FY 2022-2023 saw the media and entertainment industry battling macroeconomic headwinds with resilience and focusing on investments in further strengthening the business fundamentals, Punit Goenka, Managing Director and CEO, ZEEL, said during the Q4 earnings call.

“At Zee, as well, the year was one of concerted efforts for enhancing strategic aspects across all our key businesses. That said, the new fiscal brings in optimism, as we witness the overall market sentiment improving with key advertisers set to increase their spends.”

On the merger with Sony, Goenka said legal matters were consuming a considerable amount of time. “We are evaluating all legal options present before us to overcome any further hurdles,” he added.

He further mentioned that the NCLT has recently dismissed the plea filed by a financial institution against Zee, which is a noteworthy development. “We have the best of legal teams advising us, and I'm most certain that we are in safe hands. Hence, my focus continues to be on enhancing the business performance and completion of the merger. As you all are aware, the merger has already received most of the regulatory clearances, including the ones from our esteemed shareholders, which reinforce the fact that it's value accretive for the industry at large. As an optimist, I remain hopeful that when we connect again, there will be some positive developments to share with all of you on the merger front.”

According to Goenka, despite the headwinds, Zee has remained undeterred in its strategic approach towards the quarter. “Our focused efforts and investments in content reflect our long-term strategic intent to further strengthen our market position. We further fortified our position as the number two entertainment network in the country. In fact, during the quarter, our viewership share gain was higher than the competition. We also witnessed an increase in viewership share across our linear channels in key markets, including South, North and East.”

He also shared that significant efforts have been made in terms of content strategy for the Marathi market, and Zee is expecting that to translate into positive results over the current financial year.

On digital, ZEE5 has been gaining ground quarter-on-quarter across all metrics, Goenka informed. “We recently announced an expansive content slate of 111+ titles for ZEE5, which includes compelling originals, direct-to-digital films and theatrical releases in collaboration with renowned content creators. I'm certain that this will further enhance our unique value proposition to the consumers and attract newer audience segments to the platform.”

He also said that several industry reports peg the segmental growth of the digital ecosystem to be around 20% - 25% CAGR over the next eight years. “At Zee, we are significantly outpacing this growth and have doubled our quarterly revenue run rate in the matter of 8 quarters. That said, sustained investments in the long term amidst navigating the macroeconomic headwinds, strained our near-term financial performance. However, we have formulated a plan that is focused on higher growth and we remain well poised to capitalize on opportunities emerging across business segments during the year.”

Goenka also mentioned that taking a long-term view, he remained cautiously optimistic about the future as the inflationary headwinds ease and the benefits of NTO 3.0 flow in, resulting in positive signs of demand and growth. “I am confident that we are well placed in the financial year '23-'24 to capitalize on growth opportunities. Our focus remains on generating higher shareholder value year-on-year, and we will strive to only grow higher from here.”

Speaking about the financial performance for the quarter and full year, Rohit Gupta, Chief Financial Officer, ZEEL, said FY23 was a challenging year for the entire Media and Entertainment industry given weak ad spending, prolonged delay in NTO implementation putting pressure on linear TV subscription revenues, and relatively subpar movie content performance.

“This operating environment has adversely impacted Zee Entertainment’s performance for the year. In FY23 we also withdrew Zee Anmol from FTA, sacrificing revenues and viewership towards our long-term objective of strengthening the pay TV ecosystem.”

Gupta further said, “While we navigated these headwinds, we continued to invest in the enhancement of our capabilities across digital (ZEE5) and sports. Both these segments being relatively nascent, have needed investments in content, marketing and technology, intensifying impacting our overall profitability. We believe these investments are critical to being able to serve and delight our viewers and advertisers. Overall, in FY23 despite all the headwinds we have strived to balance near-term financial profile of the business while making room for longer-term strategic investments.”

Speaking about the Q4 operating environment, he said, “We continued to see muted ad spending by FMCG brands during the quarter. On the subscription side, while NTO 3.0 came into effect from February 1st, 2023, there were a set of DPOs who went to court challenging NTO 3.0 and did not sign the interconnection deal with broadcasters as per the provisions of NTO 3.0. This left us with no choice but to switch off our channels to these DPOs. While the standoff ended eventually with these DPOs signing new agreements, this situation impacted our ad and subscription revenues adversely during the switch-off.”

On linear business, Gupta said ZEE continued to be India’s strong No. 2 TV entertainment network and gained a healthy 40 bps viewership share during Q4 ’23, taking viewership share to 16.6%.

While on the digital side, ZEE5 has posted a healthy quarter across financial and operating metrics. “Our Q4 digital revenues are up 36% and while there is minor moderation in usage metrics QoQ, and watch time has improved QoQ to 229 minutes. FY23 has been a great year for our digital and ZEE5 strategy and our original content is being well received. The ZEE5 app user experience has significantly improved and a healthy growth in revenue continues.”