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Zee Entertainment Enterprises Ltd
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Ladies and gentlemen, good day, and welcome to Zee Entertainment Enterprises Limited Q2 FY '21 Earnings Discussion. [Operator Instructions] Please note that this conference is being covered. I now hand the conference over to Mr. Bijal Shah. Thank you, and over to you.
Thank you, Janice. Good day, everyone, and welcome to Zee Entertainment's Q2 FY '21 Earnings Call. I hope you all are well and taking good care of your health during the pandemic. We also have today our Managing Director and CEO, Mr. Punit Goenka, along with our Chief Financial 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'll subsequently open the floor for Q&A. To ask questions, please join Chorus Call bridge provided in the webcast invite. Before we begin the call, I would like to remind everyone that anything we say during the 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. Thank you, and over to you, PG.
Thank you, Bijal. Before we get into the details of the company's performance during the second quarter, let me share an overview of the strategic organization restructuring that we have recently initiated. The 4.0 version of ZEE based on the federal governance, granularity, growth, goodwill investment will drive the internal transformation required to ensure that ZEE continues to deliver exceptional performance in this rapidly evolving environment. The market is already within an explosive growth in content consumption and as per the estimates, content consumption in the genres of watch, ZEE and play in [indiscernible] as much as 3x in the near future. Along with this unprecedented growth, we are also seeing a structural shift in the industry like content personalization, integrated advertising solutions, technology and data-led innovation and disruption and increased competition. Winning in this landscape requires rewiring and realigning the organization around these challenges and emerging opportunities. The recent organization structure is the first step in the transformation journey that we embarked about. The growth in content consumption presents an opportunity for ZEE to build scale and grow exponentially over the next few years. As I mentioned during our last interaction, my team and I are working with leading global consulting firms to sharpen these brands. Even as we finalize these plans, there are 2 design principles that we believe must underpin our transformation. Simplicity and focus backed by [ relentless ] execution. The recently announced changes reflect these principles of simplicity and focus. We have realigned the organization on 3 key core value chains: content creation, content monetization and user acquisition. We believe this redesign of the organization around the core value chain, led by seasonal leaders who have successfully demonstrated their ability to build scale and drive growth will see a continued success in the years to come. We have shared a more detailed note on the revised organization design, and I'll be happy to address any questions that you might have at the end. Now let me share with you an update on subscription outstanding. We have collected from Siti Networks' receivables relating to revenue in the first half of financial year '21. But it has failed to pay subscription overdues in accordance with the payable plan agreed by it due to various challenges, including COVID-19 and pressure to prioritize lender agreement. Accordingly, the company has taken a provision of INR 81.2 crores towards subscription receivables, which were overdue. Further on account of accelerated payment demands by some of the best [indiscernible] backed lenders due to delay in restructuring by Siti and their failure to negotiate extended repayment plans, the company has provided for rest of liability of INR 97 crores as of 30th September 2020. The provisions have been made as a prudent measure, and the company will take necessary steps to recover these deals. Dish TV, on the other hand, has been making payments in line with the plan submitted by us. As to the plan, Dish should pay in every month's billing that's a part of it [indiscernible]. I would also like to highlight that Dish TV's financial position has significantly improved over the last 6 months and consequently, it's debt rating has been upgraded [ several losses ] to A4 from [ B ] in the month of February [indiscernible]. As a result of the improved financial position, we expect Dish TV to accelerate payments and we are likely to come down further by the end of the fiscal. At present, Dish TV's outstanding stands at INR 4.98 billion compared to INR 5.84 billion at the end of financial year '20. With this, I conclude by opening remarks. Now I hand over to Rohit, who will take you through the business and financial performance update. Over to you, Rohit.
Thank you, Punit. Let me now run you through the operating and financial highlights for the quarter. After the disruption placed in the first quarter, business returned to near normalcy in the second quarter. Shooting of original content resume full scale in all markets by the end of July with safety measures implemented across all regions. Other than shooting and essential operations, which requires presence of people on their location or offices as an organization, will largely continue to work from home. As components of normality is returning on brand, we are seeing the same getting reflected in viewership process as well. While ZEE viewership continues to be higher than pre-COVID times by about 15%, the shares of different genres has reverted back with ZEE regaining shares, it has gone to news and movies during the lockdown. Our original content in terms of our channels across the market, we saw a sharp bounce back in our viewership. ZEE Network has viewership share of 19% during the quarter, led by recovery in Hindi, regional and relaunch of 2 channels on DD Free Dish. There are a couple of markets where the performance is varied and our expectations and the scope to push for higher viewership share in Hindi, Marathi and Bengali market. Our teams are working hard to capture higher audiences, have higher audience shares and recently launched shows in these markets should help with that. Our performance in the South market has been very strong postlockdown with Telugu and Malayalam channels at their highest ever share and the movie channel portfolio also gaining traction. Now coming to ZEE5. Global MAUs and DAUs for the month of September as per our internal data analytics were 54.7 million and 5.2 million respectively. ZEE5 released 25 original shows and movies with return of TV content and original shows like Abhay, Mafia and Lalbazaar. Consumer spend an average of 152 minutes on ZEE5, a growth of 36% over quarter 1. The revenue and EBITDA loss of ZEE5 for the quarter was INR 989 million and INR 1.90 billion, respectively. As the cinema continues to be shut during the quarter, we launched ZeePlex, which is India's first pay-per-view platform for releasing new movies on television and OTT. We released 2 movies, Khaali Peeli and Ka Pae Ranasingam on this platform which has received enthusiastic response from audiences. We will continue to experiment with such new formats, which make access to our content easier for our audiences. ZEE Music Company added over 7 million subscribers during the quarter and continues to be the second more subscribed Indian music channel on YouTube. There was a sharp jump in the label video views on YouTube as it released new music albums during the quarter. Now coming to financial performance. The revenue for the quarter declined by 19%, a sharp improvement from 25% year-over-year decline that was seen in the last quarter. Advertising revenue during the quarter was down 26% compared to 66% [ degrowth ] in quarter 1. Each month has seen an improvement over the previous months, and we expect to reach last year levels in Q3, which will set us up nicely for driving growth in the next fiscal year. During the quarter, most of our advertisers have seen a strong rebound in demand for their products and the festive season has started on a good note. This should translate into healthy growth in ad revenues going forward. Domestic subscription saw a modest like-for-like growth of 2.3% year-on-year, which was mainly driven by the growth in ZEE5 subscription revenue. Due to the lingering uncertainty of NTO 2.0, our subscription growth this fiscal will be lesser than what we had anticipated at the beginning of the year. However, once this is settled, we should go back to our expected subscription growth guidance. With original programming resuming across the network during the quarter, operating costs saw a quarter-on-quarter growth of 27%. However, it was still 7% lower compared to last year as the production in some of the markets rapidly. Growth in A&P cost is mainly because of 2 reasons. One, we spent our content comeback campaign across markets for both TV and ZEE5. Second, the growth looks high as the base number was unusually low. EBITDA for the quarter, excluding the provision for receivables stood at INR 3.95 billion and the margin was 23%. The cash and treasury investments for the company was INR 14.5 billion as on September 30, which includes: INR 3.8 billion of bank balance; INR 2.9 billion of fixed deposits; INR 7.2 billion of mutual fund investments; and NCDs worth INR 511 million. The transaction for the scale of overseas investments have been completed and the funds will be traded into our accounts in the next few days. Thank you, and over to you, Bijal.
Thank you, Rohit. We'll now open to Q&A session. I would request the moderator to take the first question forward. Over to you, Janice.
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.
My first question is on Siti Cable. So in the Q1 call, it was not highlighted that suddenly so much declaration in Siti Cable will happen. Why I'm asking this is after that the lockdown has ended and we are seeing fantastic recovery in all parts of the economy. So I wanted to understand that why it was not highlighted? And second, our revenue recognition from Siti Cable. So way forward, what happens? Is there any more write-off, any more provisioning and what happens to the revenue which you'll get from Siti? If you could elaborate on that.
Yes. Thanks, Abneesh. On the first one, I'll ask Rohit to comment. On the first one, let me -- so on the second one, let me attend. So the revenue, as of now is being accounted for on a cash-and-carry basis. As you have heard from my opening remarks itself, that April to September 2020, Siti has made all payments for the content delivered. And therefore, it's on a cash-and-carry basis and that's how it will continue going forward from here on as well. On the first part of not being highlighted in Q1, Rohit?
So Siti, as we mentioned in our earlier calls as well, Siti had given us a payment plan which included 2 aspects. The first was payment for the current billing that will happen, and the second was payment for the old outstanding. While the payments for the current billing happened for the April to September quarter, we did not receive payments for the old outstanding, and various reasons were there. I mean as Punit highlighted, due to COVID and the pressure from the lenders as well. So in this quarter, as a matter of abundant caution, we have taken a provision of INR 81.2 crores for all the outstanding that we have from Siti Cable.
And any further provisioning likely in the coming quarters on Siti Cable or any other group company?
No. As we have already taken provisions for the entire outstanding and we are now going to work on cash-and-carry basis with Siti. So we do not expect any more write-off.
Punit, my second question is on 15% higher viewership than pre-COVID. So on a cost per thousand, are you getting the benefit because now FMCG companies are seeing good growth and in many other parts of the economy or because of the COVID uncertainty or per thousand viewership in that 15% growth now as we speak in Q3, that is not happening?
Abneesh, I don't think the pricing has yet come back to the pre-COVID levels. We have seen significant improvement in that happening. And I would see normalizing into quarter 3 and then expecting growth from quarter 4 onwards.
And so in terms of ad revenues also, you expect Q3 growth or you expect Q4 only because Q4 base anyway is soft?
In Q4, Q3 base -- Q4 base anyway is soft. But we expect that Q3 will only be able to maintain what we had achieved last year, a very, very insignificant moderate growth, if at all possible. But Q4 certainly will have healthy growth over the last year's base.
My next question is on refi. So you're seeing growth in revenue, but losses have gone up. So I wanted to understand the experience of showing new movies on OTT. So you showed one new movie in Q1 and one more in Q2. So normally, you have low-cost content in terms of strategy. So seeing the experience in Q1, Q2 and the losses which have gone up quarter-on-quarter by INR 40 crores, INR 45 crores. What would be the thought process?
So Abneesh, firstly, just a minor correction. We are not a low-cost model. We have an efficient cost model business. And it's not just one film or the other that has that impact. This is content which is planned over a period of time. And as you know, a large part of Q1, a lot of the new production had stalled, which have rectified in quarter 2 or quarter 3 or will happen over quarter 4 as well. So our guidance and how this thing is on an annualized basis. This level of granularity on a quarterly basis will be difficult to do on this call where -- you can take it up with Bijal offline certainly.
Sure. One last one. Proceeds for the foreign investment, what is the status?
As Rohit said in his ending remarks that the transaction has been concluded, and we are expecting funds any day now.
And the quantum?
The quantum is the [indiscernible] is $24.5 million from what we had already received. The total was $30 million. We have received $4.5 million, so $25.5 million is currently pending.
The next question is from the line of Jay Doshi from Kotak Securities.
Punit, my first question is if you could sort of elaborate on what is the rationale for reorganization and what are the changes in role of senior management and role for Rahul Johri who joined?
As I explained, Jay, that we have restructured the [ CMI ] around 3 key verticals. So content creation, content monetization and subscriber acquisition or consumer acquisition. Mr. Johri is going to be responsible for a monetization part of it. That is the second vertical that I talked about.
Understood. Second question is, we have noticed some leadership and viewership share loss in Marathi and Bangla. And particularly Marathi loss in Marathi is surprising. So what are the steps you are taking to arrest or to rather sort of recover viewership? And if you could sort of...
Content, Jay. So we have to work on our content pipeline, which obviously the current pipeline seems traded to the viewers, and therefore, they have chosen to go and consume more on competition. The good part is we have not lost reach on the channel as yet. So therefore, we'll have to go and revamp the content there. As you will see in Bangla, we've already seen the recovery happening. And in the month of October itself, we have seen significant recovery already taking place. For Marathi also, I expect the next quarter or 2, the recovery will come back.
Is the team stable? Or have you sort of -- is there any attrition you are seeing in the team in those real end markets?
No. There is no attrition that one can talk about at the senior level or the mid-level. They may have been attrition at the lower level but that part is also [indiscernible].
Sure. And just final bookkeeping question on -- so what are advances for content? I know the last update we had as of March 2020 was some INR 4.2 billion. I'm talking about the advances that you had given last year and some residual part was still there. So just an update whether those advances still remain as advances or you've got procured content against it.
Rohit?
Yes. So overall, our inventory advances and deposits have been coming down quarter-on-quarter. And if you see from the March quarter, where it was about INR 64 billion, it is now INR 50 billion. So there is a reduction, which is there. On the advances level, the overall advances as of March was INR 10.6 billion, which included the INR 4.2 billion you just spoke about. And that has come down to now INR 8.3 billion.
But if INR 4.2 billion -- has INR 4.2 billion come off or that INR 4.2 billion is broadly at the same level?
So the INR 4.2 billion is right now at the same level. Actually, it has reduced in the month of October, and we expect that with the inventorization that we have planned, it will come down further by March -- by the end of the fiscal.
Right. And I miss the opening remark you mentioned about receivables from Dish and it has come down. If you could please repeat it once.
Yes. So the receivables, Rohit?
Yes. I'll take it. So Dish receivables has been down. It was about INR 584 crores in March 2020. And it is right now at a gross level at INR 498 crores. We have taken a provision of INR 37 crores. And if you exclude that, so overall, it is about INR 460 crores net of provisions.
Right. And should we expect the 50 -- at least INR 50 crores reduction in this number quarter-to-quarter in line with what you've guided that those receivables would come to normalized levels in 6 to 8 quarters? Is that a reasonable expectation to expect that this number receivables from Dish will come off every quarter by at least INR 50 crores?
I don't want to put a number there, Jay, but it will certainly come off significantly before the end of the March fiscal itself. And you'll see, quarter-on-quarter, we'll make those declarations going forward.
The next question is from the line of Vivekanand from Ambit Capital.
My question pertains to ZEE5's international operations. So given that we have seen this sharp increase in viewership, is it due to additional distribution in some geographies where we were not present earlier or is it entirely organic? And Punit, if you could throw some light on how you plan to monetize the international subscription market given that we have a very big dashboard and a very strong brand internationally.
Yes. So of the viewership that you're -- the growth that we have witnessed of almost 36%, a significant part of it has come from organic business, a very -- a little bit of it may be inorganic. The monetization strategy varies from market to market, as you would agree, because the ARPU levels, the consumption levels, et cetera, vary from market to market. We intend to monetize on both advertising and subscription for the international market. But it is currently being planned and will be executed over a period of time. Therefore, difficult to give you a number. But certainly, this is what will start bringing the growth back in the international market, which has been stagnated over the last few years.
Okay. Let me frame it a bit differently. Right now, ZEE5 contributes around 6%, 7% of your total top line accounts for around 20% of your operating investments, is this materially different for your international business? Is the revenue contribution of ZEE5 to your international business materially higher or lower and investments?
Currently, it's much lower. It's not apples-to-apples comparison. I mean the biggest territory, for example, in United States, we have not even launched yet. So it's -- you can't compare it to the linear business matter.
The next question is from the line of Yogesh Kirve from B&K Securities.
Sir, the annual report for 2019, '20 year, so there was a corporate guarantee mentioned to Siti Network about of about INR [ 116 ] crores. So the commitment to spending, which is alluded to during the note and to the current quarter, refers to the same thing or this is an additional sort of kind of arrangement?
Rohit?
Yes. So what was mentioned in the annual report in the March account, they were the [ DSRA ] liability like you I said, of more than INR 100 crores. So that is the amount which has now become INR 971 million. And we have taken, as a matter of abundant caution, we've taken provision for that in this quarter.
Okay. So and [ then you got ] a balance sheet to be part of the balance sheet, right?
Yes, certainly a part of the balance sheet.
It has moved out of the contingent liability now.
Yes. Yes. Secondly, regarding the ZEE5. So regarding the MAUs and DAUs, I don't know to what extent you are comparable to the numbers you have shared over the last 4, 5 quarters. So depending on pace of the trend as it's been very encouraging. So in light of this, is there any change of strategy efforts towards content? And is that you might consider? Or we are going to stick with the part that we have decided for now?
So what we are implementing currently, we have to first get that right itself. So I think plans that we have made for ZEE5 itself are pretty large, and we will continue on those execution part. And of course, we reset for any mistakes or anything that happened as we go along. So we'll continuously keep evolving the strategy going forward. It's not just content. It's also a lot of distribution and partnerships that enable this trend line of growth and numbers. And our numbers we are sharing openly now, both from a P&L perspective as well as from a viewership perspective, and those are available openly and freely now from the Investor Relations team.
Right. Sir, regarding focus on the original shows. Do we think that we are on right track as far as the investment in the original show and content are based on the assessment of the track or kind of experience you had over the last couple of quarters?
So there is no right or wrong in the content business. Let me tell you that we get it wrong also. We get it right also. So shows work for us, some shows don't work for us. And that's a matter of the nature of the business or the business that we are in. It's a creative business, and you don't get it right all the time. So we have to cost correct as we go along. And yes, original content, movies, these are the USP and the key drivers for the subscription income for the platform.
So actually -- can you give us any guidance indication regarding what should be -- actually directionally what -- are the losses [indiscernible] it would remain at this level in the coming year?
No, no. I don't think that anything has peaked. We are still investing heavily behind this business. We have always guided to you that despite all these investments, et cetera, we'll still, as a company, overall generate a healthy EBITDA margin. And year-on-year, we've been guiding for our EBITDA margin, and we'll continue to do the same.
And then finally, Bijal, if you -- so I think there has been a restatement in the subscription revenue. So is it possible to share the international and the domestic component of the subscription? I don't [indiscernible] that will be helpful.
So entire subscription revenue, which has been restated -- sorry, reclassified, is all relating to India business and its entire amount is pertaining to India.
The next question is from the line of GV Giri from IIFL.
Punit, a couple of questions on your corporate dialing start. Can you give an update on the overall progress on that front? And secondly, specifically on your Board reorganization. And thirdly, what's your likely run rate for movie production in the next 2 years in terms of spending compared to the trend of the last 2 years? And lastly, why is your ZEE5 revenue up by only 4% sequentially?
Okay. So In terms of corporate governance, we -- whatever we have guided for, clearly, we are continuing to stand to that. We are declaring all the data as was committed, including the balance sheet, et cetera. So all those is available to use. In terms of the Board contribution, it's a continuing process. The completion of which has been committed for by the end of the fiscal year, and we will be inducting more members on this Board and going forward. We don't have an update on any names as of now, so nothing for me to share there. On the run rate for the movie production business, we expect to ramp that up very significantly in the coming years as soon as normalcy returns in the theatrical part of the value chain. Once theaters have opened up, we will be ramping up, and not just in Hindi, but even in regional languages. Quantum, we can discuss offline. I don't have these numbers as of right now, sitting here right now. And ZEE5 revenue was up only 4% because one of the telco deals was -- came to an end and we did not renew post-August. And therefore, we will have to make up that revenue through our B2C plan and not through that telco fixed fee model basis. That's it, yes. Did I miss anything?
No. I just want to do a quick follow-up on ZEE5. One, if you look back what missteps or what positives have you, under your belt, compared to your outlook 2 years back? And secondly, on your relationship with telco in general, have you evaluated if direct to consumer is a superior option compared with a -- through telco? Because there is always -- this thing about this Google tax, this 30% that you can probably avoid. And on the other hand, I don't know what the subscriber information that you get, how that compares with the direct group. So keeping all this in mind, how do you view the 2 options?
Certainly, we do evaluate every time a deal comes up for renewal or negotiation. And that's the time we do the trade-off on what is better for us to continue the relationship through a telco or to go direct B2C. In this situation, we have chosen to go B2C. I can't divulge more information than that. Therefore, that's a constant evaluation that we do every time, these decisions need to be made. So it's a constant thing that we continue to do. Obviously, in terms of data and all, we get -- in terms of the telco deal, the data is restricted because of the secrecy laws, et cetera, which are now prevalent. In a B2C deal, the data that we get is far more rich and therefore, much better from a monetization perspective. Yes.
[Operator Instructions] The next question is from the line of Rohit Dokania from DAM Capital.
Just 2 quick ones from my side. So I'm sorry to harp on this, but just to be clear, all liabilities from Siti in that sense has been written off because anyways we are on cash and carry now. Is that a fair statement to make, both from maybe a contingent side and also over the receivables side?
You're absolutely right on the receivables side. And these are provisions that have been made. We have not written off anything. We will make all endeavors to recover this money. What -- on the other account of [ DSRA ] bank loans, there is still certain outstanding which is left. Rohit, if you can confirm the numbers?
Yes. Yes. So as we've also mentioned into our financials, the overall outstanding of the [ DSRA ] bank loans has now come down to INR 2,059 million. And out of that, that's our liability that we had was INR 971 million. So we have taken, as like I said, as a matter of abundant caution, we have taken a provision of the [ DSRA ] liability that's [indiscernible] August 30th September.
Understood. It's fair to say about INR [ 108 ] crores is still left. I'm saying just to understand from a worst case scenario.
Yes. These are this outstanding, which are not due for next few years, and this form part of the [ DSRA ] liability.
But you are right on the point that you made.
Sure. The other question, I think, is slightly related to previous participants. So I think this year, I mean, loss run rate for ZEE5 is in that range about INR 700-odd sort of crores give or take. So just wanted to understand, is this -- will this year be like the peak sort of lost year for ZEE5? Or have you sort of articulated that overall margin level of the company would be pretty healthy, so absolute losses in ZEE5 could also increase given the scale of business could improve?
Yes. It's a trade-off, right? We will evaluate what the opportunity is and what money we are willing to put on that after next year going forward. I mean I don't think we have guided a number as we are specifically talking about. But certainly, we would want to get back to our aspiration of being a highly profitable EBITDA margin earning company. But the investments in ZEE5 need to be made to protect the future of the company and the business, and those will be done. If they have any impact to the margin, we will certainly call it out to you before we take those business.
Fair enough. Sir, and last one from my side. If you can sort of talk about on any update on the NTO 2.0? And also if I'm not wrong, I mean, during Q1 call you said that post-Q2, you've been -- the guidance on the domestic-like subscription, if you can comment on this, please?
Bijal?
Yes. So in NTO 2.0 at this point of time, there is really nothing which we can share. And the court has reserved a verdict, and we are awaiting the verdict. As far as the growth for the year is concerned, see what has happened is when we implemented NTO 1.0, we have complete blueprint on how we would take up our pricing and product launch which will happen. And over a period of time, how are we going to drive our subscription revenue. And in fact, what you saw over last year that in fourth -- the third and fourth quarter, we launched 4 new channels. So that was also part of it. Now because of NTO 2.0, all the plants of retaking our bouquet as well as taking up the pricing is on hold. And that is the reason why subscription revenue for this year would be impacted. On the domestic broadcast side, I said on the digital side, our subscription revenue continued to grow at a healthy rate. So once this NTO 2.0 is done and probably that there may be a quarter of disruption, we should actually go back to healthy growth, which we have been delivering over the last several years.
So fair to say it's difficult to put a number this year?
FY '21 would be -- this year would be difficult in terms of growth because of NTO 2.0 effectively in the pricing. But going forward, what we have guided about low double digit to low teens is quite possible. But NTO 2.0 should be out of the way. I mean it should have been implemented or it should be disposed of whichever way. Under both of [indiscernible] would be able to drive our growth [indiscernible]
The next question is from the line of Naval Seth from Emkay Global.
I have 2 questions. First, on content. As -- you alluded earlier that you are refreshing content, which might be dated or customer -- the subscriber or consumer is not liking. Any comments over here that, were we slow in terms of refreshing our content or competition has become very aggressive? Because first, we saw this trend in Hindi GC and now in 2 regional markets and especially Marathi, which is your core market. So any comments there?
Yes. I mean, yes, you are right, and part of it. These are -- in fact, all of the markets are our core markets. None of the markets that we operate under are noncore to us. But certainly, the new lineup that the competition has come with post the lockdown has refreshed the content for them, and the consumers have preferred that over the legacy content that we may have been serving. And as you know, there is never a -- there's always an up and down in this kind of a business. So we are confident that we'll regain our viewership back.
Okay. Continuation to this, can you state the number of fresh content towers in these 2 markets, Marathi and Bengali, which -- what is right now and what it was at pre-COVID?
I won't have the numbers readily, but I'm sure we -- you can take it offline with the investor relations team.
But just to, I mean, give you an overall idea, there has not been any meaningful reduction anywhere in terms of the Marathi and Bengali market that we have not cut down our content meaningfully. There might be some optimization looking at advertising market but nothing in [indiscernible].
Sure. And lastly, any update on SugarBox thought process, how we are tracking there. And last time, it was stated that 4Q, we will see some traction there, so any thoughts there?
It is still linked to the railway tender, as I stated in my last meeting as well. So we are still awaiting an update on that from the railway.
The next question is from the line of Kunal Vora from BNP Paribas.
Yes. I just wanted to check on subscription. What is the remaining opportunity in annual subscription, when the growth is driven by more subscribers? Or do you expect ARPU increase to kick in like FY '22 especially? And second, on other sales and services this quarter was low. How should we look at it in second half? And you talked about the EBITDA margin reaching 30%. Are you on track to get it in FY '22? That's it from my side.
Bijal?
Yes. So on the subscription on the domestic broadcast side subscription opportunity at both the places. We have a long way to go as far as television penetration itself and most of the television penetration really -- I mean, really most of the people take a pay TV. So we have seen [ 100 million ] who do not have TV. So from a longer-term perspective, there is a very significant opportunity as far as more subscribers are concerned in the domestic broadcast business. As well as pricing side, we think that the ARPU bucket, as I said that we have already planned our price increases in some of the market and also it is not only about price, we are going to offer more products. So like in Tamil Nadu market, we have launched a movie channel. So it is also driven by more product launches. So overall, our ARPU from the existing subscribers itself will grow. So that is as far as the domestic profit is concerned. Similarly in digital, I mean, you would agree that there is a very long runway for growth. And starting with the subscription to maybe for the next few years, we would be primarily focused on driving number of subscriptions rather than on pricing. And once that market starts maturing, pricing would also be an opportunity because, again, where the pricing is pretty competitive. And with respect to the income level, it's still very low. So overall pricing as well as subscriber numbers, both the places, we have a lot of it. So -- I mean you asked 4 questions, then probably I forgot the other 3. Can you repeat your question?
Yes. I just wanted to get some sense on other sales and services, which was low for this quarter. How do we look at it in the second half?
So there is nothing which has changed in other sales and services. If you are comparing Y-o-Y, there are 2 things. One is in last year, we had a movie called Article 15, which has significant revenue, which has theatrical revenue, it was setting in our other sales and services. And on top of that, there was ZEE Music Company's revenue, it was classified as other sales and services, which from this quarter has been classified as subscription revenue. And that is the reason why we're actually seeing debt. Going forward, other sales and services revenue will depend on total, which are the months that we are releasing big movies And there is a syndication income. So as you are aware, I mean, the theaters are right now closed. And this quarter, we did not have any big movie for release. Even on direct to digital, that is the reason why the sales and services -- other services have gone down.
Sure. And lastly, on EBITDA margins, considering the increased investments in OTT, are you still on track to get to 30% in fiscal '22?
So on EBITDA margin, I mean, what we have said that for the -- every quarter, we should see an improvement in margin, and that's where we are. Once FY '22 is a normal year and we do not have any disruption, maybe on the advertising side or subscription side, our margin projections will be returning to normal. That's like typically, we tied about margin for the next year in fourth quarter. So we are right now just commencing our planning for the coming year. And probably in fourth quarter conference call, we'll give you a very clear cut number, and what kind of margin we should look for. But overall, there is really no change in margin trajectory at this point of time even for the COVID-related impact.
The next question is from the line of Jay Doshi from Kotak Securities. [Operator Instructions] The next question is from the line of Alankar Garude from Macquarie.
My first question is on ZEE5. I mean we had launched ZEE5 in February 2018, we had commented that typically, the breakeven will be in 3 to 5 years. And then I think after that, we had commented it will be towards the later end of that time period, so closer to 5 years. So would you still maintain that ZEE5 is on track to achieve breakeven by, say, FY '23 end?
It's a double digit word because we are forecasting so much in ahead, it's difficult to say what my assumptions were in 2018. Are those still valid? But certainly, the revenue and the things are tracking very well. In terms of our strategies, we still focus that FY '24, we exit the year with a breakeven kind of a number. But overall, it may be delayed by about a year from the first forecast that we had given in 2018.
Understood. So basically, FY '24 broadly is the year to look at or breakeven?
Yes. Again, I'm qualifying that by saying, it's based on assumptions I'm making today for the next 4 years.
Fair enough, Punit. And my second question, Punit is, so because of COVID and maybe some other reasons as well. As far as some monetization deals on Infra or education, which the promoters were looking at, we really haven't seen anything rectified. So does it mean that the possibility of the promoters -- are they looking to add further stake in ZEE is unlikely, at least over the medium term?
I have no clue to those deals, if at all any. And I do not have any information or any plans on the promoters adding their stake on ZEE. This call is sticky for the performance of quarter 2.
Okay. And one final question on the added cap. I think earlier you had mentioned that if it is implemented, there won't be any impact. So would you still be maintaining that?
Absolutely because we are very much in line with the ad caps, which already exist in the country.
The next question is from the line of Vivekanand from Ambit Capital.
My question is on the restructuring that we have done. So you've spoken about the aggregating or aggregating content creation and also streamlining the monetization of it. So right now, when we look at content creation, the respective businesses where the content is created, that's where the content creation responsibility sits. How is it meaningfully different from how you operate today? Punit, can you talk about how the P&L will look like at the content budget, and also your approach towards monetization?
So what we have done is we are just replicating how we have succeeded in the regional right utilization of the company. And currently, what was happening is that because we're making just a little bit of content compared to the quantum concept we made for TV, it is all centralized at Mumbai. Going forward, we believe that the right model is for it to be decentralized completely. And therefore, the synergies can be broadened much more efficiency if it is decentralized at the last -- at the end of where the content actually is getting created. And that's how we're just realigning the entire digital and the linear ecosystem of content creation, where earlier 2 independent things are working. Now it's going to be a common theme that's going to deliver content for both linear as well as the digital part. On the P&L side of the business to all of you, I was responsible for P&L along with the CFO, Mr. Rohit Gupta. Nothing changes, we have both the responsibility.
Okay. And just a small follow-up. So Punit, that was helpful. Will that -- will this mean that you want to meaningfully step up the percentage of content that you create in-house versus sourcing externally? And is this very different from -- for your regional markets versus Hindi proportion of your own content that you create?
I mean I don't have an answer. There is no ABC answer that I can give you or textbook answer. But it's for those teams to derive based on the clustering of content taste that is required for each market, how that quantum will be created, whether it will be created in-house or outsourced to third parties will depend on who gives us the best idea. At the end of the day, I'm concerned with best content that can attract the maximum number of viewers or number of eyeballs, and that's how we create those decisions. I don't think we start from the fact that I want to produce 20% in-house. And that's how -- so we don't start with those strategy. We start with -- we want so many eyeballs and now let's go find the best idea for this to be achieved.
The last question is from the line of Jay Doshi from Kotak Securities.
My question is there is a short about 30% increase in DAUs of ZEE5 and about 36% increase in engagement time per user. So overall volumes, viewership volumes in ZEE5 would have gone up significantly on a sequential basis. And at the same time, we've also seen improvement in advertising environment from 1Q to 2Q. So I'm little surprised that has not translated into increase in revenues for ZEE5 from 1Q to 2Q. And normally, these kind of increase in volumes should ideally reflect in sequential increase in revenue. So you can sort of help us understand what's going on there on monetization front.
Bijal?
Yes. So number one is, Punit initially mentioned mention that we had a telco deal, which we evaluated and we decided that we should rather go for subscribers on our own. So that has an impact, and that has led to decline in the revenue in the subscription. Now as we have said so many times that our revenues on the digital is significantly tilted in favor of subscription. So as you rightly pointed out that we have seen significant increase in our [ volume ] and consequently video views and also, consequently, there is an increase in ad revenues up there. But the revenue in digital is significantly in favor of [indiscernible] -- sorry, in favor of subscription, and that is the reason why you are not seeing that impact translating into our revenue. Also, it would be very difficult -- see we have given revenue numbers and cost number only for 2 quarters. So every quarter in a new business, you either see something happening maybe at some point of time, we are entering more cost because we are launching our new products, which is what happened during the quarter, we had 365 going on which led to higher cost. And similarly, some of that are coming from contracts not getting renewed. So it is difficult to see -- absolutely we have growth from some quarter to another. Over the period of time, if you see the trajectory of growth is very healthy. I would say that it's just wait for a few more quarters, and you we will get a sense of clearly how fast we are.
And any correlation between the increase in ad and publicity expense and higher losses for ZEE5 is that largely because of higher investments in ZEE5? Or is it related to TV business?
No. It is relating to both the businesses. Number one, we had our add-on subscription expenses was exceptionally low in Q2. Now that happens at some point of time when we do not have any lot of launches or we do not have a big show or anything, which we really need to promote. On top of that, we are actually seeing a very significant increase in our advertising publicity revenue in ZEE5 on account of the fact that we have 2 big campaigns, which we are running year over with premium pack that we were for our TV shows and all and then there was a campaign for INR 365 pack, which we have launched. And also there were 25 shows which were launched during the quarter. So there was [indiscernible] expenses relating to them as well. So due to that, we have seen a significant increase in cost during the quarter. And that is also concluding into higher losses at ZEE5.
Well, ladies and gentlemen, as there are no further questions from the participants. I would now like to hand the conference over to Mr. Bijal Shah for closing comments.
Thank you, everyone, for your interest. If you have any more questions, please do reach out to Investor Relations team. Thank you, and please take care of yourself during this pandemic.
Thank you. On behalf of Zee Entertainment Enterprises Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.