Stock Review: ZEE ENTERTAINMENT

Zee Entertainment Enterprise has had yet another quarter of strong profit growth due to the frenzied pace of digitisation and its leadership position in the general entertainment channel segment. It posted a consolidated net profit of . 191 for the March 2011 quarter — a growth of about 50% over the year-ago period. The company's quarterly revenues also grew 22.8% to . 797 crore.

The growth was mainly from advertising revenue, which jumped 36% to . 479 crore. Subscription revenues grew by 23% to . 310 crore during the quarter. On a full-year basis, the company's advertising revenues grew by 60% to . 1,708 crore, while subscription revenues increased 14% to . 1,127 crore. This underlines a great improvement in the advertising situation, helping revenues grow by 37% to . 3,011 crore. But, the net profit for FY11 was almost flat at . 623 crore as growing programming and content costs related to its sports channels impacted margins.

In the last few quarters, the pace with which subscribers have been adopting digital services has been swift. It is estimated that every month one million subscribers are being added to the present total subscriber base of 34 million. Also subscribers increasingly prefer high-definition premium content. Zee Entertainment Enterprise, being the market leader in the general entertainment segment, would continue to benefit from this trend.
The company's key entertainment channel Zee Cinema continues to be the leader with more than 32% market share, followed by Sony Entertainment's Max and other film channels such as STAR Gold and UTV. Even its regional offerings such as Zee Marathi and Bangla continue to have high viewership with gross rating points of more than 250 each. In the coming quarters, considering the rapid adoption of digital services, the company plans to sell advertisements separately for digital consumers and consumers having premium content. By doing so, the company can cash in on the rising base of premium subscribers and also plain vanilla digital subscribers. The only concern for the company is its loss-incurring sports business. Analysts believe that the business would take at least a few more years to break even.