Balaji Telefilms


(manish) #41

As i understand the company intends to produce 32 web series a year.
Assuming an average of 12 episodes and 30 min of content, it will mean about 400 episodes an year.

Can anyone advise how much it will cost to make an episode of web series to get a rough idea of the expenses involved.

Understand some of it will be outsourced but still need to know the costs so as to get an idea of the profitability margins.


(Ritesh) #42

@manishinlucknow

Very good question!

Management has mentioned clearly that annual spend will be roughly 100 - 120 crores / years on ALT. 80% on content and 20% on app tech expense + marketing.

So dividing 80 - 100 crores by 400 episodes means 20 - 25 lakhs per episode - of 20 to 30 min per episode.

Balaji has clearly said that they keep a lid on production cost and that is their competitive advantage.

In comparison, Currently Balaji produces approx. 1000 hours of TV serials annually at a cost of approx. 360 crores which means roughly 18 lakhs for 30 min or 12 lakhs for 20 min program.

So what Balaji has budgeted to spend for ALT (20 to 25 lakh per episode vs. their TV spend of 12 - 18 lakhs for similar duration) is relatively generous in comparison to what they currently spend on their TV series.

In comparison TVF’s most expensive episode was Trippling (5 episode web-series) in which TVF spend approx. 50 lakhs per episode. And TVF’s production quality is not that great. Yes their comedy is nice though!

So clearly Balaji’s ability as demonstrated by their past track record to be able to produce insane number of hours of production annually and that to at low cost is a clear competitive advantage which competitors (Amazon and Netflix; Netflix’s cost of every episode is insane. Pls read Netflix 10K report!) will find difficult to compete. So I liked Balaji.

Invested!


(Ritesh) #43

And also since the cost of programs is fixed - if the number of subscribers rise significantly - then the operating leverage in this business is huge.

Plus creating significant volume of content at low cost will mean as years pass by - content library rises substantially. The library may have some 50+ web-series in the next 2 years or so. And atleast 8 - 10 of those will be super hit ones (simple probability of success rate).

This will be a significant number to draw more and more subscribers.

Invested!


(rvetri) #44

Ritesh…The most important point here is - The TV serials they produce
does not belong to them…But the web series they produce belongs to them
exclusively…Nobody else will have access to them…


(manish) #45

thanks Ritesh for the clarification.

If they can produce episodes at the cost of 20-25 lacs per episode , it is good news.
However, seems low fig to me. If they outsource some of the web series to other production houses, then their cost will be low but will reduce revenue as part of it will need to be shared. Maybe this 100 cr is only for the web series they intend to produce on their own.

Also for TV , any idea if cost of production are shared by the TV channels. Since the program rights are owned by the TV channels , why would a production house make episodes all out its own pocket expenses when it doesn’t own the rights. 18 lacs for 1 TV episode seems too less. We have seen the kind of sets the TV series have ( excluding the very expensive sets of History based series, Ashoka etc). These sets themselves will cost a lot. Agreed over a period of 100+ episodes cost per episode will go down. But then salary of actors, entire crew, director.

I agree if they can get some hit series , people will subscribe. Subscription fees of Rs 500-700 is pretty low, 2rs per day to watch an episode of your liking is not much.

What remains to be seen is the increase in the no. of PAID subscribers QoQ.

All the best.
Not yet invested. In watchlist.


(Alphin) #46

In a world full of free content with limited time for consumption, how much attention will this app get?

To draw customers and make them pay will require amazing viral content, even regular TV show type content will definitely not cut it…

On a related note just saw the guns and thighs trailer of web series by Ram Gopal Varma. Would pay to watch this kind of show if it turned out to be great… there is a huge market for Indian content for Indian fans of English series like GOT, house of cards etc in India. More than the financials I would see what kind of content they add and whether it goes viral with the series watching people.


(rvetri) #47

Alphin…we are underestimating an average Indians ability to pay a piffly
Rs 75 per month. They spend twice that amount to eat a popcorn in a
theatre…when they can buy a ITC ACT popcorn packet and make it at home at
less than 30% of the cost…And we pay more than Rs 500 per month for DTH
when we do not watch 90% of the channels given to us. Monthly subscription
Money is never a headwind in my view…The key is content. If they can hook
an average indian with their content and if they get hooked to just two of
their web series - Alt balaji will make it to relevant to the topic of this
thread…Which is - is it the indian netflix in the making.??


(Alphin) #48

You are missing an important point to substitutes, if there is a free substitute will Indians pay for it?

For comparison you can see how many indians pay for songs, DVD movies , software etc.


#49

These are the risks I see

  1. Customer acquisition is not going to be easy because most that have DTH would think twice before spending on a subscription service for a limited set of shows. Most of the competition is free.

  2. Customer retention would require a steady stream of shows. I subscribed to Netflix for 3 months and then stopped the service when I had exhausted most of what I liked to watch. Lifetime Value from a customer is going to be limited.

  3. Piracy is the biggest threat. I watched the first four seasons of House of Cards on Netflix when I had the subscription. It doesn’t make sense for me to subscribe again just for Season 5 when its available for free as torrents (Ethics aside).

  4. Bugs in the app and the ability of the tech team to keep the app robust. This is a big, big challenge that cannot be surmounted unless they have a top-notch in-house tech team. Youtube , Amazon and Netflix are as much tech companies as they are media companies.


(manish) #50

On TV , you need 40 min to watch a 20 min episode.
Web series you can watch at a time and place of your liking. Web series business can grow parallel to TV.
I don’t see TV as a threat to web series.

People do buy songs from iTunes and use paid services like Saavn , though the percentage may be small.
Piracy is a risk and don’t know what kind of impact it will have. People will be able to download the web series from pirated sites.

The bottomline is if the content is good , people will subscribe. The serials / episodes are addictive and once you get hooked you won’t mind paying few hundred bucks for subscription.

But yes it is very likely that after watching for a couple of months, and after exhausting favourite shows, the member can cancel his membership.


(rvetri) #51

And we are talking about Indians paying a piffly Rs75 per month. When every
Indian family including the lower middle class owns a 2 wheeler and pay an
EMI of Rs 3000 - Rs 5000 per month. And when every middle and upper middle
class owns a car paying an emi of Rs 5000 - Rs 10000 per month. And when
every Indian family spending Rs 50 for drinking water per day per outing.
We are talking about something you can watch which you will not get
anywhere even if it is priced higher. We are not talking about a luxury
product costing tens of thousands of products.


(Mahesh) #52

Any particular reason for a 11% rise today?


(Deepak Venkatesh) #53

Hello

Just heard from a friend that Darshan Mehta tweeted on this. Ekta Kapoor has been buying shares in the open market from 31st May 2017 onwards. She has bought approximately 10.21 Crs worth of shares.

Also at 9:40am yesterday Porinju went on TV and said he is long on Balaji Tele and he has been accumulating it. Suddenly other folks have a lot of interest too in it.

I guess one can swing trade (not invest)

Link for purchase by Ekta Kapoor http://www.bseindia.com/stock-share-price/stockreach_insidertrade_new.aspx?scripcode=532382&expandable=2

Rgds
DV


(rvetri) #54

Ekta might have bought today too… we will have to see notification
today/coming days…


(rvetri) #55

Alt Balaji ties up with Amazon’s fire TV Stick for Amazon;s global customers. This will help Alt Balaji to stream on TVs seamlessly…This is a significant tie up…

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/69d86c5f-e084-4b7d-ae49-1365c4c1af7d.pdf


(Karan Sharma) #56

While comparing this bersus television shows one has to consider the aspect of binge watching as well. This is a trend that is going to get bigger in the future


(Ravindra Mutyala) #57

Sun network launched sunnxt.com with 4000+ MOVIES, TV SHOWS, LIVE TV & much more…


(csteja) #58

1.If I understood it right, the company spends 100 crores extra on web series each year and will break even if 4mn subscribed by 2020. Considering their FCF history, I see a lot of blind optimism here.
2. In noway can Balaji compete with Netflix or Amazon on App quality. They both are Tech companies. The app of Balaji is below par. As it grows in scale (more subscribers), it will face more challenges. I also feel they are too late to join the party (subscription business) with others. I worked at Amazon. Contrary to what many believe that Balaji has Indian content and Amazon doesn’t have, I can say Amazon is very very very customer centric company. They will do anything to win the hearts of customers. Look at the way they curated all eCommerce ads in TVs look more “Indian” (with traditional dress, festival ads etc). Everything they ventured into is a success. I also feel EKTA doesn’t have the “smarts” to make it big. She proved her talent in movie business (which also need content selection and advertising)
3. As someone mentioned earlier, the one who can afford (has habit of subscribing) to web series are those guys who doesn’t watch saas-bahu serials. The one who watches them never want to pay price for a web series (they need it free). Also, considering lot of free content I would never subscribe for a below par App like Balaji.
4. I believe, the share may rise/swing due to expectations (good for trading), but I don’t see fundamentally this company going any where in near term. There is only one thing that can save Balaji, “viral” content. Lets wait and watch.

Not invested


#59

Well, lots of bias in your opinion on Ekta Kapoor. She created the TV serial business from scratch and you say she is not smart enough. SHE is still undisputed queen of TV serials in India that too when you have huge censor restrictions on content creation. She might not be the smartest bizwomen around but now she has hired a good guy and learnt her lessons in past failures.

In show biz the biggest moat is not money, first mover advantage or biz acumen. It is the ability to understand the audience and tailor your product to suit them. Even a small guy can create a viral content and monetise it. I am not a fan of her serials but she has proven time and again to come out with new content. Web edition will eliminate intermediaries like TV channels and allow complete freedom to make shows. Regarding tech challenges, they are completely solvable as they might have underestimated audience response. Now they are on Amazon Fire stick as well. Subscriber conversion rate among NRIs is underestimated. Web editions have become craze in China and other emerging markets which we look for trends too not just US.

disc: no holding but a paid subscriber of ALT


(csteja) #61

I don’t know about Ekta much. I also believe I need not know her. The way I see her is how much value she created to share holders since 2000 (all other is simply noise. I don’t need big serial business. I need a profitable one). There are so many moving parts like free cash flows, competition, content, technology, business acumen. Its very hard to guess winner (or they all go Airlines way ?). Look at Shemaroo, many people are exited some time back. Today, the YouTube ad revenues are going down. Traditional business took a hit. Its very unpredictable in internet space.

Regarding tech challenges, they are completely solvable as they might have underestimated audience response. Now they are on Amazon Fire stick as well.

I don’t think tech challenges are easily solvable. Its not a one time thing. It needs constant edits (UI, App). Its a costly affair.

Incase ALT showed good performance, I may not hesitate but buy. But all I am saying now is considering the past, I could not develop the conviction to buy this stock.