How does the Eros deal affect Balaji? Maybe more content on the Jio ecosystem, more content options for Reliance and thus a negative for Balaji as far as bargaining power goes?
Not sure how to evaluate this related party transaction.
Both Balaji and Eros, with the fund infusion, will be in a better position to create content. Jio will have access to content within India and both the companies can still make money by selling the content to diaspora. Is it going to work like that?
Earnings Call Q3 FY18 Key highlights :-
- ATL Balaji – Q3FY18 revenues at Rs1.1cr ($1.7mn) and 9MFY18 revenues at Rs3.2cr ($4.9mn)
- Q3FY18 EBITDA at Rs20cr ($3.1mn) and 9MFY18 revenues at Rs70.5cr ($10.8mn)
- Gross billing – INR 4.4cr ($6.7mn) (total collections until 31st December 2017)
- App Installs – 10mn + 1.2mn through web (excluding users of Vodafone Play and Jio)
- Paid users – 0.5mn (includes users of third party telecom operators like Vodafone Play and Jio)
- Expect to reach 1mn mark in 15 months (90% from India, Pakistan, Bangladesh, UAE)
- International ARPU – $1, Indonesia, Bangladesh, UAE ARPU – INR 20
- Churn rate 10-15%
- Live on Vodafone Play this quarter, Expect to be live on Airtel by Feb 2018 end
- Number 4 in Google’s most popular apps for India in 2017
- Capex in ALT Balaji till now – INR 100cr in content, INR 50cr marketing and others
- Approx cost per digital episode – INR 5 cr
Key highlights of previous quarters - https://quotethemoat.wordpress.com/
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Opertunity lost?
alt balaji has crossed a million payin subscribers
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Earnings Call Q4 FY18 Key highlights :-
- Paid Subs - 1.2mn as on Mar 2018 (0.4 mn through App, 0.8mn through Telcos), 2mn in May 2018, Target to achieve 5mn by the end of FY19 and 8mn by the end of FY20
- 20,000 to 30,000 paid subscribers a day, Subs retention range 33% - 40%
- Current ARPU - INR 25, expect to stabilize at INR20 in FY19
- Telco Deals with Vodafone, Jio and Airtel
- An average watch time of 120 minutes per user
- FY18 Digital revenue - INR 6.8cr (Q4FY18 Digital revenue = Q1+Q2+Q3 FY18 Digital revenue), Loss - INR 94.4cr, Target to achieve revenue of INR 85-90 cr in FY19
- FY18 content spend - INR 100cr. FY19 guidance INR 110cr
- Expect to breakeven in 3 years
- 17 Originals released in FY18, Plan to produce 24 more new shows
- 50 Concepts under development - 11 on the floor, 39 pre-production writing stage
- Digital amortization policy - 75% in 1st year, 25% in second year
- To target Indonesia (200mn internet connections), Bangladesh in 1HFY19 by dubbing the content in the local language
Key highlights of previous quarters - https://quotethemoat.wordpress.com/earning-call-summaries/alt-balaji/
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Alt balaji has crossed 3 million subscribers
Source : https://www.outlookbusiness.com/strategy/feature/the-altertnate-strategy-4466
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AltBalaji gears up to double revenue to Rs 1.5 bn, break even by FY22.
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Netflix and Amazon Prime are penetrating in india at very fast rate. Also quality of content over Netflix or Prime is much superior as compared to AltBalaji. I doubt AltBalaji can come even close to them. Also piracy of online content is very high in India.
Believe, Ekta kapoor understands very well Indian audience especially mass segment. Balaji Telefims production cost significantly lower compared to Amzaon Prime & Netflix. In the long run, it will impact a lot.
Amazon & Netflix target only urban youth segment vis-a-vis Balaji Telefils targets PAN India customer base.
alt balaji subscription rates much less then netflix and amazon prime. Alt is launching 30-40 shows in a year . Compare the same with netflix and amazon its nowhere close. (I am talking abt hindi shows) Spoke with management recently current paid subscribers is near 2.5 million and the will breakeven at 8million which dey aim to achieve in 2-2.5yrs. Of 2.5million 25% are aquired by themselves and 75% thru partners. Current attrition rate is high (cant recolloect the no ) but i feel it shud fall once they build up the library. They are going to launch 4 films this year and expect to generate 100cr revenue from the same. the tv business shud provide 300-350cr of revenue. alt revenue for half1 was arround 20cr
Alt Balaji’s content is available free of cost via Jio Cinema app for all the Jio users.
Its not free, jio pays for its users to alt balaji for d months dey use it
Exactly and this will lead to even lesser number of paid subscriptions for their content and they are likely to get less though fixed ROI on their good/bad content.
its a part of their distribution strategy. You can look at it as a customer acquisition cost
Subscribers growth will pick up in suddenly and world will realise oh that was such an obvious event. After Netflix, that had to happen.
Subscribers growth on continuous basis depends on large library. Alt has still 40 shows right now. No history to show.
Compared to it Eros and zee have large historical databases so users find better money worth with more options to see
Right now ALTBalaji customer is transactional basis, he sees one series which he likes and then unsubscribe. So retention is only 25 percent
There will come a time when they will have 75-100 series when it will makes sense to subscribe for longer term till that time we are subsidising the growth, we are investing without returns. Even the past series will start generating revenues.
They have around 400 crores of cash. They can make good number of series and can last for 3-5 years before they need money.
Telecom revenue per subscribers is lower but remove marketing cost and subscribers acquisition cost to app. My personal opinion is this is better for them. They are not technologically advanced to run a superior application then telecoms or similar to likes if Netflix.
As long as they can keep creating great content. One or two series should be blockbuster and unmissable and rest should be great/ good. We have a chance
My biggest concern is promoters and management care about fun and entertainment not very educated on shareholders value.
I feel retaining IP of their content has changed their business model, it will payback. When I don’t know.
I would keep a close check on the stock.
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Good post Puneet…realistic…
I don’t agree with your statement re Ekta Kapoor’s understanding of Indian audience. She might have done well on TV with Saas-Bahu serials. But OTT is different game altogether. Audience test in India is changing very fast. No one could have imagined the series like Sacred games or Mirzapur (produces by Netflix) would be successful 10 years back. I don’t remember single AltBalaji series with similar success. When Alt Balaji started there was no competition to them for original content in OTT segment, but new domestic players will keep coming like Zee5 or Eros. Also Netflix and Amazon prime will continue to share bigger pies with their Indian specific content.
Also Balaji mgmt is not consistent with their goals, at once they focused only TV and OTT. But now they are saying movie business will continue. What prompted them to again shifting focus to movie business. They guided 3-5 years for break even OTT business. It’s very big time for disruption in current environment where social media is also playing big role.
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It is true is management has flip flopped on many topics.
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Movies- They repeatedly said we will cut down budget in movies post “veere the wedding” they have started to invest more into films. Although they are mentioning that we are trying to monetise all the money even before film releases. It is not visible in numbers.
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They mentioned when they started ALTBalaji that they will break even by 2020. Now it has become 2022.
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Last year Nachiket gave guidance of 80 crore revenue in 2018-19 by ALTBalaji, actuals will be around 40. a big miss.
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OTT is a new segment no one knows, what will make money in this segment yet. One series will make enormous money and popularity. Sacred games or Mirzapur are still elite serials as not many can afford these platforms.
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Netflix and amazon prime have 20 times bigger budget than ALTBalaji. I don’t think they are right comparison point. Even the target audience is different
6 Nagin and Nagin-2 is on top charts from last many years. I will not even look at the serial ever. Balaji target audience is different.
- Only way to judge is to see subscribers growth, revenue growth and stickiness in subscribers to ALTBalaji. One benefit of doubt we have to give is, economies of scale will hit after 50 tv series on ALTBalaji. Without that it is not worth the value for subscribers. They are building this business grounds up. They take an year to build a series, audience watches it in 8 hours.
8 . I Look at it this way: Balaji will still be content producer. Netflix or amazon prime , Vodafone, Airtel, Jio and others will become their distributors. The difference in earlier business model(of tv) and new one will be Balaji will retain the IP. My view is In last 14 years not retaining the IP of content was working against Balaji. They would never get unlimited upside in case of superhits.
Ekta Kapoor have been able to understand pulse of mass market over last 15 years. Assumption is she will continue to do so.
- Masses have started coming to Apps very slowly. It’s only higher middle class who have reached to ott platform.
We will have painful ups and downs in this journey.
Will ALTBalaji survive next 10 years?
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due to reliance as a shareholder, money should not be a problem.
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possible merger with Eros ( reliance being common link)
Will alt Balaji be standing at as one of top5 content producer after 5-7 years?
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I think so, based on Ekta past record of connecting with masses.
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Past record of this company not creating much shareholder value also needs to be accounted for.
What could be valuation of a business after 10 years when it is in top 5 content producers?
… Take a guess
My strategy: Move forward but with caution
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