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Zee may have paid Rs 33 crore for 16 films: JP Morgan

Bipin Chandran in New Delhi

The Subhash Chandra-controlled Zee Telefilms is likely to have paid Rs 30-33 crore in acquiring the 16 blockbuster movies recently, JM Morgan Stanley has predicted in its recent report on the company.

The report also said Zee's earnings is expected to grow at a compounded annual growth rate of 31 per cent over two years and will be driven by growth in domestic subscription.

Pointing out that the acquisition cost of the movies was not disclosed by the management, JM Morgan Stanley said, "We believe that it is likely to be in the Rs 300-330 million range. The company plans to amortise the cost of acquisition over five years or period of rights, whichever is less."

According to the firm, the profitability of the movies in the first screenings on both channels will likely be very high.

Morgan Stanley also suggests that it believes that a more conservative accounting policy would have been the writing of the entire acquisition cost either in 1-2 screenings as the re-run value diminishes quickly.

Indicating that the revenue and profit upside should be immediate and substantial, Morgan Stanley says the entire movie acquisition cost to be recovered in first screening, while amortisation will be over five years.

"Sunday inventory will earn incremental revenues versus its previous use of bonusing," it said.

Commenting on the recent programming revamp initiated by Zee, JM Morgan Stanley said the latest revamp appears to be well thought-out.

"We believe that the downside from the current strategy will be limited. The upside from the revamp could be significant for the company's sagging broadcasting business."

"Strategy aims to attack competition's peak prime-time viewership with new movies and sample prime-time shows on least competitive day," J M Morgan Stanley said.

It, however, pointed out that the success depends on the management's ability to effectively market the changes and new programs to viewers, advertisers and media buyers, which was not done in the past.

Indicating that the channel has been able to bring in advertisers for the new programmes and movies, the report said that, "Zee has already signed in four associate sponsors for the movies - Coke, Cadbury India, Whirlpool and Paras. The management is likely to finalise two main sponsors this week. The company will also be able to exploit these rights on Zee Cinema and in the international markets."

The report also said programming and marketing have been critical weak spots for Zee TV.

"None of the company's prime-time shows has featured in the Top 100 until recently, in contrast to its leadership five years ago. The company has significantly improved the quality of its prime time content in the past six months, and two programmes are now among the Top 100. However, these two prime-time programs have not yet been able to garner viewership anywhere close to that for leader Star TV's prime-time shows."

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