The Netflix, Disney, Zee effect

The making of India's first global media firm and pushing broadcasting bureaucracy into action are possible fallouts of Zee's search for a strategic partner

“My words fall on deaf ears,” says Punit Goenka, managing director and chief executive officer (CEO), Zee Entertainment Enterprises. He is talking about the reaction from the market and analysts every time he points out that the Rs 66.85-billion Zee is not just a broadcaster. It has a robust film business, a digital portfolio, a theatre and music arm, and a truly national broadcasting business with channels in every major language. It has single-handedly led a (very profitable) renaissance in Marathi cinema with films such as Sairat (2016) and Timepass (2014). Some of the biggest Hindi hits such as Hindi Medium and Secret Superstar (2017) are from Zee Studios. The latter went on to rake in Rs 10 billion globally, a bulk of it in China. “But I am still asked: ‘How will you compete with Netflix, Amazon?’.”

Save your sympathy. That is a question every entertainment industry CEO is asked. Over the past five years the $11.7-billion Netflix has redefined the rules of the game. In 2017 it offered 82 films and 700 new shows, making it the biggest broadcaster and studio in the world. Its reach of 137 million subscribers in 190 countries has allowed it to create a market from the long tail of both content and geography. Rick & Morty, a surreal, animated, adult sci-fi show about a brilliant but alcoholic scientist Rick and his teenage grandson Morty may have only a million viewers in the world. But Netflix’s spread and format allows it to capture them and dozens of such audience clusters to make for a rapidly scaling-up business that is valued way beyond its book worth. It is a strange competitor — a subscription-driven service that spends huge amounts on content ($8 billion this year) to offer TV at the production quality of films, in the internet format. 

It is to take on Netflix kind of competitors that global media firms such as 21st Century Fox (which owns Star India) are selling out to bigger firms such as Disney. Most media firms will need not just their content chops, but also an uncanny understanding of technology to take on Netflix or Amazon or anyone else in this space. And they will need gumption, lots of it. Of the three categories of firms getting into OTT — broadcast/film, technology and telecom — the first have the best content brains. But without an understanding of tech, there is only so much they can do. Similarly, technology and telecom firms need media players — note that AT&T just completed its merger with Time Warner. 

Zee’s announcement earlier this month that it is divesting a part of the promoters’ 41.6 per cent in the company to a strategic partner is part of the same wave. The impression I got from chats with Chairman Subhash Chandra and Goenka is that it is looking at a large, non-US, tech firm. The idea is to take Zee global and scale up beyond South Asia. Good idea but what about its ability to partner, ask consultants. Zee has not had a great record with outside CEOs let alone joint venture partners. It is a very successful firm because Chandra is truly a visionary and his son Goenka has been the perfect foil for him on the execution front over the last 12 years. Will Zee really be able to share power, real power to make decisions, with an outsider? If it can adapt then the making of India’s first global media firm will be a joy to watch. That is the first plus this announcement offers, potentially. 

The second is the push it could give broadcasters. With a reach of 836 million people and Rs 660 billion in revenues, Indian broadcasting is profitable and continues to grow in double digits. But it has become a closed, five-player game, with a “we know what this is about” smugness. The result shows in many things — the slide in Hindi general entertainment channels over the past three years for example. Speak to any production company for stories on the pain of dealing with risk-averse, closed-minded programming teams. One part of it is regulatory constraints but the other is simply hubris. Disney’s buyout of Fox (and therefore Star), Zee’s new partnership, Sony’s search for an ally will shake things up for good. High time.

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