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Zee Entertainment Enterprises Ltd
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Ladies and gentlemen, good day, and welcome to Zee Entertainment Enterprises Limited Q1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Bijal Shah. Thank you, and over to you, sir.
Thank you, Aman. Good day, everyone, and welcome to Zee Entertainment's Q1 FY '22 earnings discussion. Hope you all are well and taking good care of yourselves. We have today with us our MD and CEO, Mr. Punit Goenka, along with Chief Finance Officer, Mr. Rohit Gupta. We'll start with a brief statement from Mr. Goenka, followed by a statement on operating and financial performance by Mr. Gupta. We will subsequently open the floor for question and answers.Before we begin the call, I would like to remind everyone that anything we say during this call that refers to our outlook for the future is a forward-looking statement and must be taken in conjunction of the risk that we face.We will now begin. Over to you, Mr. Goenka.
Thank you, Bijal. Good evening, everyone. Thank you for joining us this evening. First and foremost, I hope you and your loved ones are safe and taking good care, and the required rounds of vaccinations for you and the family are completed. As for the agenda of our call, our CFO, Rohit Gupta, will take you through the operating and financial performance of the company, while I would like to update you on the overall business environment.After the disruption experienced at the start of the previous year, the business was steadily recovering in second half. However, the second wave of COVID-19 has reversed the recovery and our performance in the first quarter has been significantly impacted by the pandemic and consequent lockdowns. Though the fall in advertising revenue was much lesser than we had experienced in the first quarter of the previous year, it was still a sizable one. Towards the end of the quarter, while the nation did see a rapid fall in the COVID-19 cases, but lockdown and restrictions on economic activities in several states are continuing well into the second quarter.The recovery in advertising spends has been slower than our initial estimates. During the quarter, our television business suffered from a double whammy on account of pandemic. As audiences were confined to their homes, they were spending more time watching television. We continue to produce -- production of our original shows by moving the shoots to cities, which have relatively lesser levels of restrictions and to resorts, which increased our production cost even as the advertising revenue dipped.Another important development for this quarter was that the Bombay High Court delivered the long awaited judgment on NTO 2.0. The court has struck down 1 of the twin conditions requiring broadcasters to build bouquets in a fashion that none of the channels included in it is priced more than 3x the average per channel. Besides these, all other conditions were deemed legally valid and new regulations are to be implemented within 6 weeks from the date of judgment. The industry forum and some broadcasters have moved to the Supreme Court challenging the order. While we are awaiting the verdict, we have parallelly started working on the revised pricing. As we have previously discussed, the implementation of NTO 2.0 can cause disruption for a quarter or 2, but once it settles, we are confident of reverting to subscription revenue growth.Moving on to our digital business. I'm happy to report that our new strategy for ZEE5 is showing early signs of success on expected lines. This quarter, we launched 2 big properties, Radhe and the much-awaited episode of Friends: The Reunion. This led to a sharp jump in app users in the MAU base. The strong content push along with better user experience is resulting in improved Net Promoter Score and top-of-the-mind recall for ZEE5 in a crowded market. We have built a very strong content lineup for ZEE5, and we are confident of building further on these improvements. ZEE5 has been expanding in global markets over the past year, starting with the APAC. This quarter, we launched in the United States, the largest market over South Asian thus far. Zee has had a long association of over 2 decades with the United States market, bringing to our viewers the best of Indian entertainment through our channels. With ZEE5, we now look to offer this audience as well as the younger demographics, access to a much deeper and wider choice of content, premium content with our [ new shows ]. We are delighted to note the response we have received and we are confident that the United States would become an important revenue driver for ZEE5 in the years to come.As I touched upon earlier, the recovery in the advertising market is slower than anticipated. Advertisers are waiting for the risk of potential third wave to abate before they start raising their spends. However, we remain confident that as and when sense of normalcy returns and fear of lockdown recedes, advertising spend would bounce back as the underlying demand for inventory remains healthy. Our confidence stems from the fact that in the previous year, once the COVID-19 surge was behind us, we saw an instantaneous jump in advertising spends. Despite slower recovery in our advertising revenues, we have decided to continue to invest in both of our core businesses that is broadcast and digital, given the large opportunity in front of us.In broadcast space, our primary focus is to improve our market share in Hindi, Marathi and Tamil markets with the launch of new shows, high-impact, nonfiction and increase the number of hours. We will be launching 30-plus new shows in quarter 2 alone across the network. In digital, we continue to offer differentiated shows and blockbuster movies. These investments will drive our market share, putting us in good stead when the recovery takes place.On that note, I would like to hand over the call to our CFO, Rohit Gupta to take you all through the operating and financial performance. Rohit, over to you.
Thank you, Punit. I hope all of you are doing well and taking good care of yourself. The second wave of COVID had an impact on our business during the quarter, like most other businesses. While the impact was much lesser than last year's, there were challenges from both operational as well as financial point of view.Starting with Maharashtra, we saw lockdowns in all the states we operate in. Our teams across the markets were quick to react to the announcement of lockdown and showed ability in moving the shootings of shows to safer locations. This enabled our consumers to continue to enjoy original content with a largely undisrupted programming lineup. We also ensured that all safety measures were duly followed and the health of our people continue to be our priority during this process.During the lockdown, content consumption saw an increase with TV impressions growing by 9% and reach growing by 7%. Genres like news and movies gained share, while GEC saw a decline. During the quarter, we continued to be India's #2 TV entertainment network. The viewership share for the quarter dropped to 17%. However, we have already seen a sharp recovery in the month of July. This drop in share was due to the cumulative impact of lockdown disruption, update in [indiscernible] and soft performance of some of our channels. While the performance in markets like Bangla, Telugu, Kannada, Odia and movies was strong during the quarter, in Hindi, Tamil and Marathi, our channels have significantly scope for improvement. Now coming to ZEE5. Global MAUs and DAUs for the month of June were 8.2 million and 7.1 million, respectively. During the quarter, ZEE5 released 11 original shows and movies. As PG talked earlier, the release of Radhe and Friends: The Reunion on ZEE5 has truly helped uplift the value proposition and brand recall of our platform. With a monthly engagement of 190 minutes during the quarter, ZEE5 is building momentum on all key metrics. Annual pack subscribers now make up more than 40% gross additions every month, highlighting the increasing traction on the platform.The revenue and EBITDA loss of ZEE5 for the quarter was INR 1.1 billion and INR 2 billion, respectively. The increased momentum on subscription revenue was largely offset by the impact of COVID on the advertising revenues. The plans of these studios continue to be impacted during the quarter. Zee Music Company continued to be second most subscribed Indian music channel on YouTube and the label witnessed 80% growth in YouTube videos on a Y-on-Y basis.Now coming to the financial performance for the quarter. Domestic advertising revenue grew by 128% year-on-year on a low base and the subscription revenue saw a growth of 2% on a like-to-like basis. Compared to FY '20, domestic ad revenue declined by 23%. This was due to the combined impact of COVID on overall industry advertising spend and some of the nonfiction properties, which could not be aired due to lockdowns. We also had to incur an additional spend of INR 27 crores on shifting locations of -- shooting of our fiction shows to alternate locations.The EBITDA for the quarter was INR 3.4 billion with a margin of 19.4%. While we are confident that advertising revenues will bounce back as soon as fear of -- subsequent fear subsides, we continue to invest in our businesses. However, with slower-than-anticipated recovery in advertising revenues so far, our full year margin will be lower than earlier guidance. The cash and treasury investments for the company was INR 17.4 billion as on June 30, which includes bank balance of INR 6.3 billion, fixed deposit of INR 3.3 billion, mutual fund investments of INR 7.4 billion and NCDs worth INR 470 million.Thank you, and over to you, Biju.
Thank you, Rohit. We will now proceed to question-and-answer session. I would like to request Aman to start the Q&A.
[Operator Instructions] The first question is from the line of Abneesh from Edelweiss.
My first question is on market share. So whenever any wave happens, Zee's network suffers more versus the other network. So question is, if wave 3 happens, what are you doing to future-proof that? Is [ 30-plus ] shows the answer to that?Second related question is &tv was supposed to address the gap in positioning of Zee TV in the sense that crime and comedy shows wherein Sony and Sab TV has a much bigger positioning. That was missing on Zee TV and &tv was supposed to address that. So whenever waves happen, the older shows are seen. So that is not possible for the fiction-heavy channel like Zee TV. So wanted to understand, &tv why it is not able to help you in this? And second for wave 3, is 30-plus show the answer? Or you would need to do something on the &tv?
So, I think, Abneesh, there are 2 completely [ things ]. So from the wave 3 perspective, what we have planned in the quarter 2 is what we can physically do from our perspective. I don't think that we can do anything more than that because as you will understand that anything that we plan today can only fructify somewhere between 6 months to 9 months, that's the creative process for any content that needs to be created.We have prioritized 3 critical markets, which is Hindi general entertainment, Marathi entertainment as well as Tamil entertainment are the key priorities for the coming quarter or for the current quarter, and that's where the significant investment for the company is going to go. The 30-plus shows that we talked about, of course, are spread beyond these 3 channels as well. But a significant part of that 30-plus shows is on these 3 geographies or channels that you are referring to.As far as when you talk about Zee TV and &tv complementing each other, it was working well. But when -- I will be very upfront here, Abneesh, as you know, when the mothership is down, the focus of the company shifts towards getting that back into place, right? So currently, all our energies and investments are going behind that rather than splitting our resources over 2 Hindi general entertainment channels.
So would you address the prime and comedy via Zee TV going ahead in the near term?
So we already have a show called Zee Comedy Show that launched on 31st July, and we are awaiting the ratings for that. That was the first nonfiction show to launch after quarter 1. So let's see how that performs. And then going forward, we'll have more such things coming out. And it doesn't mean we are giving up on &tv from any angle, from that perspective.
Sure. One last follow-up on this. Last year in day 1, Q1, there was a big drop and Q2, there was good recovery. Are things similar for this time also? You said July month has been good, but if you could give us more color on the recovery part in Q2 market share.
So we have had some recovery in market share on the viewership side. That will obviously translate into revenue in the coming month or months. But my expectation of the recovery is still lower than what I had thought because July did not go as per what we had anticipated when the second wave had hit us. We were hoping that markets like Maharashtra and Tamil Nadu would come out of complete lockdown, which they have not. And this has a direct impact on advertising revenue, especially down south from the retail segment, which is still, as you know, largely impacted by the second wave.
Sure. My second and final question is on ZEE5. So you have done a lot of steps in the last 3 months. Radhe, cutting annual price by half and you shared that now 40% annual packages are there. So what is still required now? Do you have to build on this momentum or much more is required from new strategy, new steps? And what was the actual pack in the bad time. So 40% is current, and that's a misleading number because Radhe and INR 499 happened at the same time. So what should be the number we should realistically look at?
SO actually, Radhe and INR 499 didn't happen at the same time, Abneesh. INR 499 was actually introduced in February -- sorry, in the month of March itself as an introductory offer on the anniversary of ZEE5. We made it permanent when Radhe was launched, as a permanent feature now. So therefore, it's not correlated. I think what Rohit talked about was the 40% conversion on daily subscriber acquisition is on the annual time. So every day, the number of subscribers that are being acquired, 40% of those are on Radhe -- on the back of annual pack. So it's a continuing effort, not necessarily only in the month of May, which was backed by Radhe and Friends: The Reunion.
But are you not happy with it? I'm not asking a surgical question. But are the -- most of the steps which were required for getting ZEE5 back in the top race in the OTT, are that done? Or it's a treadmill? As a new step, what are required? It's a treadmill, I know. What are the new steps required to really make it relevant in the top 3 OTTs?
So Abneesh, I don't think we could have turned around the whole platform in 3 months. If that was the case, then everybody would be running their platforms and reaching those kind of numbers. It takes a lot of effort. There's a lot more technological advancement that is being used on the platform, and we are nowhere close to being perfect or the gold standard. So we have a lot more work to be done there. And we already have a plan in place for the rest of the year for that.And obviously, content, as you rightly know, is a treadmill. So we'll constantly have to work on that. It doesn't mean that every quarter you'll see a Radhe-like film coming out, but we have to churn out good quality content quarter-on-quarter for the subscriber base to keep ramping and also remain -- stay with us so that our churn is managed at a low level for ongoing subscriber conversions.
Our next question is from the line of Vivekanand S. from AMBIT.
I have 2 sets of questions. One is on ZEE5. Punit, since Radhe was released in May, were the MAUs meaningfully higher in the month of May? And can you discuss the impact of churn and how you're dealing with it in ZEE5? And the related question on ZEE5 is would you want to give any more color on the split between domestic and international usage in terms of, say, minutes of viewing versus the international market? Anything to add, that would be great. So that's question one. I'll come back on -- for the second one.
So Vivekanand, definitely Radhe did contribute to the growth of getting the MAUs from where they were in the end of quarter 4 to the numbers that we have just declared at 82 million. Radhe did aid significantly on that, but it's not only Radhe because the people who came on to consume Radhe have experienced other content as well. And therefore, they have repeatedly come back even in the month of June. So I think it has worked well for us from that perspective. That's for your part one.On the second part, I think the international market to be split out is a little bit premature right now, given that the biggest market for South Asians just got launched last month, or in the month of June, end of June. So I think we'll wait for a couple of more quarters before we give you more color between how the India is behaving versus international.
Okay. One small follow-up. Is it fair to assume that the revenue split for ZEE5 would be similar to the revenue split for the overall business, domestic versus international? Or is it -- does it have much higher skew towards international revenue?
Again, too early to tell because, firstly, it will not be in line with the way television business revenue split is because we're talking about a business which has been running steadily for almost 3 decades versus a very new business that is just being established and the markets are still being launched. So we'll be comparing chalk and cheese here, Vivekanand, so let me not try and over guess what we want to be achieving.
Fair enough. Second question is on the subscription market. You said that we will be able to get back to the mid-teens growth basis, the Bombay High Court judgment. Did I get that right? Or do we need any more changes to be made for the NTO implementation to resume our journey of subscription revenue growth double digit?
Well, ideally, we would like all these conditions to be removed, right? That's the ideal situation. But we don't operate in an ideal world.
No. My question was more around are -- is this removal enough for you to grow faster?
I'm sorry to answer. Should I answer, Vivekanand?
Yes, yes. Yes.
Yes. So as I was saying, ideal situations are ideal situations, but we don't operate in an ideal world. And as I have maintained that even in the current form, we are gearing up to launch the NTO 2 as soon as the judgments are passed. And basis that the disruption may happen for a quarter or maybe 2 at max, and after that, we will start to see a growth trajectory on the subscription revenue line for the linear business. So that we are maintaining going forward.
The next question is from the line of Naval from Emkay Global.
Yes. I have questions around the margin guidance. As Rohit stated in his initial remarks that margins in this year will be lower than earlier guidance of close to around 25%. Now can you share, if not guidance, but new range, whether it will be like 20% to 25%, below 20%, any number over there? And it implies only for this year? Or are we changing for next year as well?
Rohit?
So see, as we highlighted -- as I highlighted, our revenue recovery is slower than estimated. And there are several uncertainties and advertisers are in wait-and-watch mode. There seems to be a possibility of wave 3 of COVID again disrupting economic activity and consumption. So this makes it difficult to predict the ad revenues for the year. However, we're continuing with our investments in both digital and the broadcast business. And accordingly, there will be an impact on margin, on working capital and cash. However, it is difficult to give you a precise number at this stage. As more clarity emerges in coming quarters, we would give color to likely margins.As far as FY '23 is concerned, it is a little too early to guide. We will talk about the margins for FY '23 around end of this year.
So follow-up on this. Basically, your FCF guidance also now stands canceled or kind of revised with margins going down substantially. Am I correct?
Yes. It's all related. So the revenue is going to be lower and like I said, we will continue to make our investments, which are required. There will be an impact on working capital.
And secondly, has the production cost gone up? Although 1Q was somewhat different because of lockdown restrictions and isolated kind of shooting what you would have done. Has production cost gone up now structurally? Or this is, again, a kind of a blip what we have seen in 1Q?
No, it was a 1Q thing, Naval, because of the lockdowns. Of course, if there is another lockdown, we are already preparing that -- in the third wave if there are lockdowns again, we will have to go ahead and shoot in markets where there are easier restrictions. But beyond that comment, I don't think it's fair to reset the benchmark of production costs.
Understood. And lastly, on ad revenues, how are yields in terms of -- although it would be distorted, but can you suggest how far are they from pre-COVID levels? If you don't kind of include Zee, which you have already stated, there has been a market share challenge there. But on like-to-like basis on your key channels, how far would we yield estimate to pre-COVID?
So most of the decline that you're seeing in the revenue against the FY '20 comes from largely yield. It's not coming from inventory fill levels.
[Operator Instructions] The next question is from the line of Sanjesh Jain from ICICI Securities.
Two questions from my side. First, on the subscription side. We said that we will see a disruption before we get to the growth. Can you give us some more color on what kind of disruption are we expecting? Are we expecting revenue to decline from these levels and then grow from there? Are we expecting disruption in the reach for some of the channels? How should we look at this disruption in the implementation of NTO 2.0?
It may be a combination of that, Sanjesh, because -- see, we are working on the pricing and we are working on the new booking strategy that we are working on. Obviously, our first and foremost objective will be to maintain status quo on both reach and revenue. But there could be some disruption if we have to take calls on either one side or the other. If we have to maintain reach, we may have to sacrifice some revenue in the short term and vice versa, for if we want to get growth immediately, we have to sacrifice some reach to do that. So we'll take those calls on the ground when the implementation is happening. But of course, the endeavor for the company is to maintain status quo rather than anything else. Even if you remember during NTO 1, we managed to maintain status quo despite losing some reach in some of the markets, but we quickly got that back once the disruption ended after a quarter.
Got it. My second question is on the movie production side, which we have guided that we are looking at expanding the movie releases which we want to do. Can you give us some color how many movie are under production and how many under planning? And do you see some of the movies you plan for this year getting pushed to the next year because of the lockdown? And what kind of investment are we looking this entire year on the movie production side?
So again, to reiterate, our investments in movie production are incremental to what we are already spending on, buying movie rights for both our satellite business, digital business and our linear business. There is no significant higher investment that's going in. Yes, what it's doing is it is locking up our inventory or advances because it's working capital in progress due to the COVID situation where movies have got delayed, either for lack of shootings happening or the fact that theaters are not open and hence, we are not able to release these movies.So definitely, as you rightly said, some movies, at least the big films that we had planned this year will get shifted to next financial year. But as and when the theater situation gets more clearer, we will be releasing some at that time. We have started work on about 20 films when we have said in the beginning of the year. Obviously, all 20 will not release this year in the theatrical situation. But more clarity will emerge with the lockdown situation changing.
Got it. One last from my side on advertisement revenue. Do you think advertisers who are largely FMCG company for us are struggling from the higher raw material cost and their margins are under pressure, and that is one of the incremental reason which is causing stress for us in terms of the advertising spend by these FMCGs? Do you think that situation needs to normalize before they come back and wholeheartedly again start advertising on our channels?
Yes, Sanjay. So -- and this is primarily what we have seen in 1Q and what we saw in July is on account of COVID. And if I look at category by category, the category within, let's say, FMCG, which are more impacted by raw material price inflation have actually fallen much less, but let's say, personal care has fallen slightly more and which has much more -- I mean going out and those things are more relevant when it comes to category like personal care, which -- consumer durable also has seen a significant decline.So I think so far, what we are seeing is much more related to consumption-led slow down that, because of lockdown consumption, is impacted and due to which advertisers are circumspect whether they should be investing right now. And also, there is not much of visibility what will happen going forward. Second thing, which is driving down the spends is very few launches or innovations being put in the market. So typically, if you see any big company, they would be launching a lot of new products and introducing new categories. Now this thing has taken a back seat right now because the supply chain -- distribution chain itself with this sort of pace and you are, let's say, launching a product and if there is a lockdown, then probably whatever you spend on advertising will get lost.So that is also one of the factors which is impacting. What we sense right now is that as and when if things -- the fear of lockdown goes away and we are around the festive season, probably we can actually see a pretty sharp rebound in our -- I mean, in the ad spend. There are some challenges which they are facing, but I really don't -- I mean, we really don't think that they are so material that growth trajectory is altered -- will be altered on account of that.
The next question is from the line of Yogesh Kirve from B&K Securities.
So I appreciate regarding the margins, the comments that were made, I mean in the short term based around COVID [indiscernible]. But from a longer-term perspective beyond FY '23 or '24, right, so based on your usual business and your strategies with respect to the digital business, ZEE5, and the state of television business, so is it fair to assume that structurally the margin profile won't be different than what it was pre-COVID?
See, again, if you're talking about very long-term perspective and assuming that COVID is completely behind us, let's say, the country is 75%, 80% vaccinated or double vaccinated, margins should improve. There should be no reason why we can't go back to nearer to the pre-COVID level margins. But if you ask for specific guidance for current year or the year after, it's difficult to predict from today's perspective given the fact that what we were predicting at the beginning of quarter 1 has played out so negatively. So that's why the reason for the, for lack of a better word, caution. But certainly, being in this business, I don't believe that the structural change in margins has happened. Things should come back to normalcy. How soon they come back to normalcy is a question that time will tell.
Okay. Second is partly related to this, so regarding ZEE5 losses, I mean, any sort of guidance or indications of when do we expect the losses to peak out? So any comments or any color on that could be useful.
I think we have already stated that this will be the peak investment year for ZEE5 in terms of losses. And as the revenue growth starts to come in, you will see losses coming out, although next year, maybe only marginally low. But the year after that, you start to see significant shrinkage in that.
Okay. Finally, related to the -- [ so there is ] cash flow, so despite cash profit. So our cash -- cash and cash equivalents have gone down. So could you take us to the key push and pulls during the quarter. So yes, I see some current -- the working capital liabilities have come off. So if you can provide some color on that?
Rohit?
Yes. See, there's also seasonality attached to it. So our March quarter is always a very strong quarter because of a lot of subscription flows coming in, in that quarter. Plus, as you would have seen from the balance sheet, there has been a release of a lot of creditors in terms of the overall incentive payouts and bonus payouts that happens. So there's no seasonality to it. Yes, there has been some digital investments that have been made in terms of movies, et cetera. But overall, it's more like more to do with seasonalities.
The next question is from the line of Jay Doshi from Kotak Securities.
First question is when I look at the sequential increase in revenues of ZEE5, it's just about INR 4 crore. So I was expecting it to be much higher given that a large part of booking related to Radhe may have happened in the quarter. So I just want to understand how does revenue accounting work for subscriptions as well as advertising? And how does cost amortization or expensing work when you buy a big-ticket movie like Radhe for ZEE5?
So first part, Jay, the revenue increase has been significantly more on the subscription line, but it got eroded because of the advertising down that we saw in terms of the COVID impact, et cetera. Also because of sporting events, a lot of the campaigns got shifted from ZEE5 onto other platforms. On the accounting of revenue, Bijal you want to take that?
Yes, Jay. So basically, a good part of this revenue will be recognized over a year because primarily subscribers have come on annual pack. Now on annual pack, we would be amortizing this -- sorry, we would be recognizing revenue on a daily basis. So let's say, if it is INR 365, every day we accrue only INR 1. Now this movie got released in the middle of the quarter and people subscribed, say, over the next 15, 20 days. So a full reflection also of the subscription revenue is not there in the quarter of people who joined ZEE5 because of, say, Radhe. And that revenue, we will continue to see in the coming quarters. On the cost side, see, it is like -- we are following exactly the same policies for recognition of cost, which has been in force for several years. So when it comes to movie, it is direct-to-digital release kind of a movie. So whatever cost is there, that will be amortized over a period of 5 years in equal monthly installments. And there are some costs of Radhe, which is relating to music rights. It will be also an amortized 50%, 25% over 25%. And the satellite also will be amortized over -- satellite rights will be amortized over 5 years.
Understood. Second question is, Punit, on the last call you had indicated, obviously, with the caveat that if COVID doesn't spill over to second quarter, then you were hoping for a double-digit advertising revenue growth versus financial year 2020. Now that clearly you indicated that July has been weak and still some impact of COVID continues, but -- I know it's difficult to predict advertising outlook, but if we are not hit by a third wave and is progressively sequentially economic environment improves or recovers from here on, where should we sort of expect advertising revenues to be? Would it be comparable to FY '20? Or it will still be lower than FY '20?
So with the caveats that you are putting, Jay, I think it should be comparable to FY '20.
Correct. And on subscription, domestic subscription perspective, these uncertainties were unknown even during the last quarter. So incrementally, would you say it has improved on the margin? Or it still remains as uncertain as it was a quarter ago, in terms of domestic subscription outlook for the current year?
So actually, we had -- when we were talking about domestic subscription, unfortunately, the implementation of this will happen right at the peak of the season of the year. That's the reason it is causing more uncertainty to us. If it had happened in the first quarter -- by the first quarter and were done with, we would have been fully settled without any disruptions during the peak seasonality of our business. But having said that, I still think the disruption will be only for a quarter or maybe a little bit over a quarter, if at all, given the fact that you have to get so many households to realign their packages once again. And after that, things should settle back and growth should start coming in.
Understood. So there is a little bit of delay versus your expectations on the domestic subscription also?
Correct. Yes.
Sorry. I mean in the opening remarks when you mentioned that you started engaging, to me, it appeared as if at least there is a little bit of improvement. Thanks for clarifying that. And finally, in response to one of the questions you indicated, I think it was around &tv that when the mothership is sort of not doing well, it becomes difficult to invest in the other channels. So I think currently, if at least the last 7, 8 years that I have observed Zee's viewership [ protected ], it was on the upward trajectory and then stabilized at a certain level. If I look at the last 7 years, perhaps it's one of the most challenging times in terms of viewership patterns in Marathi, to some extent Hindi and overall at a portfolio level so -- which you would perhaps call for higher investments in the core business and that you also indicated.So are these investments going to come at the cost of digital investments that you could have potentially done? Or are you going to sort of stick to your original plan of digital investments and incremental investments on TV will also sort of go through? So I mean, in your operating plan, both on the revenue side because there's a little bit of uncertainty both on advertising and subscription, how do you think about investments in the business versus what you would have originally projected when we were hoping that 2Q onwards, things will normalize?
Actually, Jay, sometimes in our effort to be extra prudent, we end up hurting ourselves in the bargain. The -- one of the key results of being overcautious on investments last year has resulted in the market share decline that we have seen, right? So therefore -- I mean I am of the opinion that this year, we should not be holding back any investments, either on our linear business or in the digital business. Having said that, I don't think the linear investments are going to come at the cost of digital business because in terms of the quantum, our investments are not changing. And if you compare it to pre-COVID levels, the FY '20 numbers and the investment levels in the linear business this year, we are talking about incremental growth. We're not even talking about very significant growth on an annualized basis. It may be heavy in 1 quarter or another quarter, but on an annualized basis, it will be incremental.
Understood. My final bookkeeping question is for Rohit. Rohit, I understand that free cash flow is very difficult to predict when there are too many moving parts and uncertainty. Just one number, if you can sort of at least give us some ballpark guidance. What is the ballpark budget that you may have as of now for investments in movies in terms of procurement of satellite rights for TV as well as digital?I understand Zee Studio's business can be -- will be dependent on the number of movies you're able to -- the pace of progress in terms of -- but at least for the satellite rights and for TV and digital, what -- how much should we sort of forecast?
See, Jay, what you've asked is the most difficult thing to forecast because we don't even know which movies will come. So we were looking at some of the releases and for which probably we were signing deals. Now some of these releases have actually been postponed by 3 to 6 months. And some of the guys are thinking that, let's see, there is a movie release, Bell Bottom, probably in the month of August. So how the occupancy goes and that is the deciding fact that for many of the guys to -- whether to invest or not. So at this point of time which will come up for purchase, that itself is not clear and it would be very difficult to answer this question.
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher.
I have a question on the digital side. Now given that subscription income is sticky in nature, can you share what is the current paying subscriber base in the digital domain and how do you see it evolve in the next 2 to 3 years? And in that context, what kind of market share is ZEE5 targeting considering the space is highly competitive in nature?
So currently, the paying subscriber base in India as various reports have put it out, Jinesh, is ranging between 40 million to 50 million individuals or connections. And this is projected to grow in the next 5 years to anywhere between 180 million to 220 million. And Zee would be targeting at least a similar market share as we target in our [ &tv ] industry. It's 20% to 25% market share we should be targeting [ during a ] 5-year perspective.
Fair enough. And this 40 million to 50 million connections which you mentioned, does it include the discounted connections via Telco deals? Or these are the direct acquisitions via B2C route?
No, Unfortunately, none of these reports give the split between the B2B and the B2C base. But if I was to give a guess, it can be roughly 60% coming from B2B and 40% coming direct B2C.
Okay. One last bookkeeping question from my side. Sir, in the last quarter, we collected some INR 2 billion of old outstanding from Dish. So has there been any recovery this quarter? And can you share what is the current outstanding from Dish entity that is overdue?
Rohit?
Yes. So see, we had, like I indicated earlier also, revised payment plan has been agreed with Dish, and we have been recovering monies from Dish as per the agreed payment terms. So this quarter also, we have received money as per the agreed payment terms. The amount outstanding which was there as of March -- sorry, the outstanding as on March '20 was INR 5.8 billion, which came down to INR 4.5 billion on March 21. And as we stand on 31st July, it is down to INR 3.7 billion. As I said earlier, we would be recovering all the old outstanding by the end of FY '22.
Our next question is from the line of Kshitij Saraf from Tusk Investments.
My question is, overall in terms of how you see Zee going in the next 3 to 4 years, so by the year 2025, what is the vision you've set out in terms of revenues, margins? And how do you plan to use the content that -- content investments in ZEE5 to move ZEE5 as well as Zee Music to the next leg of growth?
So as I've said several times that we do expect that Zee will continue on its trajectory of growth as it has been doing in the past pre-COVID levels, which is we have been growing at a healthy clip and certainly ahead of the industry always. We hope to achieve that once this COVID era is behind us. On the fact that the overall revenue of the company, I expect ZEE5 or the digital business of the company should contribute anywhere about 30% to 35% of the overall revenue of the company should come from that vertical.Music, again, will be smaller because the overall revenue has been much larger. The overall music industry today is just about INR 1,000 crores annually in terms of revenue, not more than that. So there's not really that one can scale into that kind of a top line. But certainly, our 2 critical businesses will be broadcast and digital. And of course, music being an important ancillary business and movie is also being another important ancillary business for us, what we also informally called feeder businesses to our core businesses.
We'll take our last question, that is a follow-up question from the line of Vivekanand S. from AMBIT.
I had 2 questions. One, Punit, last quarter, you mentioned about the 5-year business planning exercise. Are there anything -- is there anything significant to share? For example, would you want to consider entering into other genres like sports, as you will not have any noncompete then? Or say, potentially enter new categories? And is there any other guidance that you want to share on 5-year targets?
Yes. Vivekanand, the only guidance I can give you is that we will consider and enter genres or verticals or businesses that are firstly in entertainment and entertainment only. Secondly, it has to be value accretive. And therefore, we will consider entering those businesses. Just to clarify, I don't think sports will be value accretive even in the next 5 years. So that has not been considered in our plan. So beyond that, there is nothing else. As of now, I think our plate is pretty full with what we have in terms of the expansion plans. At least for the next couple of years, we're going to focus on that and then look at any other verticals. Of course, expansions within the existing verticals will continue, whether it's new genres or languages or markets that we'll enter. But any adjoining genre, et cetera, we will consider only after a couple of years, that too if it is value-accretive in nature.
Got it. Second one is a bookkeeping question. In last quarter, we also would share the monetization of music content that was included in the subscription line item. Is it possible to disclose that so that we can compare the subscription level excluding music monetization?
So Vivek, if you see the last year and last quarter -- sorry, last year's number, you can actually find out the like-to-like number. Like-to-like growth overall on subscription base is 2%. And I mean beyond that, at this stage, we are not disclosing, I mean, due -- because of timing, start disclosing first subscription revenue from digital. And that's the first thing. But at this point, often a bit difficult to give you details of quarterly music segment revenue.
Thank you. Ladies and gentlemen, that was our last question for today. On behalf of Zee Entertainment Enterprises Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.