Has Zee Entertainment finally cracked the code for online success?

The broadcaster's fourth attempt at digital seems to be paying off, but it remains to be seen if it can turn it into a sustainable business

Has Zee finally cracked the code for online success? Within a year of its launch, the broadcaster’s streaming video app Zee5 hit a claimed 56 million monthly active users in December 2018. On a comScore listing by unique users, Zee5 is now the fifth largest streaming app after YouTube, Hotstar, MX Player and Voot. While the process of selling promoters’ equity in the mother company Zee is going on, there is talk of hiving off Zee5 to drive valuation. 

“In four to five years, digital should be 30 per cent of the top line,” says Punit Goenka, managing director and CEO of the Rs 7,126-crore Zee Entertainment Enterprises. “By March 2020, we should hit three digit numbers on monthly active users,” adds Tarun Katial, CEO, Zee5. YouTube, the single largest OTT brand in India, is at over 256 million unique users and just about Rs 2,000 crore in top line after more than a decade of being around. Zee5, then, is setting pretty ambitious targets for itself. 

Some of it is the sheer buoyancy it has had on the back of Hindi shows such as Karenjit Kaur or Rangbaaz. Then, there is the huge flow coming in from other languages. For instance, Sembaruthi, a Tamil show on Zee5 “has bigger volumes than all Hindi shows,” says Katial. It has since its launch in February 2018 commissioned more than 200 hours of original content each in eight of the 12 Indian languages it offers. 

That is the first reason why Zee’s fourth attempt at digital seems to be paying off. It has leveraged online the diversity that Zee offers on its linear broadcast business to go national in a way most OTTs haven’t. Most start with film or drama in one language and then move to others. “We have tried to keep the platform as broad-based as possible,” says Katial. 

“What worked for us was coming late — therefore, you learn more. However, it makes it that much harder to get into the consideration set,” he adds. He points out that when the first OTT rush began in 2014, connectivity and data were issues. This changed after Jio’s launch in 2016, which helped accelerate the spread of the internet and broadband through tier II and III India. This, in turn, “led to the Indianisation and democratisation of the internet. Till then it was largely English consumers and audiences. There is an audience of 500 million for languages beyond Hindi. You don’t have to be a particular psychographic or demographic to consume the internet,” points out Katial. 

Zee5 came bang in the middle of this national spreading of the internet to do what it does best — lots of content in lots of Indian languages. The result is that today more than 60 per cent of its total reach is from non-Hindi languages and only 40 per cent comes from the top six metros. “Zee5 has a very strong regional reach, which is a strength for them,” reckons Dinesh Menon, chief marketing officer for the State Bank of India. Roughly 3-4 per cent of its digital spends go to OTT platforms.  

The second reason Zee5 seems to be working is more generic. “Every new platform in the last two to three years has had higher, faster acquisition numbers because the internet numbers are much higher,” points out Kedar Gavane, vice president, sales and partners, comScore. India’s 480 million broadband users watch an average of 50 minutes of video a day. This has translated into a Rs 4,000-crore market in advertising and subscription revenues. It seems small compared to the Rs 74,000-crore TV market, but India is one of the fastest growing online video markets in the world. That explains why 35 OTT apps — from broadcasters, telcos and tech majors — are fighting it out in India. Therefore unlike Zee’s earlier digital attempts with Ditto TV or Ozee, the timing looks good. 

What about monetisation, everyone’s bugbear? For now, Zee is using a hybrid model, much like most broadcasters. Zee TV shows such as Ishq Subhan Allah or others are part of the advertising driving offering. Its originals such as Rangbaaz and films are behind a paywall. Katial reckons that these are different markets. “We use ad-funded content to funnel users. Right now we don’t have enough content to put behind paywall. The way the OTT industry operates is that consumers are married to content not platforms. So, a consumer who wants to see Rangbaaz will pay for a month, see the show and go away. The key thing is that consumers are confident that Zee will put the content there,” says Goenka. 

The ad rates at the walk-in level, where free content sits, are growing. “The top show on Zee TV would get a CPM (cost per mille or cost per thousand) of Rs 35, the top show on OTT will get Rs 350. That is one extreme. On an average, OTT gives four to five times more in cost per thousand,” says Goenka. The timing then works on the revenue side too. This then puts less pressure on Zee’s rather profitable balance sheet. “The Zee5 financial leverage on our balance sheet is 5-6 per cent of our EBITDA (earnings before interest, taxes, depreciation and amortisation) and whatever revenue digital is generating,” says Goenka. 

These are early days of the jostling among 35 brands for a slice of the pie. Wait then for the dust to settle down to know where Zee5 stands.