MUMBAI: Salomon Smith Barney (SSB), in a report just released, believes the failure of the channels in the Zee bouquet to rope in telecom ads is worrisome.
The SSB report sees telecom, financial services and the retail oil sectors driving 10-12 per cent growth in the estimated Rs 26 billion C&S advertising market. The report further adds that Zee’s ratings and thereby revenues would get affected if it fails to corner a major share of this pie.
The report cites a recent instance of Reliance Infocomm’s high-decibel television ad campaign conducted on 28 December as part of its CDMA mobile services launch. On 27 December, Reliance Infocomm launched its telecom service offerings for 18 telecom circles targeted at an estimated 90 per cent of the Indian population.
According to latest ad data available with SSB analysts: on 28 Dec alone, Reliance’s 80-second ad campaign (“Tribute to Dhirubhai Ambani”) was broadcast across 24 channels generating 189 spots or 15,120 seconds of advertising. Zee bouquet of channels got only 10 per cent share of this duration (possibly lower share of spend) with ad spots on its regional channels. Alpha Marathi and Alpha Gujarathi getting 720 seconds each out the entire burst.
The report claims that no spots were bought on flagship channel Zee TV, movie channel Zee Cinema or Zee News. While clearly one day’s ad spend for one brand is not representative of the overall media plan of the industry, yet the SSB analysts believe that Reliance Infocomm would have chosen channels so as to create the maximum possible impact. The commercial launch of Reliance Infocomm is in February or March 2003 and substantial spending is envisaged.
The SSB team also compared this spend with that of the other telecom brands’ (eg, Airtel Magic) entire prime time advertising duration for a quarter.
It also expressed concern that Zee’s bouquet of channels do not address the South Indian market (20-30 per cent of the total C&S advertising market, according to industry estimates).
Looking at other telecom brand advertising – Airtel and IDEA
The SSB team also considered the advertising duration on various channels for other telecom brands such as Airtel (cellular brands of Bharti Televenture across 15 circles covering 58 per cent of the Indian population) and IDEA for the period 1 October- 21 December 2002 (coinciding with Zee’s movie premiere strategy).
The takeaways were similar. Zee’s channels (Zee TV, Zee News and ETC) enjoyed only a 5.4 per cent duration share of the total advertising duration of these brands. In the key Hindi general entertainment category, Star Plus was the clear leader, enjoying a 77 per cent share of the advertising duration, while Sony (20 per cent) and Zee (3 per cent) accounted for the rest.
Also noteworthy is the fact that during the period under review (1 October – 21 December), Zee’s Thursday “Movie Premiere” was running. Clearly, none of the telecom advertisers from the above sample was drawn to advertise on the channel because of the movies.
SSB rationale
The SSB reasons that the data validates its earlier viewpoint that
* Advertisers (and media planners) prefer to advertise on programs about which they have some idea of the stickiness of the audience – movies have a more fickle audience than highly rated soaps
* Rating points of advertisements aired during movie breaks compared with ads aired during top-rated TV serials indicate that it continues to be more cost effective to advertise during regular shows than during movies. An earlier SSB report has stated that a cola advertisement on Star Plus generated a rating of 11.61, the same advertisement when aired during Zee TV’s Thursday movie slot generated a rating of only 3.57.
* A sustained improvement in ratings of the flagship channel remains the only fundamental trigger for the stock in SSB’s view and is all the more important given the marriage of subscription and ad revenue streams to content post-CAS.
Impact on Zee
The SSB report claims that the overall improvement in viewership ratings is a key element for Zee’s growth. The SSB analysts have however retained their in-line rating and Rs 115 price target, relative to their Sensex target of 3875.
Zee’s network of channels got only a 10 per cent share of the ad duration. It is likely that the share of spend could be lower as Star Plus, Sony Entertainment Television and some regional channels such as Sun TV enjoy premium ad rates.
The report mentions that some of the recent new programmes on Zee have been positively received but they have failed to make a sustainable impact on the overall viewership data.
Tag: SSB report
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Zee failure to lure telecom ads a problem: SSB report
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Movies to boost Zee Telefilm’s Q3 FY03 – SSB report
MUMBAI: A Salomon Smith Barney report has stated that Zee Telefilm’s 3QFY03 is likely to see a significant jump in revenues and profitability due to the accounting policy followed in amortization of movie costs. But, the report adds that this strategy is unlikely to engineer a long-term shift in viewer patterns.
Through its successful “Thursday Premier” prime time slot, Zee is generating revenues equivalent to approximately 100 percent of the movie cost in the first viewing while amortizing the cost over 60 months (or license period, whichever is lower). But, Zee Telefilms has had a bad 2QFY03 and will face a tough 4QFY03 due to the World Cup cricket 2003.
The report estimates that a mere 2x jump in viewer ratings could increase profits by over 100 percent in one year. However, given the huge gap between the leader (Star Plus) and Zee, this is unlikely to happen overnight.
The report also mentioned that Zee has over the past two years lost its core channel identity as a family channel – identified by both the masses and the classes. It adds that the frequent changes to its programming lineup (changes in the FPC), redefinition of its target audience and some poor content (Sawal Dus Crore Ka) have exacerbated the problem.
The report reasoned that if Zee had to rebuild goodwill, a strong channel driver program (such as Friends or Who Wants to be a Millionaire?) is needed. More importantly, to break Star’s hegemony, attractive programming content across prime-time bands needs to be developed, it adds.
The report also claimed that Zee TV had acquired worldwide satellite broadcast rights for approximately 16 movie properties (cost approx Rs 300 million) to stem the tide of declining share and low ratings.
The report mentioned that the broadcast of these movies (every Thursday from 10 October 2002 to 23 January 2003 as per the current schedule) has been successful in generating significant advertiser interest and stemming the slide in ratings. At a recent AGM, Zee’s chairman indicated that based on ad spot bookings, the cost of the movies (plus a small profit) was being recovered in the first showing.
The report also mentioned that this development gives Zee a significant cushion to invest in improving its content and enhancing the overall viewer experience. It also mentions that there have been some recent improvements in the quality of channel promotions and interstitials.
However, the report cautioned that the follow-through has to be an important element of Zee’s movie strategy as the movie-based content was unlikely to effect a long-term shift in viewer habits for a general entertainment channel due to issues of cost and scarcity of supply of movie-based content.
The report also added that the rating points of advertisements aired during movie breaks compared to ads aired during top-rated TV serials indicate that it continues to be more cost effective to advertise on regular shows than on movies.
The report mentioned that a cola advertisement on Star Plus generated ratings of 11.61, the same advertisement when aired during Zee TV’s Thursday movie slot generated ratings of only 3.57. Movie-based content strategies have been used in the past by all channels to either strengthen their brand (Star Plus 1999-2000) or increase visibility and connectivity (Sony) or to counter falling ratings (Zee TV 1999 and 2002).
The report also mentioned that a key metric to evaluate the success of the new movie strategy was related to the incremental viewer numbers the “Thursday Premier” strategy could generate for Zee’s other prime time shows and how sustainable that is through the World Cup Cricket months of February and March 2003.
The report also saw a risk in advertising revenue growth in 4QFY03 as ad spends shift toward sports channels from general entertainment channels.
Zee’s new movie strategy, while likely to yield strong revenue growth in 3QFY03, is unlikely to engineer a long-term shift in viewer patterns. Content that attracts viewers on a daily basis in SSB’s view is the only strategy to retain viewers and attract advertiser interest.
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SSB report claims that Zee Telefilms 4QFY03 to be hit
MUMBAI: A Salomon Smith Barney report estimated that Zee Telefilms would not fare well 4QFY03. The forthcoming World Cup cricket 2003 in February and March might affect the revenue, the report says.
The report stated that the shift from the general entertainment channels to the sports channels could be among the other reasons including the following:
Advertising revenue for Zee TV could be under pressure in 4QFY03 as ad spend shifts toward channels broadcasting World Cup cricket
New movie strategy unlikely to engineer a long-term shift in viewer patterns
Dominance of Star Plus is absolute across time bands
Given this gap, an overnight turnaround in Zee’s fortunes is unlikely – investors will have time to ride the leverage wave
Overall macro story remains attractive although Zee will continue to lose market share if status quo continues.
Exceprts from the report:Star Plus is the undisputed leader of viewer ratings across all segments of Indian television. But the challenge for Zee is not to bridge the gap in a single prime-time slot but across the entire daily viewing band. Investment in content that retains viewers across time bands is needed to alter market share patterns – just one driver show won’t do.
In hindsight, KBC (its channel-driver show) alone wasn’t enough to create the kind of leadership that Star Plus enjoys. Star’s programming team engineered a complete shift in viewer patterns by following through with high quality programming designed to keep the viewer throughout the prime-time band.
The success of this strategy is shown as Star Plus continues to reign supreme across all prime-time bands even though KBC has been off the air for over six months.”
The viewer data and the ‘time spent’ data showed that India’s one-TV households seem to have become predominantly one-channel households, choosing to spend over 60 percent of their daily prime-time viewing on Star Plus.
Sampling of shows on other channels seems to have significantly declined. While this kind of leadership is unlikely to last forever, the aspirants (Sony and Zee) have an uphill road ahead to change viewer patterns in their favor. Advertisers are unlikely to support them as long as Star programs continue to enjoy such high stickiness and ratings.
The hegemony becomes difficult to break as a lack of sampling of other channels increases the ad break ratings for Star Plus. This enables Star to negotiate higher rates and reduce clutter for both advertisers and viewers. This strategy is perhaps the most difficult for the aspirants to counter.
Zee is not broadcasting any World Cup cricket matches and this is a risk to advertising revenue growth in 4QFY03. Advertising spend is likely to follow the viewer and shift toward channels broadcasting World Cup Cricket (Sony & DD Sports) from general entertainment channels.
Sports is a gap in Zee’s otherwise strong broadcasting package and could pose a risk to the growth in domestic subscription revenues during the cricket season.
It is arguable that:
a) World Cup Cricket itself could drive strong growth in the macro-market and if Zee is able to retain market share it should benefit
b) Historically, a significant shift from general entertainment to sports channels has not been noted during previous tournaments
However, we believe during the last World Cup Cricket (1999) the impact on general entertainment channels was limited (and the shift was not discernible) as the overall advertising pie was growing at a healthy pace of about 25 percent plus.
In FY2003, as shown by the 1HFY03 results of various FMCG companies (HLL, Nestle, Colgate), advertising spend has been significantly curtailed and some industry estimates suggest overall growth is likely to be only in the region of 5-6 percent.
The second quarter was a sad one for Zee TV. The TAM Media Research Adex Data (TAMMRAD) and Salomon Smith Barney (SSB) estimate that that the total duration advertised (in seconds) on Zee TV was far behind Star Plus and Sony between 23 June and 28 September (Week 26 to Week 39).