The response has been encouraging so far. ZEE5 benefitted from both OZEE and dittoTV, with a majority of existing subscribers upgrading to ZEE5. We believe that it will continue to see increased traction as we launch more original content supported by extensive marketing campaigns.
CEO – International Business
It has been four months since the launch of ZEE5. How has the initial response been? What are the critical parameters on which you are evaluating it?
The response has been encouraging so far. ZEE5 benefitted from both OZEE and dittoTV, with a majority of existing subscribers upgrading to ZEE5. We believe that it will continue to see increased traction as we launch more original content supported by extensive marketing campaigns. We are also exploring partnerships with telecom operators, which will give ZEE5 an even wider reach.
While we will be looking at a host of data to evaluate the consumer response, we would be closely following three key metrics to assess ZEE5’s performance - monthly active users (MAU), engagement (time spent), and the paid subscriber base. In the next few quarters, we will start disclosing operating metrics followed by the financial performance of our digital business.
The most significant differentiator is ZEE5’s extensive content catalogue. The sheer depth and the breadth of our content offering is overwhelming, and is significantly ahead of all other OTT platforms in India. Launched with more than 1,00,000 hours of content in 12 languages spanning original content, movies, international content, music, kids content, lifestyle content and other niche segments, ZEE5 will be a one-stop entertainment destination for the diverse Indian audience.
We are producing ZEE5 Originals in six Indian languages and the plan is to have more than 90 Originals by March 2019. This will be the most extensive offering of exclusive digital content created for Indian audiences by any OTT player. Our expansive catalogue of over 3,500 movies across languages will be another big draw for audiences. For discerning viewers, ZEE5 houses some of the best content from countries like Turkey, Pakistan, Spain, China, Korea, etc., dubbed in multiple Indian languages. Further, we have curated a line-up of 200+ English movies and 25+ English shows. We also have kids, health & lifestyle, and music content - genres that are seeing the fastest adoption on the online medium. Additionally, viewers will have access to 90+ channels that they can stream live, along with around 500 hours of content that we produce every week for television, minutes after broadcast. Unlike most existing platforms that are either focused on the English-speaking audience or the youth segment, ZEE5’s vast content catalogue and customised technology features are designed with the objective to cater to all segments of the video-viewing audience.
ZEE5 has been designed keeping in mind the peculiarities of the Indian market. A large set of Indian consumers is not familiar with English and is not comfortable with typing on small screens. This greatly affects the user experience. To address these issues, ZEE5 gives users the option to interact with the app in 11 Indian languages. We are the first Indian entertainment app with a voice search feature, which enables seamless content discovery. Also, to offer a smooth streaming experience, we have partnered with multiple CDNs (Content Delivery Networks). Keeping in mind that internal phone memory is limited for the majority of Indians, there is also an option to download content on the phone’s memory card.
India is predominantly a single-TV market with more than 95% homes having just one TV. In an average family of four, not everyone will have access to the remote. Hence, OTT becomes the default secondary platform for entertainment content. Also, existing television content may not be relevant for a section of the audience, especially the youth and male segments. This audience can be reached through differentiated content via the digital platform. Given the different formats and edgier nature of our digital original content, it will also appeal to audiences who are infrequent television viewers.
Further, in the digital space, the life of content is far longer than on TV, because viewers often watch earlier seasons before watching the latest season of a show. Therefore, it makes sense to invest in original content for our digital platform.
We have a freemium model with both AVOD and SVOD. All the catch-up content from our network and lots of movies are available for free to the users, and are being monetised through advertising. The rest of the content is behind the paywall.
We feel OTT has to be a subscription-driven business. Globally, wherever the SVOD model has become popular, consumers were already used to paying for content on TV and ended up saving when they moved to online platforms. In India, however, where an average consumer pays around `200 for a month’s cable subscription, there must be a compelling proposition if we want him/her to pay for an OTT platform. So far, digital content was limited mainly to catch-up TV with hardly any exclusive or premium content for the Indian audience. On ZEE5, our paid subscribers will be able to access an exhaustive range of digital original content, premium movies, English content, international content dubbed in Indian languages and much more. All of this at `99 per month offers a great value to the consumer. To put it in perspective, a movie ticket in multiplex costs `150 on average.
We will also provide transaction video on demand (TVOD), which will enable viewers to watch a particular series or a movie. We will see how our paid subscriber base builds up over time and make modifications to our existing plans, if necessary.
We can broadly classify OTT players into four categories - global players, telecom operators, independent platforms and broadcasters. Global platforms like Netflix and Amazon Prime Video cater primarily to the English-speaking audience. Facebook and YouTube mainly thrive on user-generated content. Telecom operators are yet to build content creation expertise, though they are playing a crucial role in content aggregation. Independent platforms generally specialize in specific content genres. In contrast, broadcasters’ OTT platforms offer a full spectrum of India-centric content. Broadcasters have a natural advantage given the quantum of content they create and their understanding of varied preferences of different segments of viewers. In this context, we think ZEE5’s closest competitors will be broadcaster-led OTTs.
We believe that more than one player can coexist in the digital space. Viewers on digital will likely sample content of multiple platforms, just like TV audience watches multiple channels. However, the number of platforms we have in India at the moment is unsustainable, and we think that eventually, consolidation will take place.
FY18 has been a year of expanding our reach in international markets. We have entered into new distribution partnerships in several markets like America and MENA to gain a wider audience for our channels. In select markets such as the UK, we have moved our channels to the basic pack of some of our distributors. These initiatives have helped increase the reach of our network to 578 million (59% YoY), across 170+ countries.
Local productions during the year were increased across territories. Though locally produced content is minuscule as compared to the library-based content aired on our channels, it helps us to establish a stronger connect with our audiences in these markets. We are also tapping new markets for content syndication to license our content library, as well as produce shows for third parties. During the year, we also started distribution of movies in international markets and have received a good response.
We started the year with macroeconomic challenges in certain markets, such as the Middle East. Also, in Bangladesh, international broadcasters faced regulatory hurdles, which we are working to resolve. Due to these factors, our advertising revenues adjusted for Sports business, declined by 2% YoY. That said, we have seen a recovery towards the end of the year, and we hope to sustain the momentum going into FY19. On the subscription front, our revenues declined 11.4% YoY primarily due to the divestment of our Sports business and adverse currency movement. We believe that in the near-term, subscription revenues will remain flattish on a constant currency basis.
In the coming year, we plan to further increase the reach of our existing channels through distribution and creation of localised content. On the distribution side, we are developing strategies for each market to ensure maximum reach of our content. On the content front, we are increasing our local programming for the Indian audience in select markets, which will be on an ad-funded model. We also plan to ramp up our programming initiatives for the native audience in select markets. In FY19, we will continue to further enhance our local programming initiatives in markets like USA and UK.
Another major goal for the coming year is the rollout of ZEE5 in the international territories. There are a few territories where traditional distribution channels are expensive. The launch of ZEE5 in these markets will help us reach the consumer in an economical way. Initially, the plan is to launch in Asian markets where there is a high affinity for Indian content, which will be subsequently followed by launch other markets.