Competition and Strategy

A Project on

ZEE

By

Section F Group 5
SAILOOSHA PATCHINEELAM 1811425

SAMANVAY MAHATA 1811416

AVIK MALLICK 1811417

VINODHKUMAR S L 1811432

ABHIJIT S PULIMOOTIL 1811434

BUDDHAVARAPU NISHANTH 1811385

1
Executive Summary
Zee started its operations 25 years ago with a single channel, Zee TV, largely targeting the
south Asian audience. With time they have expanded their portfolio to reach over a billion
people across 170 countries through multiple media. Zee Entertainment Enterprises Limited
comprises of domestic & international broadcasting, Movies & Music production, Digital
platform and Live performances. Currently, the TV penetration in India stands only at 64%,
providing scope for expansion, Average Revenue Per User per month is only at $3 compared
to $88 in USA, questioning the profitability of the industry. The Indian media and
entertainment industry saw intense rivalry in the near past with content creators are starting to
wield more power. Also, the consumers are increasingly getting attracted towards OTT
platforms which are growing at 35% y-o-y. Even amidst this growing competition and shifting
trends, big players like Zee have been able to make huge profits.
Zee’s strong content creation capability and distribution capability which reaches more than
1.2 billion across the globe provides it with the competitive advantages in the industry. Zee
leverages this to its advantage by devising a strategy that focuses on multi-format & multi-
platform delivery. Furthermore, ZEE increases the revenue realisation potential of the IP
through multi-platform access and lastly, they use divestments, partnerships & acquisitions to
create value.
The future of media and entertainment industry lies in providing consumers more control to
the user. Zee should focus on unbundling of content, using data analytics to improve
omnichannel experience, investing in niche channels to address individual customer needs and
implementing real time feedback through social media platforms to stay ahead in the
competition.

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 TABLE OF CONTENTS

1.0 ZEE ENTERTAINMENT ENTERPRISES LIMITED ............................................................... 4

2.0 INDIAN TV MEDIA & ENTERTAINMENT INDUSTRY ....................................................... 5
3.0 RESOURCES ................................................................................................................ 6
4.0 CAPABILITIES .............................................................................................................. 8
5.0 VRIN ANALYSIS OF CAPABILITIES ................................................................................. 9
6.0 COMPETITIVE ADVANTAGES ....................................................................................... 9
7.0 COMPETITIVE STRATEGY ............................................................................................. 9
8.0 RECOMMENDATIONS ............................................................................................... 11
APPENDIX A ................................................................................................................... 14
REFERENCES ................................................................................................................... 17

3
1.0 Zee Entertainment Enterprises Limited
Zee started its operations 25 years ago with a single channel, Zee TV, largely targeting the
south Asian audience. With time they have expanded their portfolio to reach over a billion
people across 170 countries through multiple media platforms.
Zee has a broad base portfolio that comprises of below
Domestic broadcasting
ZEEL operates 7 Hindi channels. It also caters to programmes in 7 regional languages with Zee
being the leader in Marathi and Odiya and a close second in Bengali, Telugu, Kannada, Tamil
and Bhojpuri. ZEEL also hosts 7 Hindi movie channels catering to different urban and rural
appetites. ZEEL also brought to India 6 niche channels serving international content.
International broadcasting
Started in 1994, ZEEL now offers 39 channels in the international market to both the Indian
and Non – Indian audiences with 13 channels catering to the latter. ZEEL has presence in the
following countries: America (17), EU (7), MENAP (5), APAC (5), Africa (5).
Movies and Music
The Zee Studios is the film production and distribution arm of ZEEL with an enviable list of
movies under its belt. Zee Music is a leader in the music publishing business. It has a 15%
share in digital music consumption.
Digital
Keeping pace with the increasing consumption of entertainment over digital platforms, ZEEL
launched Zee5 and India Web-portal to deliver OTT content covering a myriad of genres.
Live
Zee also started their latest venture Zee Live which produces live performances such as Music,
Theatre etc.
Establishing its presence across platforms, genres and geographies notwithstanding, ZEE is
facing immense competition from its rivals such as Star India, Sony Pictures and Viacom18.
Besides these national players, competition is also rife in the local/regional entertainment
landscapes which are predominantly dominated by regional networks.
• Star India
They have an extensive portfolio of channels and content, both digital and traditional
such as Sports, Movies, Hotstar (Digital Platform), FOX Star production house etc. Star
India leads the pack in terms of Turnover as well as market share ~23-25%.
• Sony Pictures
Starting out in India in 1995, Sony has a strong presence in the Sports broadcasting as
well as English, Hindi and Marathi entertainment content. It also supports an OTT
digital platform by the name SonyLIV. It has a market share of ~ 8-9%.

4
 • Viacom 18
Established in 2007 through a J.V between Viacom and TV 18, they have a plethora of
regional channels, a digital platform called VOOT and several popular Music and
entertainment channels as well as movie production and distribution house under their
label with ~9.5% market share.
• Sun TV
This regional player with its dominance in South India commands an ~ 13% market
share and has the most viewership as per BARC ratings. It hosts a multitude of regional
language programs in Tamil, Malayalam, Telugu and Kannada.
Now, we will proceed with our analysis to understand the TV Media & Entertainment industry,
the resources and the capabilities of Zee that provide competitive advantages to the firm. We
would also analyse the strategy of the firm by leveraging its competitive advantages to meet
the Key Success Factors of the industry and then provide recommendations to the firm.

2.0 Indian TV Media & Entertainment Industry

Leisure activities range from low cost to very high cost activities. Individual’s choice depends
on the factors of affordability and ease of access. In India, most of the leisure activities are
based on consuming content, especially consuming content on television which ticks both the
boxes of affordability and ease of access for majority of the households.
Even then, the TV penetration in India stands only at 64%, which not only pales in comparison
with the near 100% penetration in developed countries but is also much less than many other
developing countries, like Pakistan (75%). [1]

While this might seem to be promising, by providing scope for further penetration, the Average
Revenue Per User per month is only $3 in India compared to $88 in US. [2] In 2017, Indian TV
industry market size was Rs. 660 billion, comprising Rs. 393 billion subscription revenue and

5
Rs. 267 billion advertisement revenue, which served 181 million households. [3] This puts the
profitability of industry under scrutiny.

ARPU ($/month)

USA

UK

Brazil

Singapore

Japan

Nigeria

China

India

0 20 40 60 80 100

With the above-mentioned factors, the industry analysis was performed and attached in
Appendix A.

2.1 Key Success Factors

Based on the industry analysis, Key Success Factors in the TV broadcasting industry are

1. Creating high quality content which focuses on niche segments

2. Digital platform presence to capitalize on the growing popularity of OTT market
3. Empowering audience to control their viewing patterns by customising content delivery

3.0 Resources
3.1 Tangible Resources
3.1.1 Financial resources
Television broadcasting industry is capital intensive and operationally expensive. The growing
demand for high quality content coupled with the lack of talent in content creation has made
acquiring content costlier. High financial resources of Zee, relative to its competitors, helps it
to acquire high quality content suitable to the trends. [9]

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 Net Current Assets (in INR Cr) as of
Mar 2018
4500
4000
3500
3000
2500
2000
1500
1000
500
0
-500 Zee Sun Network TV18 Broadcast HT Media
Entertainment

3.1.2 Broadcast facility

ZEEL owns and operates 39 channels internationally and 41 channels domestically. [10] It also
runs a digital platform Zee5. ZEEL realizes significant cost synergies by broadcasting content
created for one market/platform to another and enhancing the revenue realisation potential of
the content.
Segment No. of channels
Hindi GEC 6
Reginal GEC 15
Hindi Movies 8
Niche 6
Channels owned by ZEEL in major segments
3.1.3 Production facility
Even though Zee works with multiple content creative partners, it also owns an in-house TV
studio, a movie production company (Zee Studios) and a music label (Zee Music Company).
With more than 25 years of experience in content delivery, ZEE has garnered expertise in
understanding customer needs. The production facilities of Zee provide it an edge over others
in terms of creating content relevant to the audience.

3.2 Intangible Resources

3.2.1 Brand ZEE
Zee has built its portfolio of channels from a single channel launched 25 years ago and, in the
process, has built a reputation for itself. Zee is on the leader board in most of the domestic
markets it operates, and this gives the company an advantage in terms of attracting the best
available talent and negotiate better deals with advertisers. [11]
Segment Channel
Hindi GEC Zee Anmol
Bangla Zee Bangla
Marathi Zee Marathi
Oriya Zee Sarthak
Critical segments where Zee leads the market

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3.2.2 IP rights of content
Over the 25 years of its operation, Zee has built a portfolio of content. It currently holds
Intellectual Property Rights of over 250,000 hours of content. [10]

3.2.3 Human capital

Zee’s brand reputation and financial resources have helped it to acquire the top talent from the
limited pool available in the industry. The organisational culture of Zee has helped it to retain
the people and to leverage the expertise of its people to deliver superior content. This superior
reputation also helps it in recruiting graduates from the top academic institutions who bring
fresh and creative ideas which are then leveraged to create superior content.

4.0 Capabilities
Zee deploys the resources under its control to create, produce and distribute the content with
the help of technology.

4.1 Content creation and Production capability

Zee produces 500+ hours of original content every week in 12 languages. [10] The in-house TV
studio, the movie production company and the music label along with partnerships with top
content creators across the country help Zee to produce original content. Zee ensures that it
own the Intellectual Property rights of the all the content it produces and thereby it widens its
already massive portfolio of content.

4.2 Distribution capability

Through its 41 TV channels, movie production and music labels, Zee reaches an estimated 700
million individuals in India and over 570 million individuals outside India. [10] The cross-
platform screening of content increases the monetisation potential of the content it produces.
The huge distribution network of Zee helps it to attract top advertisers. Currently, over 3000
brands are advertised over the Zee platforms. The advertisement revenue of Zee contributes
nearly two thirds of its total sales amounting to Rs. 38000 crores. [12]

4.3 Technological capability

Zee has made use of the technology to improve the quality and to reduce the cost of its
broadcasting. When the operations began initially 25 years ago, the broadcast was done from
Hong Kong which meant that the shows had to be sent 15 days in advance for up-linking. [10]
By leveraging the technological developments today up-linking is done domestically which not
only helps to reduce the costs but also gives the ability to modify content real time. By including
an array of High Definition channels, the quality of broadcasting has improved significantly in
the recent years.

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5.0 VRIN Analysis of capabilities
Non-
Capability Valuable? Rare? Inimitable? substitutable? Implication
Content
creation and Competitive
Production Yes Yes Yes Yes Advantage
Competitive
Distribution Yes Yes Yes Yes Advantage
Competitive
Technology Yes No No Yes Parity

6.0 Competitive Advantages

Competitive advantages of ZEEL can be described as below
1. Superior content creation capability and the extensive content IP rights
2. Leveraging synergies across platforms for better content utilisation
3. Distribution network that reaches over 1 billion individuals internationally

7.0 Competitive Strategy

Amidst stiff competition in a robust industry with growing consumption in both traditional and
digital platforms, to maintain and grow their strong positioning in India and grow their global
footprint, Zee relies on following strategy.

7.1 Broad Base Portfolio

Zee’s portfolio of supply comprises of
• Domestic Broadcasting
• International Broadcasting
• Zee Movies and Music
• Digital
• Live
7.2 Multi-format Delivery
To capitalise and satiate the full range of entertainment requirement, Zee provides content
across different genres such as fiction, non-fiction, music, movies, live entertainment etc. Low
switching costs for consumers, helps Zee to attract and eventually retain consumers in the long
term.
7.3 Know the consumer
Profiling the consumers based on various parameters such as Age, geography, gender, socio-
economic factors etc., helps Zee in producing targeted multi-lingual content across genres. Zee
currently has 12 language portfolios in India in addition to the 9 Non-Indian languages serving
international audiences. [13]

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7.4 Multi-platform delivery
Acknowledging the fact that consumers are no longer limited to one source of entertainment,
Zee has made available its content across different platforms such as TV, Internet (digital),
Live. This enables them to maximise the capture.
7.5 Acquisitions
Zee has also focussed on a slew of acquisitions over the years to expand its reach as well as
enable it to serve the end consumer better and faster in terms of content and variety. [14]
• Sarthak TV – to enter into fast growing regional market in Odisha.
• 9X Media Pvt. Ltd. – It will add 6 more channels focussed on Music into Zee’s current
oeuvre. (Currently put on backburner)
• Margo Networks – Technology start-up acquisition to enable faster delivery of digital
content to consumers
7.6 Monetising IP
Zee monetises the Intellectual property by catering to a global audience by providing content
that are tailored to those markets. Zee currently owns rights to more than 250,000 hours of
content.
Zee has a 3-step model for International expansion, a model that is based on creating and
acquiring international subsidiaries and then ramping up the content customized to the local
language and culture. [15]
Step 1 – To create Indian Content for the Indian viewers abroad.
Step 2 – To create/adapt Indian content for local viewers. To understand the affinity
for such content among the international audiences they have invested heavily in
Market research, which has helped Zee to tailor nuances appealing to these audience.
Step 3 – Producing local content by either acquiring local channels/programmes or by
sourcing and producing local content since the larger audience here is the local ones.
Creating International content provides the benefit of re-packaging them and showcasing them
in India, thus leveraging its foray and presence in those markets.
7.7 Going Digital
A key focal point is the ZEE5 OTT platform launched in Feb of 2018. Though a bit late into
the fray, ZEE5 is quickly catching up and Zee is planning to launch up-to 90 original contents
by Mar’19 which will make it the most extensive catalogue across OTTs. ZEE5 operates on a
freemium model and eyes ad and subscription revenues. At INR99/month they have kept
subscription charges lower than the average monthly spent on TV.
7.8 Divestment and Partnership
Divesting comes up as an interesting strategy for Zee as it is on the lookout for a partner to
divest up-to 50% of its stake. Global players like Alibaba, Comcast, Google and Sony Pictures
have been speculated as contenders. This move could reap long term benefits as it provides
them timely access to the deep pockets of a global partner as the trend shifts from traditional
TV to digital viewership and also helps them consolidate their foothold in international
markets. [17]

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8.0 Recommendations
The future of television lies in providing consumers more control. We will look at some ways
in which ZEE can provide more control and better service to its consumers.

[18]

8.1 Unbundling content

One way of doing that is by allowing consumers to only consume the content they want. This
can be done by creating a revenue model which unbundles content. Zee can do this by providing
pricing by episodes or tv series etc in its OTT service ZEE5. This will help it gain consumers
who are not willing to pay full traditional subscription fees which includes content the
consumers are not interested in.

8.2 Omnichannel platform and data analytics

The future lies in engaging consumers via multiple channels and providing customised
interactions. This can be done via omnichannel platforms which will create a unique multi-
dimensional experience. This combines great content with social interaction techniques
tailored to a viewer’s preferences. For example, Zee with the launch of Zee live has entered the
live shows market. However, the next step would be to increase social interactions via live
twitter interactions with creative talent, social gaming or other interactive social tools.
Also, for its OTT platform ZEE5, Zee should use content discovery optimization like search
engine optimization whereby content is pushed to viewer seamlessly across all sources as done
by Roku, Netflix, Tivo, cable etc. For this Zee will have to invest in data analytics technologies
which will help them analyse audience data and show the direct link between advertising and
value generated to brands.

8.3 Shifting watching patterns

With the proliferation of cheap and better internet and increasing disposable wealth,
digitization is the way ahead as already evinced by the high growth rates of 35% YOY on a
considerable base of existing 100 million subscribers. With OTT expected to dominate in the
future, the bingeing phenomenon will continue to grow. As content is available “on tap”,

11
consumers prefer to watch consecutive episodes at their ease rather than follow the traditional
daily or weekly episodic style.
Though ZEE has had a late entry to the OTT market, it is planning to make up for it by creating
the largest catalogue across OTTs by launching up-to 90 original content programmes by
Mar’19. Zee can use its vast catalogue to its advantage by getting more higher quality shows.
This is because for the same amount of show time, the bingeing model gives more content as
there is a less need to recap what happened last episode. For e.g. the producers and creative
minds behind “House of Cards” were very happy with the freedom Netflix provided and the
ease with which they could fit more content in the same time. Zee could follow the same path
by giving more creative freedom and allowing more content, thereby attracting creative minds
to its shows and thus producing high quality shows.
Also, Zee like Amazon Prime could use the OTT model to its advantage by launching several
Pilots for different TV shows and measuring directly the audience interest in them. This is way
more expensive to do in the traditional TV model. Combining this with new pricing models
where you pay for only what you watch can help Zee dominate.

8.4 Increased individualism

With the rising buying power of Indian middle class combined with lower TV and broadband
costs as well as increasing use of smartphones and tablets as viewing devices, more and more
families will be able to split their viewing patterns. Thus, the demand of General Entertainment
channels where the whole family watches together will go down and niche channels or sub
GECs will emerge with focused target audiences.
Zee can take a lead here by investing in niche channels such as cooking channels, adventure
and travel channels etc. These channels can also demand higher advertising revenues as they
are a great place for targeted advertising. The future of advertising is results-based ad models
targeting individual viewers, as is done today on the internet. Advertisers will pay per ad
viewed, and this will make niche channels more valuable to advertisers as there is a higher
chance of a niche audience watching an ad completely when the ad is targeted directly towards
them. This is like YouTube ads where most of us skip them, however highly targeted ads
towards niche audiences have a better chance of being viewed.
Another category of niche channel is regional language channels. With the penetration of
Indian TV market at only 66%, regional channels are a great way to reach to the untapped
masses. Currently Zee is yet to have a presence in Malayalam and it’ll soon be launching a
Malayalam GEC to capture a share of the growing market there. South has higher TV
penetration and audience spend more time per day on an average than the Hindi viewers and
hence this becomes an important market for them to capitalize. Zee has also been spending a
considerable amount on acquisition of Movie rights across different languages to be showcased
on their Regional channels as well as the Digital platform. [16]

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8.5 Real-time feedback
The heavy use of social media such as Facebook, Twitter, etc. opens opportunities to measure
viewership as well as trends in marketing, pricing and story-telling. Zee can use this to its
advantage by implementing social media crawlers and big data analytics

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Appendix A
1.0 Industry Analysis
1.1 Barriers to entry
Entry Barriers into the industry are very high due to the below reasons.
1. Stringent Regulations imposed by Ministry of Information Broadcasting and
other regulatory bodies.
Television channels’ content is regulated by Cable Television Networks (Regulation)
Act, 1995 and monitored by several bodies like Inter-Ministerial Committee (IMC),
Electronic Media Monitoring Centre (EMMC), News Broadcasters Foundation (NBF)
and Indian Broadcasting Foundation (IBF).
In addition to that, advertisements broadcasted in the television channels are monitored
by Advertisement Standards Council of India (ASCI). [4]
2. Highly capital intensive and high operating cost
Initial capital required for studio, satellite up linking and down linking equipment and
transponders are very high. Also, the transponder contract with TRAI are typically for
five years and upwards only which makes the transponder contracts available only to
those with very high financial capability. [5]
Operating costs are also substantially high to the tune of Rs 3.5-4 billion per annum due
to very high demand for new and high-quality content. Dearth of local talent and
professionals increases the content and the employee cost.

1.2 Threat of Suppliers

Content creators are the suppliers to the television channels. Traditionally, content creators
have had very low bargaining power. However, in the recent times, the demand for high quality
content has tilted the equation in favour of reputed content creators. This can be seen from the
below example of Balaji Telefilms Ltd., one of the top content creators in the country. The
increase in EBITDA margin are attributed both to increase in content hours as well as
realization of revenue per hour. [6]

% EBITDA of Balaji Telefilms

14

12

10

0
% EBITDA Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

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Unconventional content creators also enjoy high bargaining power for high profile events like
IPL. Star acquired 5 years of IPL broadcasting rights for $2.55 billion from BCCI.

1.3 Threat of Buyers

Advertisers and Multiple System Operators (Cable company) and DTH players, who are the
buyers for a TV channel, enjoy very low bargaining power.
Advertisers have had very low bargaining power especially with highly rated channels. With
the general elections approaching, the demand for advertisement slots would further increase
and hence reduce the bargaining power of buyers even further.
MSOs traditionally held high bargaining power due to the last mile connectivity they provided
and charged placement fee and carriage fee. But thanks to digitisation, placement and carriage
fee are eliminated and hence leading to reduction in bargaining power.

1.4 Threat of substitutes

Affordability and ease of access for a long time kept the television industry away from the
threat of substitutes. Traditional substitutes like newspapers and radios do not pose high threat
to the television industry. But with the increasing internet and smartphone penetration in India,
OTT applications like Hotstar, Voot, Amazon Prime and Netflix pose a higher threat to the
television industry. OTT applications enable the users with the control to choose and watch
their favourite program at their convenient time.
OTT market currently has 100 million active users and is expected to grow at 35% YoY. [7]

OTT Market
Platform Share
Hotstar 70.00%
SonyLIV 13.00%
Voot 11.00%
Prime 5.00%
Netflix 1.40%
1.5 Competitive rivalry
The threat of rivalry is very high due to below reasons,
• Broadcasters trying to tap the same audience and contract with the same advertisers
• Broadcasters copying formats of successful programmes on a rival channel
• Broadcasters poaching key personnel of rival broadcasters
The industry is filled with major players like Star, Sony, Zee and Sun, who operate in multiple
markets, and several other small players who operate in few markets but hold a significant
share in that market.
2.0 Industry profitability
Advertisement and subscription revenue are the major components of revenue. Higher
subscription leads to higher advertisement revenue, and hence 95% of the profits in the
industry is shared between the top 2 players. [8]

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 PROFIT MARGIN
50%
38%
40% 33%
30%
18%
20% 13%
10% 7%

0%

-10% -2%

-20% -14%
-20%
-30%

3.0 Attractiveness of Industry

TV M&E industry is a very competitive industry which is undergoing radical shift in terms of
content creation and delivery. Though the ARPU in India is very low when compared to other
countries, the industry remains an attractive one for major players as the major portion of the
industry profits is shared by them and is expected to remain the same.

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References
[1] BARC

[2] Zee TV investor PPT June 2018

[3] Dish TV investor PPT June 2011 and 2018

[4] https://blog.ipleaders.in/television-content-regulation/

[5] https://trai.gov.in/sites/default/files/cpaper15mar10no3%5B1%5D.pdf

[6] Balaji Telefilms Ltd investor PPT May 2017

[7] https://telecom.economictimes.indiatimes.com/news/netflix-restricted-to-premium-subscribers-
hotstar-leads-indian-ott-content-market/62351500

[8] Among the listed M&E companies in India, from moneycontrol.com

[9] Moneycontrol - https://www.moneycontrol.com/competition/htmedia/comparison/HT#HT

[10] ZEEL Annual Report 2018

[11] BARC statistics

[12] Nikkei Asia Review https://asia.nikkei.com/Business/Companies/Zee-Entertainment-posts-31-

jump-in-profit-as-India-ad-revenue-revives

[13] https://www.exchange4media.com/media-tv-news/zee-entertainment-acquires-sarthak-
entertainment-60810.html

[14] https://economictimes.indiatimes.com/industry/media/entertainment/zee-terminates-9x-
media-acquisition/articleshow/63334878.cms

[15] https://knowledge.insead.edu/strategy/zee-entertainments-three-step-process-for-worldwide-
growth-4747

[16] https://www.livemint.com/Opinion/UXjsDuhOnAQBaINAtYYknJ/TV-viewership-in-South-India-
takes-giant-strides.html

[17] https://www.businesstoday.in/current/corporate/zee-entertainment-decision-to-divest-is-a-
smart-move/story/291442.html

[18] https://www.ey.com/Publication/vwLUAssets/EY_-
6_trends_that_will_change_the_TV_industry/$FILE/EY-6-trends-that-will-change-the-TV-
industry.pdf

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