Why does Essel Group chairman Subhash Chandra, one of India’s biggest media tycoons, want to sell half of his stake in Zee EntertainmentNSE 2.58 % Enterprises (ZEE)?
‘Entertainment Goes Online’, a recent report by Boston Consulting Group, throws ample light on Chandra’s motivations. It says India’s over-the-top (OTT) industry has huge potential and can reach a market size of $5 billion (Rs 35,730 crore) by 2023. Access to affordable data, rural mobile phone penetration, rising affluence and service adoption across demographic segments — including women and the older generations — are some key drivers for the OTT industry to unlock its potential.
Chandra’s game plan might just be to turn his broadcasting giant into a media tech company with a heavy emphasis on OTT. Traditional broadcast media will feel the heat from OTT players as is evident from the way Netflix has gained ground among Indian audience.
Chandra believes he is better positioned to take advantage of the potential in the OTT market. In a recent interview, Chandra said the mindset and DNA at ZEE was of a content maker while the Netflixes and Amazons of the world had a trading mentality. “Our people did an analysis of Netflix’s ‘Sacred Games’ and said that the same show with the same artistes could have been done 40 per cent cheaper. And yet my producer would have had 15-20 per cent growth,” he said in the interview.
The BCGNSE -2.00 % report also says that OTT players with Indian content had the potential to tap into the international markets too, where there was a large diaspora paying higher average fees for content. This is another opportunity for Zee which has become the first Indian entertainment company to take its OTT video service, ZEE5, to over 190 countries. So far, only international players such as Netflix and Amazon Prime Video have a global presence of this scale. Hiring US-based LionTree Advisors, led by media and telecom deal-maker Aryeh Bourkoff, as its international strategic advisor, ZEE seems to have stitched a plan to lure a strategic investor which could also help it strengthen its overseas business. Bourkoff had said in an interview in May that splashy megadeals would come, especially as telecom and tech giants warmed to the idea of becoming conglomerates, housing several distinct businesses.
Unlike Netflix, which has a unified pricing model across the world, ZEE5, for now, will adopt different strategies for different markets. For developed markets such as the US and UK, the service will be available as a subscription video-on-demand (SVOD), while in a few markets of the Middle East and North Africa, there can be a freemium model. ZEE is already in talks with platform partners in other countries to bundle the service with the existing pack.
