beams its
channels to over 120 countries through various distribution platforms,
and has entered into agreements with DTH and local cable operators
in each of the countries in which its channels are distributed. Under
these agreements, Zee generally receives subscription or licensing
fees from these operators and it retains the advertising revenue it sells
from its channels broadcasted internationally.

39
 Zee Telefilms

2. Access business

Zee operates across multiple services such as cable distribution of C&S

channels through franchisees/local cable operators, Internet Over Cable
(IOC), distribution of Zee Network pay channels to the operators and
providing content and infrastructure services for the DTH platform.

a. Cable Distribution/MSO Operations

Siticable Network, a wholly owned subsidiary of Zee, is a Multi System

Operator (MSO) with an estimated reach of 7 million homes in India.
Siticable has entered into distributor agreements with over 40
dominant local cable operators to distribute television channel signals
received from satellites. Under these agreements, Siticable owns the
head end assets, which are operated and maintained by the local
cable operators who also act as the Company's agents. These agents
are also responsible for providing services to the local cable operators
and collecting payments from the local cable operators on a per
subscriber basis, in return for a percentage of the subscription
revenues collected. Siticable currently distributes its cable channels to
more than 6,000 local cable operators across India through 50 head
ends in 43 cities. Siticable offers its subscribers a total of between 70
and 80 channels, and, as with all other major MSOs, offers all
mainstream channels. It also offers its proprietary cable channel, Siti
Channel, a city specific local channel for its local audiences.

40
 Zee Telefilms

b. Distribution of pay channels for Cable

Zee Turner, a joint venture between Zee and Turner International India
Ltd., distributes the pay channels of Zee Network, Turner as well as
third party channels across the sub-continent. This includes 16
channels of Zee Network, 3 channels of Turner (CNN, Cartoon
Network & Pogo) and 5 other channels (CNBC, CNBC Awaaz, Reality
TV, HBO and VH1).

c. Providing content and infrastructure services for DTH

The Company has entered into an arrangement with ASC Enterprises
Limited, a DTH operator and an affiliated party, to provide and
aggregate content for the DTH platform - `Dish TV' for nationwide

41
 Zee Telefilms

distribution. In addition to providing its own channels for Dish TV, Zee
had also launched certain channels like the premium movie channels
Zee Premier, Zee Action, Zee Classic and Zee Select primarily for the
the DTH audience. Content for these channels is largely obtained from
its existing library as well as from programmes acquired in the normal
course of its business. Zee also provides, through it's subsidiaries,
marketing and distribution services, SMS, CAS and Call center
services to the DTH initiative. Zee believes that the DTH platform will
enable the Company to market high value content to Indian viewers
with accruing revenue opportunities on a system that provides
transparency in subscription revenues.

3. Education

Zee education was formed as a division of Zee in 1994 to focus on IT

education. Zee Interactive Learning Systems was formed in 1999 to create a
learning network and deliver a variety of education content and solutions for a
range of careers and vocations. It is the only company in the country that
caters to the learning needs of segments as diverse as preschool, youth &
corporate.

The preschool, Kidzee is the leader with over 300 centres in India & abroad. It
has adopted a curriculum based on the best methodologies of early childhood
education. It offers playgroup, nursery, activity center, Junior & Senior
Kindergarten and International Early Childhood Teachers' Education Course. Zee
Institute of Media Arts & Technology, a state of the art academy imparts
comprehensive training based on a wellstructured curriculum in all aspects of TV
& Films. In association with Autodesk Media & Entertainment, it has recently
launched India's First & World's Seventh Autodesk Media & Entertainment
Training centre to impart training on Discreet Smoke, a high end editing software.

42
 Zee Telefilms

A premier animation academy, Zee Institute of Creative Arts, has been providing
training in both Digital & Classical Animation for over a decade. In association
with Design Program & Media Technology Centre, IIT Kanpur, it has for the first
time in the country introduced a course in gaming that provides training in both
design & development of games.

4. Film Production & distribution

The Company continued to carry on its film production & distribution

business. During FY 2002, the Company financed, produced & distributed
Hindi feature film, 'Gadar Ek Prem Katha', which was one of the biggest
blockbusters in Indian cinematic history and became the top grosser of the
year 2001. The Company also acquires films for distribution across multiple
platforms. The Company's film production activities include commissioning of
films as well as in-house production.

a. Film Production

Zee retains full intellectual property rights to all films it commissions

and generally pays an agreed flat fee according to a schedule. Zee
began its films production activities by commissioning films from
renowned filmmakers such as Mahesh Bhatt, Prakash Mehra, Sachin
and Hema Malini. Example of films commissioned by the Company
include 'Phir Teri Kahani Yaad Aayee', 'Spot Boy', 'Ajeeb Dastan Hai
Yeh', 'Mr. Shrimati', 'Dil Ka Doctor', 'Tune Mere Dil Le Liya', 'Dil Kitna
Naadan Hai', 'Mohini', 'Aise Bhi Kya Jaldi' and 'Fareb'. In-house movies
that the Company has produced include 'Humein Jahan Pyar Mile' and
'Gadar - Ek Prem Katha'. The Company recently released 'One Dollar
Curry', produced in cooperation with France TV and Silhouette Films.
The movie was received with mixed response. Zee has also produced
a live cum animation film, 'Bhaggmati - The Queen of Fortunes', and
has two animation studios with over 300 animators who work on a

43
 Zee Telefilms

contract basis. This film is expected to be released during August

2005.

b. Film Distribution

Zee had entered into a commercial agreement in December 2003 with

Rajshri Pictures Private Limited ('Rajshri') for the exclusive theatrical
distribution of all Hindi films produced, co-produced or acquired by
either Zee or Rajshri, effective from January 1, 2004. This arrangement
unfortunately, was not very fruitful and hence terminated. During the
year, the Company released movies on DVD and in theatres in the
overseas markets. Prominent movies being distributed during the year
were 'Mujhse Shaadi Karogi' and 'Ab Tumhare Hawale Watan
Saathiyon'

CURRENT STRATEGIES ADOPTED BY ZEE:

44
 Zee Telefilms

The key elements of Zee's strategy are to (i) Strengthen its position as a leading
media and entertainment company in India by continuously creating and
aggregating high quality content for the viewers in India as well as the South
Asian Diaspora. (ii) Enhance its channel bouquet offerings. (iii) Build high quality
distribution networks through cable as well as satellite (DTH). (iv) Expand
selectively in international markets. (v) Focus on shareholder value
enhancement.

i. To strengthen position as a leading media and entertainment company

in India

Zee continuously invests in creating and aggregating high quality television

content for the South Asian Diaspora across various genres like news, movies,
music, soaps, sitcoms, game shows, travel shows, children's shows and across
various languages such as Hindi, English, Punjabi, Marathi, Bangla, Telugu and
Gujarati. The Company intends to periodically revamp its television channels to
provide a fresh and innovative experience for the viewers. For example, the
Company recently repackaged most of its channels with new look and logo to
enhance viewer experience.

ii. Enhance channel bouquet offerings

Zee has been consistently expanding its product portfolio and has grown from
operating a single television channel in 1992 to a bouquet of 22 television
channels. With a view to generating incremental revenue from the DTH market
the Company is offering its existing channels on the DTH platform as well. Zee
has also launched a business channel, a religious channel and more recently a
sports channel to offer a more complete entertainment package to its viewers. In
addition, Zee seeks to tie-up with international broadcasters, such as the
arrangement the Company has with Turner International Pvt. Ltd., for distribution
of their content in India alongside Zee's channels to increase the attractiveness

45
 Zee Telefilms

of the Company's channel bouquets. During the year, the Company entered into
an agreement for the distribution of the premium English movie channel - 'HBO'.

iii. Build high quality distribution network

The Company's strategy is to straddle the entire entertainment value chain from
content creation and aggregation to cable and satellite distribution. Zee believes
that both content and distribution are critical to its business and has undertaken a
number of strategic initiatives to augment its ability to deliver quality
entertainment to its viewers when they want it and the way they want it. In the
process of implementing these initiatives, Zee has built Siticable, a wholly-owned
subsidiary, into one of the largest MSO in India with an estimated reach of 7
million homes.

iv. Expand selectively in international markets

Zee distributes its television content to more than 120 countries worldwide
including the United States, Canada, Europe, Middle East, Africa and most parts
of South Asia by catering to the vast South Asian Diaspora around the world. Zee
is one of the largest Indian television networks in the world with an estimated
subscriber base of close to a million subscribers outside of India. The Company
plans to diversify its revenue streams further by selectively expanding its
presence in these key international markets either on its own or with joint venture
partners.

v. Focus on enhancing shareholder value

Zee is focused on enhancing shareholder value through delivering superior

financial performance, increased transparency and implementation of best
corporate governance practices. The Company's corporate values has been and
will be driven by product and service excellence, customer focus, creativity,
integrity and growth. Zee has also undertaken a corporate restructuring exercise

46
 Zee Telefilms

with a view to streamline its businesses, improve operating efficiencies and to

further rationalise its unprofitable operations in line with its strategic objectives.
Zee believes that it has instituted robust systems and processes to ensure high
standards of transparency and corporate governance, including the introduction
of independent Directors to its Board and the establishment of an audit
committee, a remuneration committee and a share transfer and investor
grievance committee.

vi. The strategy of airing daily soaps starting Sunday through Wednesday
has also paid off

On Sundays, Zee has tried to get the viewer interested. Once the viewers get
interested, Zee hopes that the viewers stay in through the week.

vii. The rejuvenation process of Zee began with a shift in the Target Group
(TG)

From the 35-plus to the 25-plus. The channel revamped some of its popular
shows like Kareena Kareena, Piya ka Ghar and Antakshari by keeping in mind
the youth taste. The grandeur of Zee Cine Awards and the presence of
Bollywood badshah Shah Rukh Khan were used to unveil brand new logos for
Zee.
To give a cutting edge to strategies, Guha brought Hindustan Times hand
Suresh Balakrishnan and Star TV's Joy Chakraborthy on board to take care of
marketing and network ad sales respectively.

Zee has already given its Zee Cine Awards a global positioning.

viii. Selection of Actors

47
 Zee Telefilms

Zee has deliberately gone for stars like Ronit Roy, Rajeev Khandelwal and
Akashdeep Sehgal who came to the limelight mainly through Star Plus soaps.

ix. Restructuring

Looking at a ten-year history, there has been an almost continuous constant

churn in the corporate structure. Back in 1999-2000, the company merged with
Zee Multimedia Worldwide, a Mauritius based holding company owned by the
same promoters. Post merger, equity stakes of the promoters went up
significantly. In 2002, Zee Telefilms merged four subsidiaries (Kaveri
Entertainment, Programme Asia Trading Company, EL Zee Television and
Dakshin Media) with itself.

Circa 2003, they acquired ETC Networks, which was later merged with another
subsidiary in the Internet business, Econnect India Ltd. Subsequently, a bunch of
Mauritius based subsidiaries were merged into a single company, Asia Today
Ltd.

In FY05, Asia Today Ltd (ATL) acquired Pan Asia Infrastructure Ltd (PAIL). An
ATL subsidiary called Zee Telefilms Middle East was formed to handle
broadcasting operations for the Middle East from Dubai. Another subsidiary,
Expand Fast Holdings Ltd, BVI was merged with ATL during the year.

Zee Interactive Learning Systems Ltd, another wholly owned subsidiary issued
shares to Ganjam Trading Co. Pvt. Ltd (a promoter company), and has ceased to
be a 100% subsidiary. The transactions described above do not constitute a
comprehensive list. Indeed, tracking down all these deals is a task in itself.
Worse, using publicly available data to try and figure out whether these have
been value accretive or otherwise is next to impossible!

And now after a spate of confusing corporate actions, the company has proposed
the de-merger of Zee Telefilms (ZTL) and various subsidiaries. The news and
regional channels Zee News, Zee Business, Zee Bangla, Zee Punjabi, Zee

48
 Zee Telefilms

Marathi, Zee Telegu and Zee Kannada, will all be rolled into Zee News. Some of
the direct consumer businesses of ZTL will become part of ASC Enterprises
Limited (ASCEL), which runs the DTH business. Siti Cable and other cable
related businesses of ZTL are to be de-merged into Wire and Wireless (India), a
new company. ZTL will continue to run the flagship entertainment channels. They
propose to list each of these companies separately.

Positive Outcomes of the Move

This latest move could actually help unlock value, and the share prices of Zee
reflect this. Some of these moves are also a result of regulatory (FDI
shareholding norms).

Negative Outcomes of the Move

However, from an investor perspective, history cannot be forgotten. For every

corporate action in the past, there has always been a plausible reason put
forward that would provide benefits to shareholders. Yet, continuous churn
coupled with a lack of transparency in details (ratios, valuations, etc.) and poor
performance have affected public perceptions. This has ensured that the stock
has traditionally remained "under-valued".

While the latest move might provide a one-time jump in value, the long term will
depend on the level of transparency adopted by each of the companies, and the
group as a whole. Mergers or de-mergers in themselves create no value, unless
the rationale, valuation norms and benefits are clearly visible to investors.

49
 Zee Telefilms

CURRENT STRUCTURE OF VARIOUS BUSINESSES

ZTL held 33% in Zee News Limited, while promoters of Zee hold the balance.

PROPOSED STRUCTURE OF VARIOUS BUSINESSES

(EXPECTED TO BE COMPLETED BY SEPT/OCT 2006)

• ZTL Global content business would include all non- news bearing
channels in India and all International businesses and retain 74%
investment in Zee Turner, 51% investment in ETC Networks Limited and
26% stake in Aplab Limited.

50
 Zee Telefilms

• Shares held by foreign promoters will be shifted to India as domestic

holding to bring down the overall foreign holding to about 35%. Cable
business max foreign holding permissible is 49%.

• As per scheme, ZTL shareholders get 137 shares of Zee News Limited for
100 shares in ZTL. ZTL foreign shareholders will be limited to a maximum
of 26%. Any additional shares accruing to them would be converted into
1781 preference shares for every 100 shares of ZTL.

• ZTL shareholders would get 230 shares of ASCEL for every 100 shares
held in ZTL resulting in their holding 57% in Dish TV.

51
 Zee Telefilms

GLOBAL PRESENCE

Access to 350 million viewers globally

Broadcast to over 120 countries Europe: 165,000
households Asia Pac: 456,000
Households

America: 456,000
Households

Africa: 55,000
households

America Europe Africa Asia Pac Total

Zee 456,000 165,000 55,000 456,000 1,132,000
Network
Star - 32,000 - 308,000 340,000
Network
Sony 130,000 *75,000 *40,000 297,000 518,000
Network
*Joint package of Sony and B4U

52
 Zee Telefilms

ALLIANCEs / PARTNERSHIPs

To accomplish the mission of continued and sustainable growth, in the addition to

growing revenues organically Zee has sought external growth opportunities
through acquisitions, alliances and partnerships. Zee has entered into joint
ventures to gain access to content and technology and also has acquired
significant stakes in companies, which offered complementary strengths to Zee’s
Network.

A 74:26 joint venture between Zee and Turner International to distribute the Zee
Turner pay channel bouquet in India and neighboring countries.

ETC Networks

ETC Networks Limited (ETC.BO) is a media company listed on the Bombay

stock exchange operating two television channels, ETC Music and ETC Punjabi
in India. Zee acquired a 51% stake in June 2002.

53
 Zee Telefilms

GROWTH DRIVERS FOR ZEE TELEFILMS

Advertising revenues

• Zee has an approximately 30% share of the total Cable & Satellite (C&S)
adspend, which is estimated at about Rs 20 bn. In FY05, 44% of the
company’s revenues were derived from advertising. Zee TV has a strong
brand recall by virtue of its global presence and as a consequence is able
to garner a sizeable chunk of the total ad spend of the industry. With the
company planning to foray into newer channels, growth is likely to be
robust on the advertising revenues front, as more and more viewers will
come under the company’s umbrella.

Subscription revenues
• The revenues stream, which is likely to take the company to a new level is
the revenue from subscriptions. Domestically, it generates its Subscription
revenues from Siticable Network. Beside this, it also get its subscription
revenues from Direct-to-Home (DTH) services. The total revenue of the
Zee from the subscription part stood at 50% in FY05. Subscription
revenues also accrue to the company through its international operations.
Zee is one of the largest Indian television networks in the world with an
estimated subscriber base of more than 900,000 outside of India. The
company exports its channels to over 120 countries through various
distribution platforms, and has entered into agreements with DTH and
local cable operators in each of the countries in which its channels are
distributed. The company has a strong subscriber base of 230,000 in
South East Asia, followed by Middle East. It also enjoys strong brand
recognition in international markets like the USA, Canada, the Caribbean,
UK and other parts of South Asia.

54
 Zee Telefilms

KEY INDICATORS OF HOW WELL THE STRATEGY IS

WORKING:

Trend in market share

Channel Share

16
14
12
Zee
10
Star
8
Sun tv
6
Sony
4
2
0
July-Sept 2003 April-June 2004 June-March 2005 June-March 2006

55
 Zee Telefilms

Network share

25

20
Zee
15 Star
10 Sun tv
Sony
5

0
July-Sept 2003 April-June2004 June- June-
March2005 March2006

Star Plus is the star in terms of Market Share whereas Zee does not hold a good
rank in terms of Market Share.

In terms of Network share too Zee is at the second last position but it is far ahead
of Sony because the number of channels Zee holds under its umbrella is far
more than Sony.

56
 Zee Telefilms

The recent programs of Zee have been able to capture the eyeball compared to
the recent programs of Sony and hence Zee recently is doing better than Sony.

Trends in Revenues and Operating Profit Margins

350

284 291
300
268
239
250
217
USD milliom

200 172
USD milliom

150 137

100

50

0
1999 2000 2001 2002 2003 2004 2005

Revenues
Operating revenues have grown at a CAGR of 13.3% to USD 291 mn

57
 Zee Telefilms

120 36

34
96 97
100
32
83
80 30
68
28
60 56
26
47
37 24
40
22

20 20
1999 2000 2001 2002 2003 2004 2005

Operating revenue Operating profit

Operating profit has grown by 17.6% CAGR.

Trends in Revenues and EBITDA

58
 Zee Telefilms

Trend in stock price

Stock Price of ZEE Telefilms(in Rs.)

300
279.15
250

200 197.23
Stock Price of ZEE
150 148.7
Telefilms(in Rs.)
100

50 55

0
2003 2004 2005 24/8/2006

59
 Zee Telefilms

Trend in shareholding pattern

Zee Telefilms shares in 2006 are doing amazingly well compared to the past
3 years.

60
 Zee Telefilms

Trend in Borrowings

Reduction in borrowings

• Total debt reduced from Rs 8.5 billion in 2002 to Rs.5.3 billion in 2005
• Net debt to equity is 0.15.

6500 240
6289 6289

6000 210

5500 5344 180

5096
5000 150

4500 120
2002 2003 2004 2005

debtors(amt) debtors(in days)

Improved receivables position

• Receivables reduced from Rs 6.3 billion in 2002 to Rs 5.3 billion in 2005
on enhanced sales.

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 Zee Telefilms

ZEE TURNOVER

Big Three" (Zee, Star, Sony) with aggregated consolidated turnover in excess of
$830 million (Zee leading with $309 million, narrowly followed by Star with $302
million), though China's leading broadcaster CCTV outstrips this alone with its FY
2004 turnover coming in just below $970 million.

PERFORMANCE OF THE VARIOUS BUSINESSES

Broadcasting & Content Increase by 5.9% from 10,591mn to

11,179mn

Access 17.1% from 1754 mn to 1455mn

Film Production & Distribution 205.9 mn.

Education 112.2 mn

Others (sale of electronic devices) 648 mn

62
 Zee Telefilms

1%
5% Revenue Mix
2%
10% Broadcasting & content

Access

Film production &

distribution
Education

Others

82%

Leadership Roles
• Zee TV is the first company to come up with DTH.
• First to set up MSO operations at a national level – Siticable with
• the cable distribution reach of 6.7 million homes.
• First to launch a regional bouquet of channels - Zee Marathi, Zee
• Punjabi, Zee Bangla, Zee Gujarati.

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 Zee Telefilms

KEY ISSUES FACING ZEE

• The major problem for ZEE is the lack of variety of content as they seem
to always depend on a few programs to drive their TRP’s. Moreover Star
tv has an arrangement with Balaji telefilms which is the most successful
content provider in the television industry.

• The advertising revenues of ZEE’s competitors are much more as in the

case of STAR due to the popular programming.

• Star has future plans of diversifying their business and getting into
licensed merchandising ( nach baliye CD’s), outdoor, internet (IPTV),
mobile entertainment and similar ventures.

• A probable competition in the DTH arena with the advent of TATA SKY,
there could be a competition on the prices these services are offered at as
the Indian audience is very price sensitive.

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COMPETITIVE ANALYSIS

In the Hindi movie genre

Prime Time From

Weekend
All Day (8 pm - 7am - 12
Channel ( Sat and Sun)
11pm) midnight
TVR Share TVR Share TVR Share TVR Share
Zee
0.48 38 0.92 33 0.57 38 0.65 38
Cinema
Set Max 0.44 34 1.07 39 0.54 36 0.58 34
Star
0.36 28 0.77 28 0.4 27 0.49 28
Gold
Source: TAM, TG: CS 4+ Markets: HSM, Period: 27/3/05 to 23/4/05

As seen from TRP’s Zee Cinema is No.1 in the Hindi Movie Segment (example
of only one week taken but it is similar in other cases)

In the General Entertainment Genre

Channel Average TVR Avg. channel share

Star Plus 6 61.2
Sony Ent. 2.27 23.2
Zee TV 1.13 11.5
Sahara One 0.28 2.9
SAB TV 0.12 1.3
Source: Tam CS4+ HSM, 5 June - 19 June: 8 pm - 11 pm TVR/Chnl share

In the general entertainment genre Star rules by a big margin.

In the English Entertainment Genre

ZEE Café versus Star World

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The top 20 shows for 2005

Zee Café Star World

Name TVR Name TVR
Friends 0.92 Koffee With Karan 1.64
Friends 0.82 Koffee With Karan 1.1
Fresh Hits 0.72 Friends 0.91
Friends 0.64 Koffee With Karan 0.85
Friends 0.54 Koffee With Karan 0.84
Full House 0.51 Koffee With Karan 0.83
Friends 0.50 Koffee With Karan 0.83
The Hogan Family 0.48 Koffee With Karan 0.79
The Benny Hill Show 0.41 Koffee With Karan 0.63
Friends 0.40 Star Asia Travel 0.62
Sports Illustrated 0.38 Star Asia Travel 0.60
Full House 0.36 Koffee With Karan 0.59
Will and Grace 0.35 Koffee With Karan 0.58
Full House 0.35 Western Music 0.57
The Making of Reindeer.. 0.34 Koffee With Karan 0.56
The Benny Hill Show 0.34 The Bold & The... 0.55
Full House 0.33 Star Asia Travel 0.53
Full House 0.33 Star Asia Travel 0.53
Full House 0.33 Star Asia Travel 0.53
The Hogan Family 0.33 Western Music 0.53

The top 20 shows for 2004

Star World Zee Café

Name TVR Name TVR
Koffee With Karan 1.01 Friends 0.81
Miss World 2004 0.81 Caroline In The City 0.75
India Child Genius 0.78 Friends 0.75
Just Shoot Me 0.74 Caroline In The City 0.68
Rendezvous... 0.73 Tune in 0.68

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Cover Story 0.72 Will And Grace 0.68

Focus Asia 0.71 Fresh Hits 0.60
Koffee With Karan 0.67 Caroline In the City 0.59
Koffee With Karan 0.65 Tune In 0.58
Movie in Focus 0.59 Friends 0.58
Hollywood Squares 0.59 Tune In 0.57
Whose Line Is... 0.59 Music Café 0.57
Movie In Focus 0.59 Hard Rock Live 0.57
Star Asia Travel 0.56 Amazing People 0.57
Star Asia Travel 0.56 Benny Hill Show 0.57
Rendezvous... 0.53 Over The Edge 0.53
Top Drive Getaway 0.52 Music Café 0.53
Koffee With Karan 0.52 Tune In 0.53
The Bold & The... 0.52 Tune In 0.53
India's child Genius 0.52 Hidden Hills 0.48

Ratings Scenario
On this front Star World clearly has the upper hand. Tam data C&S 15+ five
Metros SEC A,B indicates that viewers spend more than twice as much time on
Star World as on Zee Café. In March 2005, viewers spent an average of 13
minutes on Star World versus six minutes on Zee Café. This is a healthy
increase from September 2004 when viewers spent an average of 10 minutes on
Star World versus five minutes on Zee Café. A part of the reason has to do with
localization initiatives.

The ad pie size

Star World holds the edge here for two reasons. Firstly, on account of its
localization initiatives. The other reason is that Star World is seen as being more
upmarket on account of the network that it belongs to although, as one observer
put it, Zee Café's shows are just as good. Star World has seen more clients hop
on board compared to Zee Cafe. The figures tell their own story.

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Minimum
Variety Zee Telefilms

The size of the English general entertainment ad pie (including AXN) is around
Rs 450 million. Information with Indiantelevision.com indicates that while Star
World got Rs 200 million last year Zee Café got around half that.

ON AIR PROMOS CONVERSION INTO ACTUAL VIEWERS

On Air program

On Air program

Program Viewed Program Viewed

viewed

viewed

Yes No Yes No
Yes Yes

10% 43% 25% 52%

No No

2% 45% 1% 22%

Channel: Zee TV Channel: Sony TV

Show: Cinestar Primetime Show: Indian Idol, Primetime
Conversions: 23% Conversions: 32%
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Variety in Product Line

Zee Telefilms

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 Zee Telefilms

SWOT
STRENGTHS WEAKNESS

• India’s largest vertically integrated • Zee has always fallen short of good
media and entertainment company, content programming behind Star tv,
encompassing the content-to- they always rely on the success of a
consumer value chain; television few shows.
content, broadcasting, cable • They have lost the leadership
networks, films, music and animation position to star few years back and
• One of the largest Indian multiple have never gained it since then.
distribution platforms with a reach of • Their advertising revenues are much
more than 350 million viewers in over less compared to star tv.
120 countries
• India’s largest MSO –with a cable
distribution reach of 6.7 million home
• Dish TV is India’s first private Indian
company to be fully authorised to
start DTH broadcast operations in the
country
OPPORTUNITIES THREATS

• Estimated growth rate of TV industry
on an overall basis for next 5 years
18% CAGR
• The DTH arena provides tremendous
opportunity
• Content for regional channels as this
space is growing.
• Star venturing into the DTH space
with TATA SKY
• The proposed restructuring of ZEE
TV and its probable impact on the
investor confidence and the market
value of ZEE.

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FUTURE OUTLOOK

1. Niche viewing trends/changing viewer ship patterns

As the television set moves from the drawing room to the bedroom and
individual viewer ship( versus family viewer ship) increases, channels catering to
individual interests like gardening or extreme sports will multiply. Viewers are
becoming more knowledgeable and niches will be created. From niches sub-
niches will be created. There are a large number of groups planning to start new
channels. There will be room for all as the TV industry is still in its growth phase.

2. Localization of content
The focus of channels will shift towards localization of content
wherein greater time will be allotted for regional news and regional language
based programs. Audience fragmentation will be higher and this new trend
will only accelerate. At the moment the channels are focusing on English
viewers and up-market viewers, but there will be a trickle down effect.
Advertisers will fight to get the SEC A, B up-market households and upper
middle class viewers. This will lead to more launches in this category.

3. Digitalization
Digitalization will create more bandwidth space and more channels
will be telecasted. However digitalization, as in the case world over, is
surely the future of television, with its benefit of superior quality and value
added services such as pay per view and video on demand.

4. New channels

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It could be right to say that the last decade has been the decade of
carpet bombing with mass channels mushrooming. The next decade in TV
would be of precision targeting through niche channels. The increased
launch of new and niche channels will not only amend the viewing patterns
but also the revenue models of the content producers, TV broadcasters and
the MCO’s and LCO’s.

5. Content regulation
It was the first time in 2004 that the need for content regulation was
also felt. The I & B ministry is planning to setup a separate regulator to
monitor content on TV channels. How the regulator would be constituted
and what kind of monitoring mechanism would be in place, is yet to be
finalized. Hence a comprehensive media policy is what the industry needs.

BIBLIOGRAPHY

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• PRICE WATERHOUSE COOPERS report on India Entertainment

Industry

• TAM media research reports:

- Television audience measurement
- Television viewership
- Channel Scan

• Report on Entertainment and Media industry By IBEF foundation

• Articles and reports from FICCI frames 2005 & 2006

• Annual Report- Zeetelefilms

• Coporate presentation of Zeetelefilms

• Capitalonline

• Specialreports from indiatelevision.com

• Business World, edition 8th May 2006.

Websites

• www.indiantelevision.com
• www.indiainfoline.com
• www.zeetelevision.com
• www.yahoo.comindia/budget
• www.dna.com
• www.setindia.com
• www.startv.com
• www.tamindia.com
• www.acneilsen.com
• www.agencyfaqs.com

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