From left to right: Punit Goenka, Subhash Chandra and Amit Goenka (Source: Punit Goenka’s Twitter Handle

Zee Promoters Looking To Seize The Next Trend, Not Exit, Says Ronnie Screwvala

Zee Entertainment Enterprises Ltd. promoters’ plan to sell half their stake should be seen as a move to seize the next trend and not become outdated, rather than their intention to exit the business, according to media entrepreneur Ronnie Screwvala.

A stake divestment triggers a negative perception only in India where control is over-dramatised, according to Ronnie Screwvala, co-founder of UpGrad. “Today, most growth at scale is going to happen through collaboration and not necessarily on a competitive basis,” he told BloombergQuint in an interview

Subhash Chandra-led Essel Group decided to divest up to 50 percent of its holding to a global strategic partner in Zee Entertainment to help transform the country’s largest broadcaster into a “global media-tech player”.

Screwvala said there’s going to be disruption in the Indian media industry where the “winner takes it all” . Other players need to collaborate for the next 10-15 years, he said.

Key Highlights:

On why promoters are divesting stake and Zee is not raising fresh capital:

  • Negativity around promoters offloading their stake is over-dramatised in India.
  • The context for the company in the deal is what the new strategic investor brings to the table to take it to the next level.
  • Connectivity to their audience, brand-recall value is the asset base of Zee Entertainment.
  • It’s an era of collaboration than consolidation for the media industry to survive against market disruptors.

Is content the biggest challenge in India?

  • Multinational companies have struggled to provide localised content to Indian markets and a collaboration with Zee Entertainment is a good entry point for them.
  • Partnerships are going to focus on technology, consumption pattern of content and data mining.

Storytelling in India versus global content...

  • Newer audience keeps entering the lower-middle class segment to replace those moving out due to fatigue of staple content of daily soaps.
  • The millennials and people moving out of TV viewership is a big niche market of 20-30 million in India.
  • The focus over the last two years has been on broadening the base through music and movies in digital platforms.

Watch the full interview here:

Here are the edited excerpts from the interview:

Zee promoters’ intention is to sell 50 percent of their stake and get a global strategic partner. Is this the sign of promoters wanting to exit their business slowly? Or is it a recognition that inherently they might be incapable of battling the large media giants and therefore the need to get in a stronger and global partner?

When I look at advancements, I look at things as opportunities. I don’t look at the negative context of it. I don’t see this as an intent to exit. I don’t see this as something which puts them in an incapable position. The promoters have been the pioneers. They are five steps ahead. They have understood trends. They built multimedia business. When you look at trends and crossroads, your ability to preempt the next trend and figuring out your strength and weaknesses is to look and re-evaluate exactly what you are doing. They are not just the broadcaster or content supplier, but they have built a multi-media business. If you look at the divergence, from the element of content to element of multiple platforms as they are able to scale Zee5. I think what Subhash Chandra and the founding team is rightly looking at is how the consumer is going to consume and what is he looking at. ‘If I don’t preempt that change, I could be an anachronism’.

If indeed the business was looking so favorable, why liquidate only their stake? Why not get fresh funds into the business?

The control context in India is over-dramatised. The minute you are not the 51 percent owner, you are working on a larger framework. The company can raise money at the company level or holding level. The context for them is what somebody will bring to the table to take it to the next level. Given the competitive environment, it’s the question of how the audience will look at this. What do I need to do? Is the investment in technology or content or customer acquisition?

The asset base for a media company like Zee is footfall, connectivity with audience, brand recall, access and ability for that kind of viewership and the mindset of audiences. If you take all of it, then that’s substantial. It is to be decided by the founder group if they are fine to be a 20 percent shareholder instead of 40 percent. Today, most growth to add scale is going to happen through collaboration and not on a competitive basis. For most other companies, it will be the era for next 10-15 years of collaboration more than even consolidation.

Do you think any media house in India currently needs a partner which enables them to reach more people and then have that content discovered well? Will that be the kind of partner which Zee could be looking for?

I would say no. Everything is content play, but this is much more about how I get somebody to collaborate to figure out content. Most multinationals are struggled with culture and context of India to localise. Zee has cracked it, not just in terms of economics but in terms of reach and understanding the consumer. It is much more of the consumption pattern of content. The partnership will be much more about technology, deeper understanding of consumer and audience, and how to mine data? Actually, the biggest things which are happening with social media companies or Apple’s or Facebook’s of world today is exactly how they look at data and how they mine it.

It is also competitive environment which is coming in here. Because you have a consolidation with Disney and Fox which in India means Disney and Star. You have Jio which is no longer a telecom company, not even a multimedia company in many aspects. Between them and media access they own equally robust, competitive network. You need to look at that landscape also and see how you will be three steps ahead of what could be competitive environment in any case.

What do you reckon the biggest need for a content provider like Zee or any other provider would be? You mentioned that it won’t be just be a content play but a technological play, but there are a bunch of global media houses who have shown interest and bunch of them don’t have assets which their competitors have? Jio has some, Amazon has video content. Walmart-Flipkart or Airtel entity doesn’t have content edge that their competitors have. Do you reckon that is a good marriage?

If you look at marriage and the strategy part, there are a couple of things. If the present founder of Zee is looking at this as much more liquidity event along with strategy, then there is different incumbent. For business at scale to come in here, there needs to be very strong for an incumbent to come in. India is one of the largest markets but at the same time they know that it is big barrier to break in. China is closed and very insulated and unwelcome for anybody outside China. Therefore, India is a massive bastion. First and foremost is, what is the interest. Amazon is an e-commerce play. Amazon Prime is same day delivery. If you ask 9 out of 10 consumers today, it is same day delivery process and content is bonus. We have to look at what is the strategy of someone looking in. Multiple media companies have tried to come in India many times, failed, retreated and there has been expensive learning lessons for them. Today the need is much more for technology, data and deeper understanding of consumer and audience.

Would you believe that storytelling in India will need to change? What happens to content player like Zee, Star for next five years?

It is not about a knack of storytelling which will replace anything else. It is the fact that if a daily soap which is the staple plate which appeals to 250-300 million core audience that’s not going away in hurry for a fair period of time. Every year 20-30 million people are moving out with fatigue on it. There is a new ground of another 10-20 million people in a country like India which is coming in. The people in some form become more aware, accessible, the lower middle-class level can now access them. That middle common denominator will always stay there. Your millennium and early millennium segment will get redefined and people will drop out... I don’t think we are finding a replacement as much as we are going to find a broader base of consumption, a broader base of different storytelling. So, Zee, Sony and Viacom are addressing it. If you look at Star’s flag bearer is Hotstar. There is a lot much focus on digital medium. Not necessarily in content. You will add five more channels to your bouquet, that will not move the needle. HD versions of them or a plus here or there will not move it. People are looking at it. For the last few years, the focus is how to broaden the base and how to look at digital platforms.

So, you think that Zee’s reckon is to attract the partner of equal footing to do all of that and more?

I think so. If somebody asks the founder an abated question that if somebody cuts you a cheque that makes you an offer, you can’t refuse. If somebody makes an offer which can’t be refused, then I have already answered the question. That is a rhetorical question. I don’t think we should read too much into it.

In this case, nobody has cut a cheque, they are seeking a cheque and only for their stake and not for company wide dilution.

At this stage I don’t want to get in dilution mood, but I do want somebody to come in and share that burden and risk. Then things will unfold. If anyone who owns 20 percent of their company then decides what to do with that company after that. It makes sense rather than just raising funds. But it is a different strategy from promoter to promoter and opportunity to opportunity. Full marks to them if they find someone who is paying more secondary than a primary offering.