Telecom Deal Renewal Delay Drags Zee5 Revenues

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Zee5, the over-the-top (OTT) streaming platform recorded a dip in quarter-on-quarter (QoQ) revenues due to the delay in the renewal of a telecom deal. The development was shared by Punit Goenka, the managing director of Zee Entertainment Enterprises in the fourth quarter earnings call on May 20, 2021. Goenka said that the renewal of the telecom deal has been “pending” since the third quarter of the previous year and that the company is currently “under negotiation” with the operator. The managing director of Zee Entertainment said that the Zee5 is the “youngest OTT platform” in India and that the company sees “scope for significant improvement” in the upcoming quarters.

Zee5 Set to Soon Receive Performance Enhancements

In its earnings release, Zee Entertainment Enterprises said that its operating revenue hit Rs 1965.8 crores in its fourth quarter of the 2021 financial year, translating to 0.8% year-over-year (YoY) increase. The company said that the Zee5 platform for the month of March recorded 7.26 crore global monthly active users (MAU) while its daily active users (DAU) were at 61 lakhs.

Goenka said that the Zee5 annual pricing was reduced to Rs 499 in the fourth quarter “in line with what is happening in the market.” Further, Rohit Gupta, the chief financial officer at Zee Entertainment Enterprises in the earnings call said that the new pricing of the annual pack enhances the user's “value proposition.”

“We expect that it will enable us to upgrade consumers to the 12-month pack instead of monthly subscriptions,” Gupta said.

Crucially, Goenka said that the company will now be working on improving the user experience and that Zee Entertainment has been “behind the curve.”

“We have drawn up a technology and product roadmap, in order to upgrade this digital platform to the next level,” Goenka said in the fourth quarter earnings call. “I believe ZEE5 will certainly see an all round improvement in performance over the next few quarters.”

Gupta said that the Zee5 platform in the quarter ended March 31, 2021, recorded Rs 110 crore in revenues.

Analysts Say Zee5 Likely to Emerge As Future Growth Engine

Further, Bijal Shah, the head of investor relations at Zee Entertainment said that the partnerships with telecom operators are “only for premium content or for subscription service.” Shah said that the users gained through the partnerships with telecom operators are “not really that large.”

“So predominantly our MAUs are coming and DAUs are also coming from our own organic growth rather than through telcos,” Shah said in the fourth quarter earnings call.

While Zee Entertainment did not reveal the telecom operator it is currently holding negotiations, it has to be noted that Vi in early March stopped offering Zee5 premium pack with its postpaid plans. The third largest operator in India earlier offered Zee5 subscription for no additional cost to its postpaid users subscribed to plans priced Rs 499 and above.

Meanwhile, multiple analysts including Prabhudas Lilladher have said that they remain positive on Zee Entertainment Enterprises largely due to the “emergence of Zee5 as future growth engine in changing content consumption landscape.”

ICICI Direct, one of the largest retail broker and financial product distributors in India in a report on May 21, 2021, said that the Zee subscription revenues will improve with Zee5 ramp up. With the company already reducing the Zee5 annual pack pricing, Goenka said that the company would also focus on the content along with enhancing the Zee5 platform experience.

“First increasing the value proposition of ZEE5 which will be achieved through a combination of compelling content and competitive pricing,” Goenka said. “We are in the process of creating a very strong line-up of movies and digital originals.”

Gupta highlighted the company released over 75 shows during the 2021 financial year including “14 original shows and movies” on its Zee5 platform in the fourth quarter.

However, Dolat Capital, the financial firm engaged in the trading markets said in its report on May 20, 2021, that the OTT platform run by Zee Entertainment has had “limited success.”

“Zee’s effort in [the] digital space has met with limited success,” Dolat Capital said in its report. “Competition OTT platforms remain the buzzword.”

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Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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