Zee Entertainment Enterprises Ltd
NSE:ZEEL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
114.9
289.95
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Zee Entertainment Enterprises Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Zee Entertainment Enterprises Limited Q4 FY '18 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now had the conference over to Mr. Bijal Shah. Thank you, and over to you, sir.
Thank's Vij. Hello, everyone, and welcome to Zee Entertainment's earnings call to discuss earnings performance in Q2 FY '18. Joining us today on this call is Mr. Punit Goenka, Managing Director and CEO of Zee Entertainment, along with senior management of the company. We'll start with a brief statement from Mr. Goenka on the fourth quarter performance. Subsequently, we'll open the call for your questions. Before I pass it on to Mr. Goenka, 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 context of the risks that we face. Thank you, and over to you, Mr. Goenka.
Thank you, Bijal. I would like to welcome everybody to the call and appreciate you joining us for the discussion on the results of the fourth quarter of fiscal 2018. As most of you would be aware, we launched our new digital platform Z5 in the month of February. We're happy with the initial response, and we are confident that the sheer depth and breadth of our content offering makes it stand out amongst the host of platforms at present. With digital, exclusive original content and expansive movie library, catch-up TV, international shows dubbed in multiple Indian languages, music videos, kids entertainment, lifestyle-related content and extensive live TV offerings across languages, Z5 is a one-stop entertainment destination for Indian consumers. We are also focused on the peculiarities of Indian market and design technological features to improve the user experience. Unlike most of the existing apps, which are either focused on English-speaking youth segments or the youth audiences, Z5's exhaustive content catalog is designed with an objective to cater to all sections of the video-viewing audiences. We are delighted with the strong operating and financial performance during quarter. Domestic ad revenue growth of 24% is driven by broad-based recovery in advertising spend. With high visibility of product campaigns, improving consumer demand and GST-related benefits trickling down to ad spends, we are confident of continued traction in advertising spending. The full year domestic subscription revenue growth of 12% is a tad lower than our initial expectations due to some unforeseen events. However, there is no change in our medium-term outlook for the same. EBITDA for the quarter was INR 5.06 billion with an EBITDA margin of 29.3%. Full year EBITDA was INR 20.8 billion with an EBITDA margin of 31.1%. The cash and treasury investments for the quarter ended 31 March stood at INR 32.4 billion. Now coming to the operational performance. In fiscal 2018, Zee was the #1 network in the non-sports and non-news entertainment segment, with an all-India viewership share of 18%. The network improved its performance in every regional language markets and became the leader in pay Hindi GEC segment. Zee TV maintain its leadership position in the pay Hindi GEC segment. The newly launched shows have performed well and further strengthened our viewership in the fiction genre. &TV largely maintained its market share in the urban market. In the Hindi FTA segment, Zee Anmol was the leader, and Zee magic continue to perform strongly. Our cinema cluster continues to retain its leadership position in the pay Hindi movie genre. Our Regional entertainment portfolio witnessed another quarter of strong performance. Zee Marathi continues to be the leader in all prime time slots and maintained its #1 position. In West Bengal, Zee Bangla gained significant traction and narrowed the gap with the leader. Zee Television maintained its share and is a close second in the urban market. Zee Kannada improved its share to second-rank channel in Karnataka. Zee Tamil further improved it's market share, making up its highest in the time spent numbers. Zee Sarthak continues to be the leader in the Odiya market, and Zee Ganga maintained its strong viewership in Bhojpuri market. Zee Studios, our movie production division, released 2 Marathi movies, Ye Re Ye Re Paisa and Gulabjaam. Both the movies were well received at the box office. During fiscal 2018, a total of 10 movies were released in across 3 languages, Hindi, Marathi and Punjabi. Zee Music Company, our music label company, did the library expansion of both Bollywood as well as regional music. Further improving its performing during the quarter, the music label registered approximately 3.4 billion views on YouTube and is the second-most subscribed music channel on YouTube. With this, I would like to address any questions that you may have.
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.
My first question is on the Tamil market. You've done well with the highest time spent, et cetera. My question is, in a regional market, Tamil is one of the few wherein there is a strong dominant player, and all the 3 national players are there. So my question is, is the market big enough for 4 large players? And what happens on the cost side? Will all the 4 players be viable from the longer-term perspective?
Well, Abneesh, the rules of any business applies to us as well. The top 3 players are the people who make money in the business, and of course, generally, this is money. Same rationale should apply even in the Tamil market for anybody.
And what I'd like to -- the highest time spent, your market share has also improved. Could you talk about that, in Tamil?
Again, it's driven through higher engagement through ground connect as well as content that we have been able to put together, and that's what is gaining the traction.
My second question is on Z5. It's been a short time, only 3 months of launch. Do you think original fiction content and movie library is enough? Or you think sports or kids, which your competitors are doing, that will be required at some stage, which is currently difficult where rights have been sold?And second is, could you give us some numbers on how we evaluate this business because we've tried it earlier also? So in terms of subscriber or in terms of time spent, if any data you can share, how things are?
So Abneesh, definitely, having sports channel is an easy way to grab eyeball for even a digital platform. Having said that, we have exited the sports business, and currently, do not have any intensions of reentering that. We do believe that original content as well as movies is good enough traction for attracting consumers to our platform. The other thing, which is also very attractive is the concept of content created in their local languages, which is a very attractive factor. As you know, as you've seen on television that the consumers consume content in their preferred language of viewing. The same thing applies to even the new platform, which is the digital platforms. What was the other part? I think what -- the metric you should use for evaluating any digital platform is monthly active users and time spent that they spend on every session that they view. Having said that, 2 months is too short a period for us to start sharing numbers. I can only share with you that I'm quite pleased with the performance in the first 2 months itself. And at the end of quarter 2, I will give you definite numbers of where Z5 stands in the market compared to everybody else.
A small follow-up here, you have plan for some 60, 70 new shows in FY '19 on Z5. So will you be able to back up by so much ad spend? Because I think that is critical for this kind of a new media. If you don't back up, what is the plan? What is the investment plan in terms of advertising for these 60, 70 new shows?
Well, all the original content that will be created is behind the payroll, and it's not available for advertising at all.
No, I'm asking in terms of popularizing those shows, you need to invest in terms of media ad spend. That is my question.
Yes, absolutely. We will have to invest to make people aware of the kind of content we are putting out there [indiscernible]. So we will be taking adequate marketing spend for the shows. Obviously, you don't go and spend and promote every show that you do. You spend disproportionately on your tent poles, and that's where that people start discovering all the other content around them.
The next question is from the line of Kapil Singh from Nomura Securities.
I wanted to check, has there been any non-recurring or one-time kind of cost incurred during Q4 for Z5? Or should we expect this kind of expenditure to continue for next few quarters?
So we have -- there is launch expenses that was done in quarter 4 for Z5, we will continue to spend in advertising going forward as well, and also the introduction of more original content that will come in will get the cost up. Having said all that, our -- we are pretty confident of still delivering the 30% gross margin that we have guided to.
Okay. Any number you would like to share, like what was the launch cost?
Sorry, Kapil, we don't share those numbers.
Okay. And what kind of content cost inflation should we expect for next year? Because we are also seeing significant investment in inventories drop almost INR 950 crores-or-so. So any color on that as well, please?
So well, inventories you're referring to is predominantly driven by our group strategy of buying [indiscernible] as well as investing behind production of films. And that will continue going forward as well because that strategy has been up for us. The original content, if you are referring in context of Z5, will not move the needle much, because if you look at -- we produce close to 500 hours of content per week for television, I don't think we will go anywhere near that number on an annual basis for Z5.
Okay. So what kind of content cost inflation should we look at?
So content cost, as I've said in the past as well, on per hour basis will be inflationary. It's only when you add number of hours will it move the needle. We have not changed our plans on the original number of hours significantly on any of our networks. But we will be adding 2 markets, one particularly, in this financial year itself. But again, should be [ little ].
The next question is from the line of Kunal Vora from BNP Paribas.
Two questions. First is, can you share your thoughts on digital video advertisement and the revenue shares, who is doing well? It looks like the market is dominated by YouTube in broadcast, Facebook, telcos, all of them looking to get a share of the pie. So would it be possible for you to give some numbers, how -- like, what your thoughts are, and what your aspirations are in terms digital video advertisement?
So I think if you look at the growth that you're seeing in digital advertising, a significant part of that is being driven through video consumption. As you rightly said, yes, YouTube is leading in that in terms of volume. But definitely, my view is that in terms of value, if you professionally make content, which will have an edge going forward. Does that adequately answer your question?
No, but partly. Actually, what I was looking at is, like, Google's revenue was almost INR 7,300 crore last year, which is like very, very large. So it looked like they are not only capturing the, like, volumes, but also value, they seem to be doing very well. So...
You need to split the search revenue from that before we can even talk about it. A large part of that comes from search and not from video.
Okay, okay, okay. Understood. Fine. And second question sir, on the, like, revenue from the telecom operators. The [indiscernible] you now have over 300 million customers, and they decided to give the service free for next 1 more year. So like, how are the connections, and is the revenue keeping pace with the customer additions, which we are doing? At some point in time, would you decide to, like, charge a lot more compared to what you're charging right now?
Yes, definitely. We will be preempting the decision to as and when the contracts come out for renewal, and we will be asking for fair value of our content. Even if the telcos want to give it free to their customers, we will still need to get fair share of our value. So we are investing in that content significantly.
Will that number become, like, start becoming meaningful for you? Or is it already sounds like a meaningful number for you? And any number which you can give out? Like, what - because already 300 million customers are getting access of the content, while they might not be watching all of them, but…
Kunal, we don't give details by party or on a subscription view. That will not be fair. But let me assure you that the growth you see on those numbers will be higher than the regular cable and DTH companies.
The next question is from the line of Parag Gupta from Morgan Stanley.
So 2 questions. Firstly, on your digital strategy, Punit, what I'm just trying to understand is, you're talking about maintaining 30% margins going forward as well, which obviously, means that you're not going to be really spending a lot of money on advertising relative to what some of the other players are trying to do. So what I'm just trying to get at is, with your digital strategy, what do you think you're trying to play for? Are you there because you think consumer behavior will change, and they're looking for different content? Or are you doing this because you believe that at some point in time, advertising will shift digital and hence, you would want to capture the entire pie? So which is the key priority for which Z5 is critical? So that's question number one. And related to that, is based on Z5 for fiscal '19 and the way the market is at this point in time, what do you think could be the outlook for advertising and subscription growth for fiscal '19 on the back of both your broadcasting business as well as the digital business?
So Parag, I think, first statement of yours is not correct in my view that we are not investing behind the digital business in terms of advertising for it. If I was to stop all my investments today, I can deliver margins of upwards of 35% and I'm guiding for 20%-plus margin. So all of my new businesses are taking almost 500-basis-point plus of my profit into it. And you are better at calculation, you can do the calculation better than I can. So definitely, we're going to invest behind Z5 and make it a real formidable player in the digital space. The reason we are doing that is, we are, at the end of the day, a content company. And if the consumers preference to consume content is not the television, but an alternate screen, we are going to make sure that we are available on the end of that screen as well. We are looking to capture the mindshare of entertainment of consumer, not just at the end of [indiscernible] screen, but at the end of any screen that we choose to. That is also the reason our investment into the film production business, into the digital business and also, now going forward into the live entertainment business. That's my answer to your first question. If you can just don't mind repeating the second question again?
I was looking for what could be thinking about advertising and subscription growth for FY '19, given that you would also have some incremental revenues coming in from Z5?
So the industry for the television side, we're expecting a 12% or 11% to 12% kind of number. Our endeavor will always to beat the industry number. And obviously, the margin of beating the industry numbers will depend on how our viewership share changes going forward. On the subscription side, we are pretty confident of low teens kind of delivery, given that the TRAI -- the tariff on the matter is still subdued and we don't have any visibility as to how and when that will come out.
The next question is from the line of Ankur Periwal from Axis Capital.
So continuing with the domestic subscription bit. Now FY '18 did see a relatively slower growth, essentially because of some confusion regarding the implementation of TRAI's policy. And given the legal angle is still there, probably it may get implemented, probably, but if at all, by the end of this calendar year or next financial year. What happens till then? We are still continuing with the older deals, or there is some inflationary hike which we take across the deals?
So every deal takes an inflationary hike, definitely for us. The reason for last year numbers being a bit lower than our expectation also has to do with the fact that one regional advertise player has gone away from the market in the DTH segment. That has also led to a certain amount of slowdown for us. Having said that, given the current situation, we are largely in the fixed-fee arena itself. And a low-teen kind of growth is what we are targeting.
Sure. So Punit, for Phase 3 for [indiscernible] as and when they got sort of digitized, that number still remains a lump sum deal with that inflationary hike, or there is probably a higher hike there?
It's a combination of things that we do. A large part of the hikes are coming in are on account for Phase 3, because as you know that ARPUs in Phase 1, Phase 2 have not moved significantly and therefore, we expect too much hike on that will be unfair, on the video partners.
Sure, that's helpful. And secondly, Punit, on the content bit. Now you did mention that inflationary hike on a like-to-like basis plus some bit of volume growth wherein we are focusing to increase the original content. Just trying to understand the same from a digital -- from a OTT content perspective. How are we accounting for the OTT content? Will it be fully accounted for in P&L? Or how is the structure there, if any clarity has emerged?
It's pretty much in line with the television policy.
Okay.So it will be -- the content once shown will be fully amortized in the P&L and in the first year itself?
No, our television product is ET content, so it will be a live event.
Okay. And movies will be similar as for our digital bit -- for our TV bit?
Yes. I mean, we are not expecting any change in that.
Okay. And any timelines we can look forward to for the international launch of Z5 as well or it's still some time away?
No, it's maybe in the next quarter or 2 itself. Territory-wise, we're still going. It's not a composite launch globally. So it will be done [ in 2020 ].
The next question is from the line of Vikash Mantri from ICICI Securities.
Two set of questions. On the subscription side, Punit, you said you're a tad disappointed with the results, and clearly that is because of the DTH problem also. And my question is, there was a view, you no more have the sports portfolio, so does that reduce your bargaining power with the distributors, and that is why you got into many more tiffs in last quarter than regular? Also, we are seeing consolidation in the DTH space among 2 players. So does the outlook change from a DTH space in terms of our Pay TV revenues also for FY '19?
Vikash, firstly, thank you. But my view is that because the sports business has gone away, that has not taken away any leverage in terms of our negotiation power. And as you can see from the tiffs that you mentioned, that we have emerged there victorious there as well. Therefore, our entertainment content without sports is also in demand, and therefore, we are able to take increases as and when they come along. So having said that, a first consolidation does help the other parties also. But as long as my content is relevant, I am pretty confident on getting the right value for my content.
Okay. On the inventory side, we did talk about that investments in movies will increase last quarter as well. What I was surprised with the quantum of increase of INR 700 crores in this quarter. Now the way I see it is, generally, it's a 5-year amortization on the movies front. So from last year where you had -- or 2 years back, where you had INR 1,300 crore sitting in inventory, and the annual amortization of that would be maybe close to INR 300 crores. Now you will be amortizing close to INR 500-plus crores, INR 560 crores. So shouldn't that affect your margins on the programming side clearly? Also, can you explain me how does this INR 1,000 crore increase happen in a year? What has been the driving factor? And also, outlook over -- I was assuming these levels to be after 3 years, they're hit now. Is there a possible trajectory downwards from year of inventory?
So I think with amortization. So firstly, entire amount of inventory does not -- is not new. There is -- there are other factors in inventory also, which are in regular course. I mean, of course, that's it. We will definitely see a sharp increase in amortization of [indiscernible]. But you are just looking at the cost side. You need to look at the revenue side as well. So one is, we are, I mean, exploiting this movie over many more number of channels. So that's number one. Number two, we are actually increasing our movie buying in regional markets also. So that's where the additional monetization is happening, and there is -- in due course of time, we will actually see, like [indiscernible] launching movie channel in open markets as well. So if you take into account that revenue also and this amortization expense is very well planned, when we talk about 30% margin, and when we talk about our content strategy remain in the similar belt, you are actually taking into account this increase in amortization.
Just to add to that, then also, what is next to this kind of significant increase is the fact that we have bought a lot of future rights where advances have been paid to block those libraries, which will further strengthen, and therefore, reduce the need to buy a lot more [indiscernible]. So it's a lot of advanced buying that we are doing, which is also fitting in there, not necessarily, all of it will hit amortization in the coming years.
From absolute basis, would you still continue to increase a bit of the trend line? Or should we see, now that we have spend high, maybe slow down over the next 2 years?
So usually, I mean, if you look at our content cost, there are 3 or 4 buckets. So normally, that's original content. Now original content is standardized if you produce, that is certainly a very large chunk, then there is movie amortization, then there is syndication of content. So if you look at movie amortization, we addressed that question actually during this meeting. But still in overall -- still the increasing cost would be an excitement to this.
I'm asking the balance sheet inventory number.
So balance sheet inventory number, I mean, we still see some increase in inventory, because there are some things which are there in progress. But I think in next 1 year, I mean, in FY '19, we would have done -- we would have been done with most of our purchase and most of the repositories we used to launch regional new channels, also for digital offering and the kind of response we have, we would probably acquired almost [indiscernible]. So I think, beyond that, you can actually start seeing inventory not going up, that's number one. And as Punit mentioned that some of the rights will come into the future. So there our view is to buy more movies in the future will also go down significantly.
The next question is from the line of Sanjay Chawla from JM Financial.
I've got 2 questions. So one -- first question is on, what is the movie slate in terms of production and release for FY '19 and across various languages? That is one. And second question is, what are your thoughts on the telco tie-ups in terms of pushing Z5 something that some of the other OTT players have been doing quite aggressively over the last few weeks and months?
Well, our slate for next year, in film production is 8 -- sorry, 10 films have been locked in already, which we will be releasing in financial year in '19. We may be adding 1 or 2 films more to that. These are predominantly in the Hindi and Marathi language segments. On the telco tie-ups front, yes, we are in active dialogue with all telcos to look at partnering with them on refining just as they have with other OTT players. And as and when we have things to disclose, we'll come back to you.
So Punit, just to follow-up on this OTT issue. Do you -- does the company have to demonstrate a certain level of activity in the volume of consumption on the digital side for it to be able to command a certain price from the telcos and to actually enter negotiations?
Absolutely. I mean, they will not -- they will only pay content players that move the consumption of their data significantly. And therefore, that's the way to get the value from your content, Sanjay.
So over what time frame do we see the telco deals, kind of, panning out?
These are complex, technical integrations, apart from commercial negotiations. So I wouldn't like to give you a time line to put myself under pressure.
The next question is from the line of Alankar Garude from Macquarie.
My first question is in terms of viewership on ZEE5. So if you can help us understand how currently the viewership is divided between content, which is already available on television, versus the originals?
So as of now, we have put very small content or original content on ZEE5, and so we'd not be able to put up numbers on this. On the consumption today, it is largely driven by our television content as well as the movie library, which is a good segment. Our first tent-pole property on digital will launch in the month of June, and that's when we start seeing traction in terms of viewership from there.
Understood, sir. Sir, secondly, more from an industry perspective. So if I just look at the gap between registered users and paid users for most OTT apps in India, it remains quite wide. So in your opinion, what can ZEE5, or for that matter, any other platform, do to bridge this gap, apart from originals of course?
All of us are in the trial-and-error mode, as we speak. So does anybody have an answer as to what will work and what will not work? I think very difficult to say. Obviously, we know for a fact that sports is an easy hook to get consumers to pay for content. Having said that, originals, in my opinion, will be a key driver for paid consumption in this country. But we've still to see what genres of content will play out.
[Operator Instructions] The next question is from the line of Yogesh Kirve from Batlivala & Karani Securities.
So in terms of the original programming hours in the television business in the existing channel, so could you give us, sir, some sense for what could be the increase from the existing channel in the time that you would like to add new markets over that will be on top of that?
So it varies from channel to channel as we speak. Currently, we're already at our -- on the Hindi GEC, Zee TV, at 32.5 hours of visual content. And as I've said, we will cap it at 35 for the time being.
That's the plan moving forward.
Similarly, there are the other channels between 20 hours to even as much as 50 hours on some of these.
Sir, are there any focus there where we could see a more material increase in FY '19 compared to FY '18?
So in my view, I don't think you will see too much growth in original hours in financial year '19. It will predominantly remain and to leverage a bit, maybe 5% to 10%, depending on the need on -- during the year, market to market.
Sure, sir. That's so helpful. And secondly, in terms of the international discussion, the ad revenues have done well after a while. So are the challenges which exist in the market are largely behind? And should we expect a steady growth from FY '19 onwards?
Well, we would like to expect that. We are investing in creating local content for those markets. Our non-Indian-language channel also has started seeing traction in some key markets, which has led to this kind of growth. And we do expect that the advertising growth should continue. On subscription side though, it will remain flat in dollar terms.
Next question is from the line of Amit Kumar from Investec Capital.
My first question is actually just a follow-up from the previous one. So as I understand ZEE5, I mean it's both a AVOD platform and a SVOD platform. On the SVOD side of the business, I mean, how do you -- how are you today expecting the market to shape up? I mean, is the B2C side of the business, with sort of direct access to consumer, do you expect that to be a bigger pie over a period of time? Or is it going to be more the telco side of the business, which is sort of B2B, B2C side of the business, you believe is going to be bigger in say in the medium term, in the 4 -- next 4 to 5 years? What are your thoughts around that essentially?
Well, obviously, the telcos will be an easier route and a faster route to capture the consumer, because we already have relationship built there. If we try to go pure B2C route, that will be a very long-drawn and a very expensive route to take. And therefore, we would like to partner with telcos, just like we partnered with [ BPOs ] on the traditional distribution side.
Okay, okay, okay. But then -- and in full focus of something, will your focus be on that side of the business, and you still want to grow the B2C side of the business as well? Are you okay? I mean, you are next -- I mean, nearly 100% of SVOD model basically comes from there. You're fine, right. That's okay.
No, it doesn't work that way. Our B2C relationship is based on the content that we create. The B2B, B2C or -- B2B and B2C model only works if my content is relevant, right? A telco will agree to partner with me only if there is demand for my content. So the relationship on both angles has to be equally maintain from our perspective.
Okay, okay. Understood. So then quickly on the subscription revenue side. This Tamil market, which is -- I mean, all the other markets that we see, 1, 2, 3 have been sort of completed; Phase 4, pending a bit. I would want a little bit of your comment on Phase 4 also on how much time from here do you believe it sort of takes to fully come in. But more importantly, in the Tamil market, till around 6 months back, our market share was in the 7% to 8% region. It has sort of shot through quite significantly, almost doubled to around 14%, 15% now and fairly significant. So I mean, do you believe that isn't some sort of subscription revenue upside is there for us also in the market as [ aragu ] digitizes and the market digitizes. And of course, in the rural areas, with especially in the urban Tamil side. And I mean, any sort of either numbers or thoughts that you have around it?
So I think, firstly, Phase 4, as I've said in the past, I'll repeat it again that pretty much digitization in Phase 4 is done. Anybody who has the potential to pay for television is already into the fold through the [ DPS ] companies. People who did not have move to either Free Dish or other alternates that they may have chosen. On the Tamil now side, it's unfortunate while our shares have grown significantly, that's the only state where digitalization is at its lowest currently. It's still 40% -- sorry 60% analog market at what our last estimate was. And therefore, the opportunity definitely will come in the future, but we're not there today.
Okay. What are your sense of what Amazon is doing in that market? I mean the digital subscriber base hasn't sort of significantly moved up in the last 6 months.
If we will could comment what Amazon is doing in the market, well, definitely, they are not -- I mean it's still 60% analog. So something must be wrong there.
All right. Just a small follow-up on that Phase 4 question. So even though it's significantly [indiscernible] India filed a complaint against one of the larger cable operators saying that there is some bit of analog piracy we are still doing. That's the reason why I actually asked that question.
Can you take it off-line?
Yes. Sure, sure. I can do that. Not a problem
Next question is from the line of Rajiv Sharma from HSBC.
Just a couple of questions I have. Firstly, when you go and partner with the telco community in that case, don't you give away your platform power to telcos? And then how do you really build this as the alternate destination for investment in multiple-screen era? And second is, telcos are also getting into content like, particularly, Reliance Industries with INR 1,000 crores with Eros, and they're trying to stitch all the properties they have on the content side. So how do you see Amazon Prime and Reliance, which are emerging as big players? Do you think you provisioned enough with your guidance of 30%, 31% EBITDA margins for the potential contest, which we may see in this whole space? Because we are trying to sponsor some other business maybe in the next 2, 3 years. And for you, this is core. So just trying to understand your thoughts on both issues.
Well, firstly, let's talk about the power shifting that you talked about. At the end of the day, as I have said, ZEEL is a content company. And it's the consumer is available at the end of anybody, and if that consumer is available at the end of telco, I would have to go and access that. If that means I have to partner with telcos, so be it. I mean, today, when I partner with a DTH company or a cable company, I don't give away the power of my content. The content belongs to me. Moving to your second question. I think the fact of the matter is, content is a business where the relationship is directly with the consumer. And I do not believe that any one party can control the entire consumer's consumption of content in any kind of environment. So having said that, as long as we make relevant content, which resonates with our consumers, we will be relevant in the market and, therefore it doesn't really matter.
So just to follow up. So you think there may not be any need to invest more than what you've planned currently from a 12- to 18-months' perspective.
Well, I can't foretell. But from the plan today, I think, we have made a formidable plan, which, if executed to where we want to make it achieve, we would have achieved our objectives.
And as you've said that your entire 60, 70 originals will not even stack up to 500 hours. But just trying to understand your strategy. Then when Reliance will take a year, or it's -- Airtel will follow Reliance, which could be 2 years away, why not use this fiscal '19 to really -- the original is one space where there is no player today in terms of doing volumes. So why not take this opportunity to go a little more aggressive and become the destination? Because Worldstar is more about cricket, and when it comes to original, there's hardly anything there today.
Let me flip it you. Do you know any other OTT player who's launching 70 shows in 1 year?
Yes, but I said, -- yes, it's not adding to 500 hours. So -- and...
It's the optimum quantity. I don't know. Is it 500 hours? Is it 1,000 hours? Is it 5,000 hours? It's a question of we are discovering the market. And just like throwing money at it is not the right strategy in our view, and that's not the way ZEEL operates. So we will go into the market at our own pace, grow the business as [indiscernible] have.
Yes. And one last question. Any plans to add any new market or new channels in any market this fiscal year?
We will be adding the Canada market to the system, and we are looking at other genres within the existing regional markets.
Next question is from the line of Rohit Dokania from IDFC Securities.
Just 2 quick questions. Can you talk about your tax rate expected for FY ' 19 and '20? And also, can you talk about any update on Free Dish and that is, increasingly, Free Dish wants -- continue to become free. Can that open an incremental opportunity for us in terms of subscription revenue?
Bijal, can you take the first one?
Yes, so our income tax, here, they should go back to normalized rate of around [indiscernible] in FY '19 and '20.
On the previous slide, definitely, if the Free Dish becomes weaker, there will be huge opportunity not just on subscription side, but even on advertising side. Because if you look at all the advertising moves that has happened on the FTA side, or will eventually come back to the paid channel, which is not the case today.
So are you seeing that happen, Punit? Is Free Dish then currently becoming weaker and weaker?
Not from where I'm sitting today, because the policy is still not out. We do not associate the policy with pay. And even if it -- policy comes out, this is very, very detrimental to the broadcasting industry. I think that [ the long players ] will fall out first before the main players get -- start getting advantage.
The next question is from the line of Manish Adukia from Goldman Sachs.
I have 2. The first one is just on the subscription revenue. It seems like ARPU growth for some of the pay TV operators has been somewhat challenged in the recent quarters. How do you see the ARPU of pay TV operators, is this growing over the next 3 to 5 years from a consumer point of view? And as such, how do you see your own revenues on the subscription side pan out over the next 3- to 5-year period? You mentioned in the previous question about the potential of subscription if, let's say, if Free Dish were to get more weakened. So -- but you also earlier mentioned a comment that a consumer who has the ability to pay is already on a pay platform. So do you really think that from a Free Dish standpoint, I mean, consumers who are today on that platform, could move to, let's say, a pay subscription platform and as such, help in increasing the subscription revenue for the industry? That's just the first one. And second, on ZEE5, a follow-up question. Given the scale of these telecom operators that you said that you will look to tie up with them in the near future, do you think that for you, in a 3-year horizon, is it safe to say that a larger chunk of your ZEE5 dollars will come from subscription revenues and not ad dollars, just because the scale of these telcos are so large today versus some of the other operators?
So I'll take the second and first. So I think it's still something that we're going to discover. India has, as a market, will have both AVOD as well as SVOD as well, the consumption package. If you look at our strategy, purely on the AVOD side is driven largely from a catch-up TV perspective. Whereas the premium services, which includes original content, et cetera, all sit behind the paywall. So we do expect a healthy mix of advertising and subscription to coexist. And yes, a large part of that may come from -- through the telcos, because it's an easier access to the consumers from our perspective. We look at telcos like another BPO in our ecosystem of business. And that's how we are looking at the business. The first question on the Free Dish part, I think what I said earlier about anybody who has the ability of paying has already paid in the paid subscription. One has to also see in the lines that we have data to prove that a large chunk of the previous subscriber keep shifting between free and pay for services purely because they have both the connections. It's a function of whether they want to pay for the content in that month, based on certain content that's available, whether it's sports, whether it's movies, whether it's a show that really resonates with them. The 2 are not in isolation of each other. I think they're linked in a certain manner. Having said that, when 30 million consumers are used to entertainment content of the kind of quality that we provide and were to shut down, then a large part of that would definitely migrate to a paid service. Whether they will move to an ARPU level that currently exists in the market may not be, but I'm sure the BPOs will come out with [indiscernible] tax as we have seen in the international markets and including Indian market going forward.
Right. That's helpful, Punit. And just one other question that I also had was, on the outlook for the pay TV ARPU ex of Free Dish. So for example, all the broadcasters, including yourself, are trying to tie up with these telco providers would offer a lot of content to mobile phones over time. So do you think that the subscription growth on the pay TV side or the ARPU growth there could stay challenged for the next few years? And as such, on your core subscription revenue side, that could come pressured once the whole digital digitization benefit is behind us?
I don't think the 2 are linked. I think they're independent of each other because we are talking about 2 distinctly different services. On the traditional form of distribution of our linear content, we cater to households and, therefore, that's a different way of us charging for our content. Whereas on the alternate device, it's largely individual-driven consumption. So that cannot be compared one versus the other. I think the BPOs in the traditional [indiscernible] way, their own level of issue as to why they're not able to drive ARPUs up because of undercutting themselves, is the reason that we are not seeing the ARPUs move up. If we look at on the telco side, while they claim to give content away for free, but they do charge for bandwidth. And if you look at most of the bandwidth consumption, it does come on the back of video consumption.
Next question is from the line of [ Kultikara Sloggi ] from ACK Capital.
So I would like to ask some question, right, on an industry level...
Sorry to interrupt, [ Miss Sloggi ]. I just wanted to check have you put your phone on speaker, if I may ask? Because your voice is too loud actually.
Yes. So on an industry level, I would like to know the ad revenue trend as to how much is coming from TV, digital or print.
The ad revenue.
Around -- this is [indiscernible] from television, then, [indiscernible] around 35% and around 15% is digital and rest is radio, out-of-home and other services.
Thank you very much. As there are no further questions, I now hand the conference over to the management for closing comments. Over to you.
Thank you very much. Thanks for -- everyone, for your interest in Zee Entertainment. If you have any follow-up question, you can reach out to Investor Relations team. Thank you very much.
Thank you very much, members of management. Ladies and gentlemen, on behalf of Zee Entertainment Enterprises Limited, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.