Management Discussion and Analysis
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ANNUAL REPORT 2015-16 90 CONSISTENCY & CHANGE MANAGEMENT DISCUSSION AND ANALYSIS INDIAN MACROECONOMIC SCENARIO In 2015, subscription revenues grew at annualized growth rate 11.4%, from INR 612 billion India is one of the few shining spots on an otherwise gloomy global economic map. While in 2014 to INR 682 billion in 2015. With the effects of cable digitization yet to show impact, most of the global economies did not fare well in the past year, the process of economic the subscription revenue is expected to grow to INR 1,266 billion by 2020 at a CAGR of recovery in India continued with the GDP growth being one of the highest in the world. 13.2% during 2015-2020. Renewed industrial activity, sustained low crude oil prices, favorable business sentiments, INDIAN MEDIA & ENTERTAINMENT INDUSTRY easing interest rates have spurred the economic growth. The government’s promise to stick to the fiscal deficit target for the current year and reduce it for the next year bodes well for 2014 414 612 the Indian economy. Indian GDP grew at 7.3% for FY16 and is projected to grow at 7.5% 2015 475 682 in the next fiscal year. 2016(P) 547 768 2017(P) 637 865 2018(P) 739 985 GDP GROWTH RATE OF SELECTED COUNTRIES 2019(P) 860 1120 2020(P) 994 1266 8.2 AD REVENUE SUBSCRIPTION REVENUE 7.3 7.3 7.5 7.5 7.8 Source : FICCI-KPMG Report on Indian Media & Entertainment Industry 2016 6.5 6.9 6.5 6.2 3.4 2.9 3.1 3.2 3.5 TELEVISION 2.2 2.5 Television forms the core of the Indian M&E Industry contributing to around 47% of the 2.4 2.4 2.2 2.4 2.2 1.7 0.1 2.2 0 overall revenue of the industry. Television sector grew from INR 475 billion in 2014 to INR 542 billion in 2015, registering a growth of 14%. The growth was driven by a strong 17% 2013 2014 2015 2016(P) 2017(P) rise in advertising spend. The sector is projected to more than double its revenues to INR 1098 billion by 2020 growing at a CAGR of 15% for 2015-2020. (Source: FICCI-KPMG -3.8 -3.8 Indian Media and Entertainment Industry Report 2016). WORLD OUTPUT CHINA BRAZIL TELEVISION REVENUE (INR BN) US UK INDIA Source : IMF World Economic Outlook Report (April 2016) 2014 155 75 245 2015 181 86 275 MEDIA AND ENTERTAINMENT INDUSTRY 2016 (P) 210 100 307 The Media and Entertainment Industry is a key growth driver for the Indian economy. 2017 (P) 242 118 350 According to the FICCI-KPMG Report 2016, the sector witnessed 12.8% growth in 2015 growing from INR 1,026 billion in 2014 to INR 1,157 billion in 2015. The industry is 2018 (P) 276 145 403 expected to grow to INR 2,260 billion by 2020 at a CAGR of 14.3% during 2015-2020, 2019 (P) 320 174 463 which is more than double the rate of growth of global M&E Industry. 2020 (P) 365 203 530 Total advertising spend across different media verticals was INR 475 billion in 2015 AD REVENUE BROADCASTER SUBSCRIPTION REVENUE SUBSCRIPTION REVENUE contributing to 41% of the total Media & Entertainment industry revenues. Fueled by Source : FICCI-KPMG Report on Indian Media & Entertainment Industry 2016 the continued economic growth, advertising revenues saw a growth of 14.7% in 2015. Currently, advertising revenue in India contributes less than 0.5% of the GDP, compared to the average 1% contribution across most developed economies. It is expected that FY16 saw the commencement of digitization of DAS III cities. Digitization is expected to give advertising will increasingly contribute a higher share to the GDP in the coming years the consumer better control in terms of the subscription choices. It will also lead to increase and is projected to double to INR 994 billion by 2020 growing at a CAGR of 16% during in the ARPU and subsequently increase in broadcasters’ share of subscription revenues. 2015-2020. Another major milestone for the television industry was the launch of new TV audience measurement system from BARC(Broadcast Audience Research Council) India in April 2015. BARC has started with a sample size of 22,000 homes and will gradually increase it to 50,000 over the next few years further improving the quality of data. The data was CURRENTLY, ADVERTISING REVENUE IN INDIA CONTRIBUTES rolled out in phase wise manner with the launch of rural data in October 2015 completing LESS THAN 0.5% OF THE GDP, COMPARED TO THE AVERAGE 1% the process. Inclusion of rural ratings has given the broadcasters as well as the advertiser CONTRIBUTION ACROSS MOST DEVELOPED ECONOMIES. insights into the hitherto unknown rural market. CORPORATE OVERVIEW STATUTORY REPORTS FINANCIAL STATEMENTS A B MANAGEMENT DISCUSSION AND C 91 ANALYSIS FILMS India lags the rest of the world in terms of content consumption on the internet due to The Film sector grew by 9.3% to INR 138 billion in 2015 from INR 126 billion in 2014, bandwidth constraints and high data charges. Most of the internet expansion in India mainly driven by Regional and Hollywood cinema. Growth of Regional and Hollywood will be led by mobile connectivity. The trend of content consumption on the small screen content points to the trend of audience appreciating the quality of the content irrespective will increase gradually as the smartphone penetration increases and is expected to be of the language. complement TV viewing. India is still under penetrated in terms of screens which means there is a huge scope Realizing that the digital medium is going to be a frontier of growth in future, the company of growth for the film industry. With the proliferation of multiplex screens coupled with launched OZEE last year in addition to existing DittoTV. While DittoTV is a SVOD platform technology to conveniently book tickets the footfalls are expected to increase. Growing which offers content from ZEE and other broadcasters, OZEE is an AVOD one stop popularity of VOD services has opened up a new revenue stream for films. The Film destination for all ZEE content. Both the platforms have managed to find traction in the sector is projected to grow to INR 227 billion by the end of 2020 at a CAGR of 10.5% for crowded OTT space. The company has also started producing content exclusively for these 2015-2020. platforms which will find resonance with the digital consumers. Essel Vision, ZEE’s content production and distribution arm produced its first Hindi Movie, COMPANY PROFILE ‘Jazbaa’ which was the comeback movie of Aishwarya Rai. The company also produced Zee Entertainment Enterprises Limited (ZEE) (BSE Code: 505537, NSE Code: ZEEL.EQ) and distributed a number of blockbuster and hit Marathi movies like ‘Natsamrat’, ‘Katyar is one of India’s largest vertically integrated media and entertainment company. The Kaljat Ghusli’, ‘Double Seat’, ‘Killa’ and ‘Timepass 2’ last year. Company was formed in 1982. ZEE was the first company to launch a satellite channel in India and from being a single channel in a single geography, today operates multiple MUSIC channels across multiple geographies in different languages and genres. The Company’s Music industry grew by 10% % to INR 10.8 billion in 2015 compared to INR 9.8 billion programming reaches out to over 1 billion viewers across 171 countries. in 2014. More than 55% of the music industry revenue comes from the digital platforms with music streaming services catching the imagination of Indian consumer. The music ZEE channel portfolio, across various genres in the Indian market, includes: industry is projected to grow to INR 20.6 billion by the end of 2020 at a CAGR of 13.8% I. Hindi Entertainment: Zee TV, &tv, Zee Anmol, Zindagi from 2015-2020. II. Hindi Movies: Zee Cinema, &pictures, Zee Action, Zee Classic III. English Entertainment, Movies and Life style: Zee Studio, Zee Café, ZEE Music Company, the music production arm of ZEEL has in a short time become one of IV. Regional Language Entertainment: Zee Marathi, Zee Talkies, Zee Bangla, Zee the leading music producers in the country. The company boasts a wide catalogue of Hindi Bangla Cinema, Zee Telugu, Zee Kannada, Zee Tamil, Sarthak TV and regional music like Singh is Bliing, Drishyam, Bahubali, Bang Bang, Bombay Velvet etc. V. Sports: TEN 1, TEN 2, TEN 3 VI. Music and Lifestyle: Zing, ETC DIGITAL VII. Niche and Special Interest: Zee Q, Zee Salaam The consumption of content on digital platforms has been increasing gradually. Digital VIII. HD: Zee TV HD, &tv HD, &pictures HD, Zee Cinema HD, Zee Studio HD, Zee Café HD, advertising grew 38% compared to 2014 to reach INR 60 billion. It is expected that digital TEN 1 HD, TEN Golf HD advertising will continue its strong growth and will grow to INR 255 billion by 2020 at a CAGR of 33.5% for 2015-2020. Digital advertising is projected to double its share and Apart from the channels listed above which are available in India, the Company also will contribute over a quarter of the revenue of the total advertising revenue. Currently non broadcasts 38 dedicated channels in the international markets. video advertising contributes to three quarters of the share of digital advertising revenue. DIGITAL AD REVENUES GROWTH 26% 23% 21% 18% 15% 13% 11% 171COUNTRIES 44 60 81 114 153 199 255 2014 2015 2016(P) 2017(P) 2018(P) 2019(P) 2020(P) THE COMPANY’S PROGRAMMING REACHES OUT TO OVER 1 BILLION VIEWERS ACROSS 171 COUNTRIES.