A sliding global economy has turned up the heat on the international businesses of the Hindi content broadcasters.

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In 2008, Zee group stretched its wings in Russia while deepening its presence through the launch of Veria (the natural wellness channel is part of the Essel Group initiative) and Aflam (a Hindi movie channel with subtitles in Arabic) in the US and the Middle East respectively. Riding on a bull market, the group also launched a radio business in the UK.

The 2009 landscape will be far different, more punitive, and starkly grim. Delinquent ventures will be avoided and risky bets put on hold.

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Zee Sports, thus, will not travel to other countries as the RoI (return on investments) just does not work out. In the US, it was launched as Zee Sports America because a partnership was hatched with EchoStar.

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Zee Entertainment Enterprises Ltd (Zeel) will make efforts to guard turf in its two main markets – UK and the US – which make up 70 per cent of its total international revenues.

With around one-fourth of its revenues coming from its international business, Zeel’s drive will be to maximise revenue opportunities from each market.

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In an interview with Indiantelevision.com’s Sibabrata Das, Zeel COO international operations Bharat Ranga talks about the need to value content appropriately, keep away from reckless expansion, and be tough on costs.

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Excerpts:

Zee took several initatives to expand its global presence in 2008 like tapping the Russian market and launching channels in the Middle East and the US. Will the global downturn force a more conservative strategy in 2009?
Our focus in 2009 will be to maintain our profitability and not get into adventurous ventures. In these uncertain times, it is important to maintain stability. It is better to hold on to your growth plans than to expand recklessly in this market. We will have to be tough on our costs without compromising the value of our product.

Will there be a drive to take Zee Sports to other markets after launching the sports channel in the US?
We launched Zee Sports in the US in partnership with EchoStar. We work along with EchoStar on that brand. For launching in other markets, we feel that the RoI (return on investments) is not there at this stage.

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Will there be more subscriber churn and slowdown in Zee’s two main international markets, UK and the US?
The global economic turmoil is bound to have an impact on these two markets, which make up around 70 per cent of Zee’s total international revenues. But growth in the US will be faster than in UK.

Why?
UK is a tougher market because not all South Asian content is pay. This is not the case in the US. We, however, are pay in the UK and have five channels in that market – Zee TV, Zee Cinema, Alpha ETC Punjabi, Zee Gujarati and Zee Muzic. We have a subscriber base of 200,000, but it is growing slower. The yield, however, is higher and we are priced at 13 pounds a month for two channels. For each additional channel, we charge 5 pounds a month.

Have you priced yourself lower in the US?
No. But unlike UK, we are not retailing ourselves. We are part of EchoStar and other cable companies like Comcast and Time Warner. We enjoy a revenue share with them.

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One of our group initiatives to expand in that market was the launch of Veria, a natural wellness channel, last year. It is a very premium and growing segment and we are bullish about the channel’s growth. We do not have Zee Muzic in that market. Our subscriber base in Americas is close to a million.

How far has Zee progressed in cracking the Chinese wall?
We have applied for landing rights and are waiting for approval for over a year. We hope to get the permission soon. China is a very complicated market to crack and it is important to have a very clear business model in place. Many international media companies have invested billions of dollars in that market, but not gained much. We have taken a cautious approach and, meanwhile, have started a syndication buiness there. Foreign content syndication itself is tough as there are more rules stating why not to buy such content than why there is need for it. For us at Zee, China remains a romantic thought at this stage.

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Even Russia is considered to be a very difficult market, as Disney found out recently when it did not get the nod for taking a 49 per cent stake in a joint venture with local firm Media-One Holdings. What has been your experience so far?
Russia is a cheap pay TV and advertising market. We launched Zee Russia last year, but the channel hasn’t taken off the way we expected. It is a pay channel with Indian content dubbed in Russian. We are at a nascent stage but, like China, it is an initiative for the future.

Zee had to rework on its strategy in the Middle East and shut down Zee Arabia. Why?
We saw an opportunity for offering our content to local audiences in the Middle East. We tasted the water with Zee Arabia launch and learnt the nuances of the mainstream market. We replaced it with Zee Aflam, a free-to-air Hindi movie channel with Arabic subtitles, last year. Our Hindi offerings – Zee TV, Zee Cinema, and a hybrid channel of Zee News and Zee Gujarati – are, however, pay in that market.

Since Zee Gujarati is wrapping up after 30 April, will that offering end in the international market as well?
We have not decided if we will do away with that offering for our international audiences. We have standalone Gujarati audiences. We may have a repurposed channel by sewing up content from others. That business decision is yet to be taken.

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The rates of the Zee channels have stayed flat in UK at least. Has Zee lost pricing power in the international markets?
There is room for hiking subscription and advertising rates, but it is not easy in this market condition. Besides, competitors have to work together for growing the size of the market.

Which means that the revenue potential is still untapped?
There are 35 million Indians residing outside India. There are also South Asians who consume Indian entertainment content. This throws up a nice business proposition. Zee is the dominant international player, with over 50 per cent market share. We reach out to 167 countries, have 200 people spread across 16 offices, and treat it as a strategic business unit (SBU). The irony of the international business is that the South Asian players have not valued their content appropriately. Hence, the revenue potential remains untapped.

What is it that Zee has done right in the global arena?
We learnt from our Indian market experiences and priced ourselves appropriately in the developed markets.

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