ZEE Entertainment

MD & CEO'S REVIEW

Investor Relations



Dear Shareholders,

FY17 WAS AN INTERESTING YEAR BY ALL ACCOUNTS. AS AN INDUSTRY, OUR RESILIENCE GOT CHALLENGED AND AS A COMPANY, OUR STRENGTH AND STRATEGY WERE PUT TO TEST. I AM HAPPY TO SAY THAT BOTH THE INDUSTRY AND OUR COMPANY EMERGED STRONGER FROM THE CHALLENGES.

AN INDUSTRY ON THE MOVE

The Media and Entertainment (M&E) industry was gaining momentum in the first half of the year. However, demonetisation had an all-pervasive impact on the industry. Advertisers cut back spends across the board and adopted a wait-and-watch strategy for the economy to normalise. Subscriber additions were also impacted with consumers facing a cash crunch. Movie footfalls dipped and events had to be postponed due to lack of sponsors. Despite this, the industry managed to report 9% growth. The impact of demonetisation is behind us and the industry is poised to get back to its strong growth trajectory.

While demonetisation impacted the industry's growth, there were two clear trends on the content production and delivery fronts which accentuated further. Innovation in content gave the audience an option to choose from a plethora of novel ideas and more targeted content. The trend of regionalisation in television continued to make headway while some genres saw further segmentation. Acceptance of niche movies increased while popular movies became bigger than ever. Content produced in one language also saw significant success in other languages. It was a landmark year for live events, as several events including musicals and international artists' performances witnessed immense success. Audiences in smaller cities got access to a wider choice of music after the launch of new radio stations.

The ecosystem for content delivery on digital platforms got a boost with an explosive growth in wireless connectivity and deep cuts in data prices. This triggered the launch of new OTT platforms and increased investments in existing ones. Availability of content, including digital only content, increased multifold. As a result, online video consumption increased sharply and the trend will sustain.

CONTENT AT THE HEART

ZEEL, an entertainment content company, represents the ‘A to Zee' of content leadership and has consistently demonstrated its ability to be at the forefront of content innovation. We are committed to creating content across formats to suit the evolving taste and preferences of customers. We endeavour to build capabilities which give us a sustainable advantage in content creation and help us leverage our presence across platforms to connect with the audience. Our content reaches consumers at multiple touch points through presence across television in domestic and international markets, movies & music, digital and live events.

The television business in India has a long and exciting journey ahead of it. India's low television penetration of 63% and a significantly lesser time spent on watching television provides headroom for sustained growth. As per estimates, television will continue to increase its share within the M&E industry, indicating the growth opportunity for our broadcasting business. During the year, our portfolio of entertainment channels further strengthened its competitive position on the back of differentiated content and launch of targeted channels. We will continue with our strategy of segmenting the audience and expanding our product offerings across genres, languages and demographics.

Movies & Music are an integral part of viewers' entertainment bouquet and account for over 15% of the Indian M&E industry. It also allows access to a wider audience base, especially in the youth and male segments. The operating environment for movie producers has improved significantly over the years on account of drop in piracy and proliferation of multiplexes. Increasing digital consumption is further improving economics, especially for music. Our movie production arm, Zee Studios, and music publishing label, Zee Music Company, are scaling up well and we see them as important growth drivers.

In several international markets, Hollywood and US production houses have gained a strong foothold due to paucity of quality local content. Over the past few years, content from a few other countries has also made inroads into these markets. We believe that even Indian content has the ability to transcend boundaries, as evident from the recent success of Indian movies in international markets. Our international channels targeted at local audiences have seen success and we will continue to expand in new markets leveraging our expansive content library. In addition, we remain committed to serve the Indian diaspora through more channels.

Increasing digital consumption in India is adding to the overall time spent on video viewing and represents a strong growth opportunity. Our two products, dittoTV and OZEE, performed well during the year in terms of increasing their reach and building organic traffic growth. We are in the midst of refreshing our digital offering, consolidating the learnings from our subscription and advertising based platforms. We will be launching this product in the second half of the year.

The Indian audience is now opening up to large scale ticketed events and this represents a growth opportunity in the entertainment space. ZEE LIVE, the youngest member of the ZEEL family, kick started its operations with the launch of its first two events -‘Wicked Weekends' and ‘Zee Theatre Tour'. We are working on several concepts in this space which will be rolled out gradually.

THE YEAR GONE BY

During the year, we sold our sports business to Sony Pictures Network and agreed to acquire broadcasting business of Reliance Broadcast Network (RBNL). The decision to exit the sports business is underpinned by financial rationale as the gestation period continued to elongate. RBNL's broadcasting business gives us entry into Bhojpuri market and complements our Hindi GEC portfolio.

Our consolidated revenue grew by 10.7% in FY17 to ` 64,342 million. EBITDA margin improved to 30% and EBITDA grew 27.3% to ` 19,269 million. This performance in an uncertain environment reflects the inherent strength of our portfolio.

TOGETHER WITH PEOPLE

We are nurturing and building our teams to help us continue our growth journey. We continue to build an entrepreneurial culture that encourages people to think beyond the brief and rewards endeavour and enterprise. At the same time, we are preparing ourselves for the future, constantly upgrading our skillset. We are equally cognizant of our social responsibilities and ensure that our channels are not just a medium but also a message. We have aligned ourselves to relevant social causes spanning education, women empowerment, spreading awareness about female foeticide among others.

GRATITUDE

I would like to thank our Board, our teams, our audience, partners and all our shareholders, for empowering us to deliver powerful stories that people love. I am confident that together with your consistent support, it will seem like we have just begun.

Yours truly,
Punit Goenka
MD & CEO
ZEE Entertainment Enterprises Ltd.