B E A C O N A Newsletter by SIMCON– SIMSREE Consulting Club

Volume : 2

Issue : 11 September 2014

Inside this issue:

Industry Analysis: Media and Entertainment

Company Analysis: Zee Entertainment

Enterprises Ltd

CONvergence’14

Concept of the Month

Quiz

Did You Know?

Volume: 2 BEACON : Page 1

Issue : 11 Sep. 2014

Introduction:

According to a FICCI-KPMG report published on January 3,

2014, India’s Media and Entertainment (M&E) industry reached

Rs 92,000 crore in 2013, a 12% increase as compared to 2012.

As of January 2014, around 161 million households in India

watch television. More than 330 million newspapers are circu-

lated daily in India. A staggering 214 million are connected to

the Internet; of which 130 million are mobile internet users.

Such statistics show how much penetration the media has at-

tained in a country of around 1.21 billion, and also how there is

still loads of ground to cover – offering opportunities.

2013 saw an increase in the digitization of media products and

services, like the effect on cable Television. With the boom of

Internet, digital marketing has grown by leaps and bounds as

numbers suggest.

The industry continues to grow and also plays an important role

in bringing about awareness on many issues impacting the entire

population. Digital technologies, ever increasing demand of

smartphones, penetration of broadband internet & digital cinema

have brought about the increase in this sector. Backing from the

Indian government is also an added advantage. Advertising con-

tinues to evolve over a period of time and going Digital is the

way ahead.

Market size of the Media & Entertainment sector:

According to the above mentioned KPMG report, Media & En-

tertainment industry has the potential to ramp up by 14.2% to

more than Rs 1.78 lakh crore in the coming four years.

The television industry in India is anticipated to increase at a

CAGR of 16.2% over 2013-18. That makes it around Rs 88,500

crore.

Without much surprise, digital advertising is projected to have

the highest CAGR of 27.7% with other sub-sectors projected to

grow at a CAGR in the range of 9-18 %, till 2018.

The foreign direct investment (FDI) inflows in the information

and broadcasting (I&B) sector (including print media) in the

period April 2000 - July 2014 stood at around Rs 23,060 crore,

as per data released by Department of Industrial Policy and Pro-

motion (DIPP).

So how are companies investing in this sector?

Recently, a MoU was signed between Prasar Bharati and

Deutsche Welle, a German public service broadcaster to expand

the reach of Doordarshan India into other markets like Asia,

Europe, and Middle East. This enables the availability of

Doordarshan India’s programmes at no cost, on Hotbird 13B, a

leading

DTH platform in Europe.

Discovery Communications India recently launched its Investi-

gation Discovery (ID) channel and thus ventured into the Hindi

entertainment space. After the launch of HD variants, Discovery

channel’s portfolio in India has now grown to eleven.

Multiplex chain INOX bought 100% shares of Satyam Cine-

plexes Ltd (Satyam), valued at Rs 182 crore. This deal raises

INOX’s screen count in India to 358, across 91 multiplexes and

50 cities. The intent of this deal was to increase INOX’s pres-

ence in North India; especially Delhi.

In association with Orange, Infosys launched its IP TV

(Television on the Internet) services to its customers. Infosys

plans to create interactive television apps on Orange’s store -

Livebox Play. It also intends to integrate this system with its

cloud-based services.

Vodafone India is currently working with Disney India’s Inter-

active business to develop games and applications for smart

phones.

Media and Entertainment Industry:

Media industry is composed of various segments like television,

print, films, music, digital etc. The share of each of the compo-

nents in the total industry can be shown in a chart below. Tele-

vision contributes to the largest share as of now and continues

to grow at an ever increasing rate. It is expected to grow at 51%

till 2017 estimates the KPMG report mentioned earlier.

Figure 1- Industry Segments

Source: http://www.ibef.org/industry/media-entertainment-

india.aspx

Figure 2- Advertising revenue

Source: http://www.ibef.org/industry/media-entertainment-

india.aspx

For detailed report and all company analysis from previous Beacons together, please visit

our blog:

http://simconblog.wordpress.com

INDUSTRY ANALYSIS:

Media and Entertainment

Volume: 2 BEACON : Page 2

Issue : 11 Sep. 2014

For detailed report and all company analysis from previous Beacons together, please visit

our blog:

http://simconblog.wordpress.com

INDUSTRY ANALYSIS:

Media and Entertainment Top Industry Players:

Top companies according to Market Capitalization:

Porter’s five force analysis of industry

Impact of current issues in M&E Industry:

High and multiple taxes in film industry:

A high amount of indirect tax - 15-50% - is levied on film indus-

try. Along with this, multiple taxes like VAT + service tax are

imposed on the industry. This has been a long stretched issue in

film industry. Of the earnings after tax, 40% of the money goes

to exhibitors and the balance is left with the producers. So for

financing a project of Rs 10 crore with 50% tax, the box office

collection of Rs 50 crore is required to break even. The film pro-

ducers argue that only 5-6% of the movies in the film industry

are a box-office hit. For others recovering such high amount

money is very tough. It discourages investment.

Piracy:

Piracy is one of the biggest and ever increasing problems of the

film, television and music industry. With the rise in digital me-

dia it has become easier to pirate and share the movies. An E&Y

report estimates the losses due to piracy to be around Rs 2,469

crore per year in India.

Intellectual Property Rights:

According to a survey conducted by E&Y, 56% of the frauds

happening in the industry are due to Intellectual Property Rights

(IPR) issues. With the increase in digitization in M&E sector,

more and more such cases of breach of faith and frauds happen.

This is resulting in monetary as well as reputational loss. With

more companied growing from unorganized firms to organized

company, it is has become very essential for them to increase

vigilance.

What role is the Indian Government playing in this?

To promote exchange of culture and art between the two coun-

tries, the Indian and Canadian governments signed a co-

production deal in 2014. This deal would help producers from

both countries to enhance and utilize their creative, technical,

artistic and marketing resources in the process of making films/

serials.

The Central Government has given the green signal forlicenses

to around 50 new news and entertainment channels in India.

Star, Sony, Viacom and Zee have already acquired licenses to

such energies. Presently, around 350 broadcasters cater to close

to 780 channels ranging from news to entertainment to sport

and many other domains.

How to build on this momentum?

Digitization and the Internet will drive India’s Media & Enter-

tainment industry forward. Internet Service Providers are al-

ready earning increased revenue due to broadband penetration.

Additionally, advertising agencies began competition with each

other to acquire in the digital and social media domains. These

developments suggest growth for the M&E industry in India.

Opportunities outside the country also beckon. The African

continent and the Middle East are two relatively unexplored

markets, and Indian M&E companies could plan their expansion

realizing the regions’ potential.

Conclusion:

Growth of middle class, rise in disposable incomes, high

amount of content consumption and a favourable regulatory

environment in India are bound to encourage foreign invest-

ments and growth in the M&E industry. With increase in broad-

band penetration and services like 2G, 3G and even 4G being

provided by the telecom companies, we are bound to get more

people into the digital world. With increased foreign invest-

ments, there is a rising sense of urgency to take up opportunities

offered by the Indian M&E industry. It is of utmost importance

to comprehend and adjust to the economic and cultural nuances

in a diverse country like India, and come up with content tai-

lored for the local market. While M&E companies continue to

be exposed to risks ranging from competition, piracy, corrup-

tion & fraud, our on-going structural and regulatory reforms by

the new Government and focussed development of corporate

governance norms are bound to reduce these threats.

References: Deloitte

Best Media Info

IBEF

MoneyControl

FICCI

E&Y

Company Name Market Cap (Rs. Cr)

Zee Entertainment 32,444.05

Sun TV Network 12,833.37

DB Corp 6,405.75

Dish TV 5,844.12

TV18 Broadcast 4,886.79

Volume: 2 BEACON : Page 3

Issue : 11 Sep. 2014

Company Overview

Launched in 1992, ZEE is a globally recognised company in the

M&E industry. With over 730+ million viewers across the

globe, ZEEL has a presence in 169 countries.

Zee Entertainment Enterprises Limited is one of India's leading

television, media and entertainment companies. It is amongst

the largest producers and aggregators of Hindi programming in

the world (having produced 32 serials & daily soaps till date),

with an extensive library housing over 1.2 lac+ hours of televi-

sion content. Zee TV has a leading share in the Hindi General

Entertainment genre (GEC) with an average weekly channel

share of 17% amongst all GECs. With rights to more than 3,500

movie titles from foremost studios and of stellar film stars,

ZEEL houses the world's largest Hindi film library.

ZEEL's well-known brands include Zee TV, Zee Cinema, Zee

Premier, Zee Action, Zee Classic, Ten Sports, Ten Cricket, Ten

Action+, Zee Cafe, Zee Studio, Zee Trendz, Zee Khana

Khazana, Zee Salaam, Zee Jagran, Zing, ETC Music and ETC

Punjabi. The company also has a strong offering in the regional

language domain with channels such as Zee Marathi, Zee

Bangla, Zee Telugu, Zee Kannada and Zee Talkies.

The ZEEL stable owns an integrated range of businesses. All of

these in singularity adhere to the content–to–consumer value

chain model of media and entertainment business. ZEEL is a

pioneer in every aspect of content aggregation and distribution

through traditional media like satellite and cable and new media

like the internet, in India.

It has also entered the educational arena with brands like ZICA,

Kidzee, ZIMA & ZED. Zee also has its in–house production

company under the name Zee Motion Pictures.

Shareholding Pattern

Management

SWOT Analysis

For detailed report and all company analysis from previous Beacons together, please visit

our blog:

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COMPANY ANALYSIS:

Zee Entertainment Enterprises Ltd

Strengths

- Global presence and complete

array of channels - Zee has

total 34 channels that cater to

various customer segments

across 169 countries

- Have good viewership base

(730+ viewership in FY14).

The channels provide good

content and enjoy high TRP

ratings

- Trailblazing growth in ad

revenue (around 17% YoY

growth in Q1 FY15)

- Good subscription revenue –

Revenue through subscription

contributed to almost 41% of

the revenue in FY14.

Weakness

- Zee does not have rights to

major sporting events and as a

result, it lags in the sports seg-

ment

- Lack of high cost content -

Zee, the flagship channel of

ZEEL, has shied away from

making major investments in

acquiring high cost content like

new movies and reality shows

Opportunity

- The TV industry is expected

to double its size by 2018

Increasing digitisation will help

in increasing subscription reve-

nue – Penetration level of digi-

tal TV is still low at around

36% and is expected to rise

steadily

- The new channel launches by

Zee like Zee Zindagi offer

great potential due to its fresh

concept

Threats

- The discontinuation of Media

Pro with Star might put pressure

on subscription revenue growth.

- Star Sports has rights to tele-

cast cricket matches in India till

2018 as well as events like ISL

whereas Zee do have right to

broadcast any major sporting

event in FY2015 as well as in

FY16

Name Designation

Dr. Subhash Chandra

Non-Executive Chairman &

Promoter of Essel Group of

Companies

Mr. Suboodh Kumar Executive Vice Chairman

Mr. Punit Goenka Managing Director & CEO

Mr. Ashok Kurien Non-Executive Director

Lord Gulam K. Noon Independent Director

Prof. R. Vaidyanathan Independent Director

Prof. Sunil Sharma Independent Director

Prof. (Mrs.) Neharika

Vohra Independent Director

Volume: 2 BEACON : Page 4

Issue : 11 Sep. 2014

For detailed report and all company analysis from previous Beacons together, please visit

our blog:

http://simconblog.wordpress.com

Financials

The financial highlights from Balance sheet for FY 13-14 are as

given below:

The Return on Net Worth (RONW) and Return on Capi-

tal Employed (ROCE) stood at 18.8% and 28.1%, respec-

tively as compared to 18.4 and 27.1 the previous year.

The Price-Earnings (PE) Ratio and Earning per Share

(EPS) was 29.2 and Rs. 9.30 respectively in FY 2013-14.

The Liquidity ratio increased from 3.3 in FY 2013 to

3.5 in FY 2014.

Competitor Analysis

The breakup of Entertainment industry is shown below:

The table below shows the media companies finance for the

year that ended March 2013.

New Developments

1. Ad cap case – The final decision regarding 12 minute ad

cap case will be taken by the Delhi High Court on 20th

November, 2014. But impact on Zee is unlikely as it

already adheres to the 12 minute per hour ad cap.

2. New channels – Zee launched 5 new channels in the FY

13-14. These channels were – &Pictures (Hindi movie

channel), Zee Anmol, Zindagi (syndicated content from

Pakistan), Zee Bioskop (Indonesia’s first Bollywood

channel) & Zee Nung (Bollywood Channel in Thai)

3. Disbanding of Media Pro – Media Pro, a JV between Zee

Turner Ltd and Star Media, came to an end in April 2014

after TRAI disallowed aggregators to bundle channels of

more than one broadcaster. The disbanding of Media Pro

is likely to put pressure on subscription revenue growth

in the short term.

4. Plan of global expansion – ZEEL is planning to increase

its overseas presence by expanding its operations to

countries in Middle East, South East Asia and Africa.

5. Collaboration with entertainment industry to re-build

Kashmir – Zee Entertainment, Event and Entertainment

Management Association (EEMA) and the Film & Tele-

vision Producers Guild have joined hands to raise a fund

raiser campaign to raise funds and awareness for the

flood stricken Kashmir.

References:

NDTV Profit

Money Control

Zee Television Financials

Zee Entertainment Company Overview

COMPANY ANALYSIS:

Zee Entertainment Enterprises Ltd

Company Revenue

(Rs Cr)

Net

Profit

(Rs Cr)

Net Worth

(Rs Cr)

Star India 4,075.6 349.3 2,929.1

Zee Entertain-

ment

2,684.9 640.5 3,352.8

Viacom 18 1,579.0 -40.6 790.4

Multi Screen

Media

966.1 102.9 1,447.1

Discovery

Comm India

159.6 24.3 130.8

Volume: 2 BEACON : Page 5

Issue : 11 Sep. 2014

Sydenham Institute of Management Studies, Research and Entrepreneurship Education organized SIMERATIONS’14 – its flagship

inter college annual festival. The 20th edition of SIMERATIONS, a management-cultural-sport-literary festival, was the zenith for

India’s youth from prominent colleges to showcase their acumen in a variety of fields and enhance their versatility. During this festi-

val on 21st September 2014, SIMCON - SIMSREE Consulting Club - in association with ‘Benchmark Six Sigma’ organized ‘CON-

VERGENCE’- an Inter B school case study competition.

Promotion of the event:

Convergence was promoted on several social sites like Facebook, Blogs, Linkedin. Also the updates of competition were posted on

dare2compete.com; a very popular online portal for B-School students to be updated about competitions and other events.

The search for the best minds, who could think like a consultant, spanned across three challenging rounds. We received around 300

entries from across B-schools like IIMs, XLRI, SPJIMR, NMIMS, NITIE, JBIMS, TISS and many more. The first round was an

online quiz of 20 questions for 30 minutes and 30 teams were shortlisted for the next round. In round 2, a case study from the ship-

ping industry was given to the teams. Based on the presentations we received from these teams, we got them evaluated and came up

with the top six teams for the final round.

Our judging panel:

Mr. Shripad Ranade is a Senior Principal at TATA Strategic Management Group; where he looks after

the strategy and operation consulting in automotive, engineering and metal sectors. He has been helping

TSMG’s clients through high quality strategy formulations as well as performance improvement pro-

grams. He had been a part of the Aditya Birla Group of Companies and Alcan India before joining the

TATA Strategic Management Group.

Mr. Saurabh Kumar Sahu is working as a Senior Principal in Accenture management consulting. He has

ten years of Management Consulting Experience and is engaged in strategy assignments in growth strat-

egy, supply chain management, procurement transformation and sales & marketing effectiveness. He has

handled projects across the retail, consumer goods, pharmaceutical and automotive industries in India, UK

and US.

Mr. Dhananjay Bapat is Director of Marketing at Videojet technologies. He has over 16 years of experience

in sales & marketing. He has played a key role in driving profitable revenue growth through sales, market-

ing and product management. He is also responsible for developing strategies for high growth based on

market intelligence. Previously, he has worked with companies like Atlas Copco, Saint Gobain Abrasives

and Godrej.

Ms. Sangeeta Pandit is a Chartered Accountant and has been a member of Bombay Stock Exchange. She

is currently on the board of directors of ZEE Learn Ltd. She is a HOD of Finance at SIMSREE.

On-Campus Event:

For the final round, finalist teams were called for on-campus presentations of the case study. Finalist teams were from TISS, NITIE,

IMT Ghaziabad, SIMS and SIMSREE. A brief description of case study was shared before starting with the presentations for the

benefit of audience. The teams were asked not to mention their college names in their presentation, for anonymity. After individual

CONVERGENCE’14

IMT Ghaziabad, SIMS and SIMSREE. A brief description of case study was shared before starting with the presentations for the

benefit of audience. The teams were asked not to mention their college names in their presentation, for anonymity. After individual

presentations, the Q&A sessions were very interesting as some of the questions asked by the judges flummoxed the teams; apart

from the other ones which were handled by them very well. Judges then shared their insights on the case and the consulting world

while we consolidated the results.

Team ‘Invictus’, comprising of Ramya Lakshminarayanan and Vikram Singh Thakur from SIMSREE, emerged as winners and were

awarded prizes worth INR 15000.

Team ‘TopGun’ comprising of Mihir Haryaal and Satyanarayan Sanwal from SIMS emerged runners-up and were awarded prizes

worth INR 10000.

Team ‘Invictus’ Team ‘TopGun’

We would like to thank our sponsor Benchmark Six Sigma, our judges for taking time out from their schedule on a Sunday, the par-

ticipants, audience and the Simerations’14 team for helping us make Con-vergence’14 a grand success.

Core Competency A Core competency is a deep proficiency that permits a corporation to deliver distinctive price to consumers. It displays an organiza-

tion’s cumulative learning, notably of how to coordinate numerous production skills and integrate multiple technologies. Such a

Core ability creates sustainable competitive advantage for a corporation and helps it branch into a large form of connected markets.

Core Competencies additionally contribute considerably to the advantages a company’s product offer consumers. Some critical indi-

cator for a Core Competency? It’s rigid for competitors to copy or procure. Understanding Core Competencies permits corporations

to take a position within the strengths that differentiate them and set ways that unify their entire organization.

How does it work?

An organization should take the below mentioned steps to establish its Core Competencies:

Segregate its key skills and sharpen them into organization wide strengths

Analyse itself with different firms with an equivalent skills to confirm that it's developing distinctive capabilities

Develop an understanding of what capabilities its consumers really value, and invest consequently to develop and sustain valued

strengths

Build an organizational game plan that sets target for competence building

Pursue alliances, acquisitions and licensing arrangements which will additional build the organization’s strengths in its crux

areas

Encourage involvement and communication in core capability development across the organization

Preserve core strengths at the same time as management expands and redefines the business

Reconstruct or deprive non-core capabilities to release resources that may be used to deepen core capabilities

Why do companies use it?

Organisation use core competencies for the following reasons:

Design competitive positions and techniques that take advantage of company strengths

Consolidate the corporate across business units and functional units, and improve the transfer of information and skills among

them

Help workers perceive management's priorities

Incorporate the use of technology in carrying out business processes

Decide where to assign resources

Make outsourcing, divestment and partnering selections

Widen the domain within which the corporate innovates, and spawn new products and services

Initiate new markets and expeditiously enter emerging markets

Enhance image and build client loyalty

Volume: 2 BEACON : Page 6

Issue : 11 Sep. 2014

CONCEPT OF THE MONTH

QUIZ

1. In which country has DHL launched its first commercial delivery service

“parcelcopter”?

2. Which company has recently started India’s first bit coin exchange

“BTCXIndia”?

3. Which Nobel laureate founded RugMark, an international scheme that tags all carpets made in factories certified as child

labour-free?

4. Pharmaceutical company X on 6th April 2014 announced to buy Pharmaceutical company Y with the deal pegged at $4 bil-

lion which would make company X India’s largest drug maker by sales. Identify company X and Y.

5. Which semiconductor chip maker was formerly known as “NM Electronics”?

The FedEx express once had just $5000 to its name. The founder decided to gam-

ble in Vegas with that money and made $32000 which was enough to continue its

operations for a little longer. Now, in 2014, the company is worth more than $2 bil-

lion.

The first Apple computers logo featured Sir Isaac

Newton reading a book under an apple tree with a single

glowing apple suspended in the tree above his head.

In 1972, Bill Gates started his first company by

name “Traf-O-Data”. The company was formed with

the objective of processing raw data from roadway traf-

fic counters to creating reports for engineers.

Volume: 2 BEACON : Page 7

Issue : 11 Sep. 2014

Contributions invited:

To make this feature a successful effort, we seek continued involvement and contribution from our readers,

that is YOU. We invite articles and trivia on themes related to consulting. Be it industry news, consulting

trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down

your thoughts and mail your entries to simcon.simsree@gmail.com.

Best Regards, Our FB page : https://www.facebook.com/SimCon

SIMCON –SIMSREE CONSULTING CLUB Mail To : simcon.simsree@gmail.com

Winner:-

Sharved Mahajan

SIMSREE

ANSWERS : AUGUST ISSUE

Answer To: simcon.simsree@gmail.com with Subject= SIMCON_Quiz_September_2014

Winner will be recognized.

All Correct Answers will be published in next month’s Edition.

1. Lakme

2. Brylcreem & Godrej Consumer Products Ltd

3. Vistara Airlines (A JV between TATA and SIA)

4. X: General Electric, Y: Honeywell

5. Erstwhile Satyam Computers (now part of Tech Mahindra)