Media and Entertainment Industry Analysis and Zee Entertainment Company Report

B E A C O N
A Newsletter by SIMCON– SIMSREE Consulting Club
Volume : 2
Issue : 11 September 2014
Inside this issue:
Industry Analysis: Media and Entertainment
Company Analysis: Zee Entertainment Enterprises Ltd
CONvergence’14
Concept of the Month
Quiz
Did You Know?

Volume: 2 BEACON : Page 1
Issue : 11 Sep. 2014
Introduction:
According to a FICCI-KPMG report published on January 3, 2014, India’s Media and Entertainment (M&E) industry reached Rs 92,000 crore in 2013, a 12% increase as compared to 2012.
As of January 2014, around 161 million households in India watch television. More than 330 million newspapers are circu- lated daily in India. A staggering 214 million are connected to the Internet; of which 130 million are mobile internet users. Such statistics show how much penetration the media has at- tained in a country of around 1.21 billion, and also how there is still loads of ground to cover – offering opportunities.
2013 saw an increase in the digitization of media products and services, like the effect on cable Television. With the boom of Internet, digital marketing has grown by leaps and bounds as numbers suggest.
The industry continues to grow and also plays an important role in bringing about awareness on many issues impacting the entire population. Digital technologies, ever increasing demand of smartphones, penetration of broadband internet & digital cinema have brought about the increase in this sector. Backing from the Indian government is also an added advantage. Advertising continues to evolve over a period of time and going Digital is the way ahead.
Market size of the Media & Entertainment sector:
According to the above mentioned KPMG report, Media & En- tertainment industry has the potential to ramp up by 14.2% to more than Rs 1.78 lakh crore in the coming four years.
The television industry in India is anticipated to increase at a CAGR of 16.2% over 2013-18. That makes it around Rs 88,500 crore.
Without much surprise, digital advertising is projected to have the highest CAGR of 27.7% with other sub-sectors projected to grow at a CAGR in the range of 9-18 %, till 2018.
The foreign direct investment (FDI) inflows in the information and broadcasting (I&B) sector (including print media) in the period April 2000 - July 2014 stood at around Rs 23,060 crore, as per data released by Department of Industrial Policy and Pro- motion (DIPP).
So how are companies investing in this sector?
Recently, a MoU was signed between Prasar Bharati and Deutsche Welle, a German public service broadcaster to expand the reach of Doordarshan India into other markets like Asia, Europe, and Middle East. This enables the availability of Doordarshan India’s programmes at no cost, on Hotbird 13B, a leading
DTH platform in Europe.
Discovery Communications India recently launched its Investi- gation Discovery (ID) channel and thus ventured into the Hindi entertainment space. After the launch of HD variants, Discovery channel’s portfolio in India has now grown to eleven.
Multiplex chain INOX bought 100% shares of Satyam Cine- plexes Ltd (Satyam), valued at Rs 182 crore. This deal raises INOX’s screen count in India to 358, across 91 multiplexes and 50 cities. The intent of this deal was to increase INOX’s presence in North India; especially Delhi.
In association with Orange, Infosys launched its IP TV (Television on the Internet) services to its customers. Infosys plans to create interactive television apps on Orange’s store - Livebox Play. It also intends to integrate this system with its cloud-based services.
Vodafone India is currently working with Disney India’s Inter- active business to develop games and applications for smart phones.
Media and Entertainment Industry:
Media industry is composed of various segments like television, print, films, music, digital etc. The share of each of the compo- nents in the total industry can be shown in a chart below. Tele- vision contributes to the largest share as of now and continues to grow at an ever increasing rate. It is expected to grow at 51% till 2017 estimates the KPMG report mentioned earlier.
Figure 1- Industry Segments
Source: http://www.ibef.org/industry/media-entertainment- india.aspx Figure 2- Advertising revenue
Source: http://www.ibef.org/industry/media-entertainment- india.aspx
For detailed report and all company analysis from previous Beacons together, please visit our blog:
http://simconblog.wordpress.com
INDUSTRY ANALYSIS:
Media and Entertainment

INDUSTRY ANALYSIS:
Media and Entertainment
Top Industry Players:
Top companies according to Market Capitalization:
Porter’s five force analysis of industry
Impact of current issues in M&E Industry:
High and multiple taxes in film industry:
A high amount of indirect tax - 15-50% - is levied on film industry. Along with this, multiple taxes like VAT + service tax are imposed on the industry. This has been a long stretched issue in film industry. Of the earnings after tax, 40% of the money goes to exhibitors and the balance is left with the producers. So for financing a project of Rs 10 crore with 50% tax, the box office collection of Rs 50 crore is required to break even. The film producers argue that only 5-6% of the movies in the film industry are a box-office hit. For others recovering such high amount money is very tough. It discourages investment.
Piracy:
Piracy is one of the biggest and ever increasing problems of the film, television and music industry. With the rise in digital media it has become easier to pirate and share the movies. An E&Y report estimates the losses due to piracy to be around Rs 2,469 crore per year in India.
Intellectual Property Rights:
According to a survey conducted by E&Y, 56% of the frauds happening in the industry are due to Intellectual Property Rights (IPR) issues. With the increase in digitization in M&E sector, more and more such cases of breach of faith and frauds happen. This is resulting in monetary as well as reputational loss. With
more companied growing from unorganized firms to organized company, it is has become very essential for them to increase vigilance.
What role is the Indian Government playing in this?
To promote exchange of culture and art between the two countries, the Indian and Canadian governments signed a co- production deal in 2014. This deal would help producers from both countries to enhance and utilize their creative, technical, artistic and marketing resources in the process of making films/ serials.
The Central Government has given the green signal forlicenses to around 50 new news and entertainment channels in India. Star, Sony, Viacom and Zee have already acquired licenses to such energies. Presently, around 350 broadcasters cater to close to 780 channels ranging from news to entertainment to sport and many other domains.
How to build on this momentum?
Digitization and the Internet will drive India’s Media & Enter- tainment industry forward. Internet Service Providers are already earning increased revenue due to broadband penetration. Additionally, advertising agencies began competition with each other to acquire in the digital and social media domains. These developments suggest growth for the M&E industry in India. Opportunities outside the country also beckon. The African continent and the Middle East are two relatively unexplored markets, and Indian M&E companies could plan their expansion realizing the regions’ potential.
Conclusion:
Growth of middle class, rise in disposable incomes, high amount of content consumption and a favourable regulatory environment in India are bound to encourage foreign investments and growth in the M&E industry. With increase in broadband penetration and services like 2G, 3G and even 4G being provided by the telecom companies, we are bound to get more people into the digital world. With increased foreign investments, there is a rising sense of urgency to take up opportunities offered by the Indian M&E industry. It is of utmost importance to comprehend and adjust to the economic and cultural nuances in a diverse country like India, and come up with content tai- lored for the local market. While M&E companies continue to be exposed to risks ranging from competition, piracy, corrup- tion & fraud, our on-going structural and regulatory reforms by the new Government and focussed development of corporate governance norms are bound to reduce these threats.
References:
Deloitte
Best Media Info
IBEF
MoneyControl
FICCI
E&Y
Company Name
Market Cap (Rs. Cr)
Zee Entertainment
32,444.05
Sun TV Network
12,833.37
DB Corp
6,405.75
Dish TV
5,844.12
TV18 Broadcast
4,886.79

Company Overview
Launched in 1992, ZEE is a globally recognised company in the M&E industry. With over 730+ million viewers across the globe, ZEEL has a presence in 169 countries.
Zee Entertainment Enterprises Limited is one of India's leading television, media and entertainment companies. It is amongst the largest producers and aggregators of Hindi programming in the world (having produced 32 serials & daily soaps till date), with an extensive library housing over 1.2 lac+ hours of television content. Zee TV has a leading share in the Hindi General Entertainment genre (GEC) with an average weekly channel share of 17% amongst all GECs. With rights to more than 3,500 movie titles from foremost studios and of stellar film stars, ZEEL houses the world's largest Hindi film library.
ZEEL's well-known brands include Zee TV, Zee Cinema, Zee Premier, Zee Action, Zee Classic, Ten Sports, Ten Cricket, Ten Action+, Zee Cafe, Zee Studio, Zee Trendz, Zee Khana Khazana, Zee Salaam, Zee Jagran, Zing, ETC Music and ETC Punjabi. The company also has a strong offering in the regional language domain with channels such as Zee Marathi, Zee Bangla, Zee Telugu, Zee Kannada and Zee Talkies.
The ZEEL stable owns an integrated range of businesses. All of these in singularity adhere to the content–to–consumer value chain model of media and entertainment business. ZEEL is a pioneer in every aspect of content aggregation and distribution through traditional media like satellite and cable and new media like the internet, in India.
It has also entered the educational arena with brands like ZICA, Kidzee, ZIMA & ZED. Zee also has its in–house production company under the name Zee Motion Pictures.
Shareholding Pattern
Management
SWOT Analysis
COMPANY ANALYSIS:
Zee Entertainment Enterprises Ltd
Strengths
- Global presence and complete array of channels - Zee has total 34 channels that cater to various customer segments across 169 countries
- Have good viewership base (730+ viewership in FY14). The channels provide good content and enjoy high TRP ratings
- Trailblazing growth in ad revenue (around 17% YoY growth in Q1 FY15)
- Good subscription revenue – Revenue through subscription contributed to almost 41% of the revenue in FY14.
Weakness
- Zee does not have rights to major sporting events and as a result, it lags in the sports seg- ment
- Lack of high cost content - Zee, the flagship channel of ZEEL, has shied away from making major investments in acquiring high cost content like new movies and reality shows
Opportunity
- The TV industry is expected to double its size by 2018
Increasing digitisation will help in increasing subscription revenue – Penetration level of digital TV is still low at around 36% and is expected to rise steadily
- The new channel launches by Zee like Zee Zindagi offer great potential due to its fresh concept
Threats
- The discontinuation of Media Pro with Star might put pressure on subscription revenue growth.
- Star Sports has rights to tele- cast cricket matches in India till 2018 as well as events like ISL whereas Zee do have right to broadcast any major sporting event in FY2015 as well as in FY16
Name
Designation
Dr. Subhash Chandra
Non-Executive Chairman & Promoter of Essel Group of Companies
Mr. Suboodh Kumar
Executive Vice Chairman
Mr. Punit Goenka
Managing Director & CEO
Mr. Ashok Kurien
Non-Executive Director
Lord Gulam K. Noon
Independent Director
Prof. R. Vaidyanathan
Prof. Sunil Sharma
Prof. (Mrs.) Neharika Vohra

Financials
The financial highlights from Balance sheet for FY 13-14 are as given below:
 The Return on Net Worth (RONW) and Return on Capi- tal Employed (ROCE) stood at 18.8% and 28.1%, respectively as compared to 18.4 and 27.1 the previous year.
 The Price-Earnings (PE) Ratio and Earning per Share (EPS) was 29.2 and Rs. 9.30 respectively in FY 2013-14.
 The Liquidity ratio increased from 3.3 in FY 2013 to 3.5 in FY 2014.
Competitor Analysis
The breakup of Entertainment industry is shown below:
The table below shows the media companies finance for the year that ended March 2013.
New Developments
1. Ad cap case – The final decision regarding 12 minute ad cap case will be taken by the Delhi High Court on 20th November, 2014. But impact on Zee is unlikely as it already adheres to the 12 minute per hour ad cap.
2. New channels – Zee launched 5 new channels in the FY 13-14. These channels were – &Pictures (Hindi movie channel), Zee Anmol, Zindagi (syndicated content from Pakistan), Zee Bioskop (Indonesia’s first Bollywood channel) & Zee Nung (Bollywood Channel in Thai)
3. Disbanding of Media Pro – Media Pro, a JV between Zee Turner Ltd and Star Media, came to an end in April 2014 after TRAI disallowed aggregators to bundle channels of more than one broadcaster. The disbanding of Media Pro is likely to put pressure on subscription revenue growth in the short term.
4. Plan of global expansion – ZEEL is planning to increase its overseas presence by expanding its operations to countries in Middle East, South East Asia and Africa.
5. Collaboration with entertainment industry to re-build Kashmir – Zee Entertainment, Event and Entertainment Management Association (EEMA) and the Film & Tele- vision Producers Guild have joined hands to raise a fund raiser campaign to raise funds and awareness for the flood stricken Kashmir.
References:
NDTV Profit
Money Control
Zee Television Financials
Zee Entertainment Company Overview
COMPANY ANALYSIS:
Zee Entertainment Enterprises Ltd
Company
Revenue (Rs Cr)
Net Profit (Rs Cr)
Net Worth (Rs Cr)
Star India
4,075.6
349.3
2,929.1
Zee Entertain- ment
2,684.9
640.5
3,352.8
Viacom 18
1,579.0
-40.6
790.4
Multi Screen Media
966.1
102.9
1,447.1
Discovery Comm India
159.6
24.3
130.8

Sydenham Institute of Management Studies, Research and Entrepreneurship Education organized SIMERATIONS’14 – its flagship inter college annual festival. The 20th edition of SIMERATIONS, a management-cultural-sport-literary festival, was the zenith for India’s youth from prominent colleges to showcase their acumen in a variety of fields and enhance their versatility. During this festival on 21st September 2014, SIMCON - SIMSREE Consulting Club - in association with ‘Benchmark Six Sigma’ organized ‘CON- VERGENCE’- an Inter B school case study competition.
Promotion of the event:
Convergence was promoted on several social sites like Facebook, Blogs, Linkedin. Also the updates of competition were posted on dare2compete.com; a very popular online portal for B-School students to be updated about competitions and other events.
The search for the best minds, who could think like a consultant, spanned across three challenging rounds. We received around 300 entries from across B-schools like IIMs, XLRI, SPJIMR, NMIMS, NITIE, JBIMS, TISS and many more. The first round was an online quiz of 20 questions for 30 minutes and 30 teams were shortlisted for the next round. In round 2, a case study from the ship- ping industry was given to the teams. Based on the presentations we received from these teams, we got them evaluated and came up with the top six teams for the final round.
Our judging panel:
Mr. Shripad Ranade is a Senior Principal at TATA Strategic Management Group; where he looks after the strategy and operation consulting in automotive, engineering and metal sectors. He has been helping TSMG’s clients through high quality strategy formulations as well as performance improvement pro- grams. He had been a part of the Aditya Birla Group of Companies and Alcan India before joining the TATA Strategic Management Group.
Mr. Saurabh Kumar Sahu is working as a Senior Principal in Accenture management consulting. He has ten years of Management Consulting Experience and is engaged in strategy assignments in growth strategy, supply chain management, procurement transformation and sales & marketing effectiveness. He has handled projects across the retail, consumer goods, pharmaceutical and automotive industries in India, UK and US.
Mr. Dhananjay Bapat is Director of Marketing at Videojet technologies. He has over 16 years of experience in sales & marketing. He has played a key role in driving profitable revenue growth through sales, marketing and product management. He is also responsible for developing strategies for high growth based on market intelligence. Previously, he has worked with companies like Atlas Copco, Saint Gobain Abrasives and Godrej.
Ms. Sangeeta Pandit is a Chartered Accountant and has been a member of Bombay Stock Exchange. She is currently on the board of directors of ZEE Learn Ltd. She is a HOD of Finance at SIMSREE.
On-Campus Event:
For the final round, finalist teams were called for on-campus presentations of the case study. Finalist teams were from TISS, NITIE, IMT Ghaziabad, SIMS and SIMSREE. A brief description of case study was shared before starting with the presentations for the benefit of audience. The teams were asked not to mention their college names in their presentation, for anonymity. After individual
CONVERGENCE’14

IMT Ghaziabad, SIMS and SIMSREE. A brief description of case study was shared before starting with the presentations for the benefit of audience. The teams were asked not to mention their college names in their presentation, for anonymity. After individual presentations, the Q&A sessions were very interesting as some of the questions asked by the judges flummoxed the teams; apart from the other ones which were handled by them very well. Judges then shared their insights on the case and the consulting world while we consolidated the results.
Team ‘Invictus’, comprising of Ramya Lakshminarayanan and Vikram Singh Thakur from SIMSREE, emerged as winners and were awarded prizes worth INR 15000.
Team ‘TopGun’ comprising of Mihir Haryaal and Satyanarayan Sanwal from SIMS emerged runners-up and were awarded prizes worth INR 10000.
Team ‘Invictus’ Team ‘TopGun’
We would like to thank our sponsor Benchmark Six Sigma, our judges for taking time out from their schedule on a Sunday, the par- ticipants, audience and the Simerations’14 team for helping us make Con-vergence’14 a grand success.
Core Competency
A Core competency is a deep proficiency that permits a corporation to deliver distinctive price to consumers. It displays an organization’s cumulative learning, notably of how to coordinate numerous production skills and integrate multiple technologies. Such a Core ability creates sustainable competitive advantage for a corporation and helps it branch into a large form of connected markets. Core Competencies additionally contribute considerably to the advantages a company’s product offer consumers. Some critical indi- cator for a Core Competency? It’s rigid for competitors to copy or procure. Understanding Core Competencies permits corporations to take a position within the strengths that differentiate them and set ways that unify their entire organization.
How does it work?
An organization should take the below mentioned steps to establish its Core Competencies:
 Segregate its key skills and sharpen them into organization wide strengths
 Analyse itself with different firms with an equivalent skills to confirm that it's developing distinctive capabilities
 Develop an understanding of what capabilities its consumers really value, and invest consequently to develop and sustain valued strengths
 Build an organizational game plan that sets target for competence building
 Pursue alliances, acquisitions and licensing arrangements which will additional build the organization’s strengths in its crux areas
 Encourage involvement and communication in core capability development across the organization
 Preserve core strengths at the same time as management expands and redefines the business
 Reconstruct or deprive non-core capabilities to release resources that may be used to deepen core capabilities
Why do companies use it?
Organisation use core competencies for the following reasons:
 Design competitive positions and techniques that take advantage of company strengths
 Consolidate the corporate across business units and functional units, and improve the transfer of information and skills among them
 Help workers perceive management's priorities
 Incorporate the use of technology in carrying out business processes
 Decide where to assign resources
 Make outsourcing, divestment and partnering selections
 Widen the domain within which the corporate innovates, and spawn new products and services
 Initiate new markets and expeditiously enter emerging markets
 Enhance image and build client loyalty
CONCEPT OF THE MONTH

QUIZ
1. In which country has DHL launched its first commercial delivery service
“parcelcopter”?
2. Which company has recently started India’s first bit coin exchange
“BTCXIndia”?
3. Which Nobel laureate founded RugMark, an international scheme that tags all carpets made in factories certified as child
labour-free?
4. Pharmaceutical company X on 6th April 2014 announced to buy Pharmaceutical company Y with the deal pegged at $4 bil-lion
which would make company X India’s largest drug maker by sales. Identify company X and Y.
5. Which semiconductor chip maker was formerly known as “NM Electronics”?
 The FedEx express once had just $5000 to its name. The founder decided to gam-ble
in Vegas with that money and made $32000 which was enough to continue its
operations for a little longer. Now, in 2014, the company is worth more than $2 bil-lion.
 The first Apple computers logo featured Sir Isaac
Newton reading a book under an apple tree with a single
glowing apple suspended in the tree above his head.
 In 1972, Bill Gates started his first company by
name “Traf-O-Data”. The company was formed with
the objective of processing raw data from roadway traf-fic
counters to creating reports for engineers.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers,
that is YOU. We invite articles and trivia on themes related to consulting. Be it industry news, consulting
trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down
your thoughts and mail your entries to simcon.simsree@gmail.com.
Best Regards, Our FB page : https://www.facebook.com/SimCon
SIMCON –SIMSREE CONSULTING CLUB Mail To : simcon.simsree@gmail.com
Winner:-
Sharved Mahajan
SIMSREE
ANSWERS : AUGUST ISSUE
Answer To: simcon.simsree@gmail.com with Subject= SIMCON_Quiz_September_2014
Winner will be recognized.
All Correct Answers will be published in next month’s Edition.
1. Lakme
2. Brylcreem & Godrej Consumer Products Ltd
3. Vistara Airlines (A JV between TATA and SIA)
4. X: General Electric, Y: Honeywell
5. Erstwhile Satyam Computers (now part of Tech Mahindra)

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