good compilation of data…
My 2 cents…
We have to take this growth with a pinch of salt because of JIO free promotions overlapping with your compilation period. Yes, JIO free promotion affects every channel but can the growth (view count) sustain after JIO free promotions?
Disclosure: Not Invested.
JIO has benefitted whole industry, from T Series to Eros to Saregama to Shemaroo. Even when Jio was not there, there has been 4-5 years more than 40-50% compounding of sales for Shemaroo in new media. Jio has worked as catalyst to reduce cost of broadband and increase data speed, both drive more video consumption which assist video content owner.
In fact the data selected during the same period as JIO, since JIO has increased reach of broadband on mobile to older/ not so tech savy generation. That is the point I was trying that subsequent JIO, growth in subscriber for so called old media like Shemaroo and Saregama is highest among all peer. Same is true even in viewership. This is in context of previous discussion on the thread, where there were valid concerns were raise about demand for old content and its target audience. JIO has reduced cost of access to the target audience, particualrly for Shemaroo and Saregama, in my opinion.
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Yes…It is true that there had been a blip upwards due to Jio free offer.
The positive spin in that is many people have got to use Shemaroo’s
channels without Shemaroo spending a singe Re. Otherwise this could have
taken a lot of time and money for them. So, there is no doubt that it will
have a rub off to Shemaroo in the long run…
The success of Shemaroo’s business is to a large extent dependent upon how many eyeballs can its library generate. It is interesting because the older its inventory gets the more valuable it becomes. One can get older through only one way - with the passage of time.
The extension is therefore - eyeballs will increase with the passage of time as people age and are gripped with the desire to time travel and visit the “good old days”. In that sense - Shemaroo is best understood backward and in black & white.
Nostalgia Proneness is a psychographic variable which has been popularized by Morris Holbrook one of the leading researchers in this area. He teaches at the Columbia Business School. He developed a scale called the Holbrook’s Nostalgia Index.
More importantly - Nostalgia helps sell products. That to me is where all the juice is. Classics sell a lot of stuff. Alia Bhatt at 50 will emotionally connect with her 50 year old fans. If shemaroo has a couple of alia bhatt classics in its library ( i am sure it will ) - you get to sell a lot of stuff to these 50 yr olds in a manner that only shemaroo can. For that to happen, one will have to wait till alia bhatt turns 50. The point is however, a certain amount of time has to pass by default before one can call a movie a classic.
Shemaroo should take on all the debt that it can service and just focus on hoarding these potential classics in its library and then wait for its audience to grow old. By default it is a business that has long term written all over it.
From a technical view it has also formed a channel with no less than 4 touches on both trendlines. Traders will have a field day switching channels (pun intended) !
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Please find below some data points based on interaction with people from the industry.
Will big spike in number of subscriber lead to similar growth in revenues?
In short term the answer is clear no. As per the management Ad spend on digital media hasn’t increased in similar proportion as Advertisers want to check the sustainability of the numbers. What has happened is that either there is unsold inventory or price per view has gone down (lower CPM-
What Does CPM Stand for in Advertising? | Small Business - Chron.com ).
In addition, there is risk of ad not reaching its target customer as seen from the recent Youtube fiasco which led to youtube changing policy for advertisers http://www.exchange4media.com/digital/indian-digital-content-creators-relatively-unaffected-following-youtube-fiascoexperts_68394.html
1 more possible reason the ad spend hasn’t increased in similar proportion could be because the advertisers has still not been able to figure out how to use mobile as advertisement platform
Even the largest smart phones have relatively pissy little screens. They are used to watch movies etc. but only because a small screen is better than no screen at all.
So considering how and why a person uses their mobiles, they are not conducive to advertising as we traditionally know it. (And there is the little problem of the estimated 500 million or so ad blockers that have been downloaded worldwide). Every now and again I read motherhood type statements telling us how we can utilise mobile for content and that somehow serves as advertising
Mobile does have a role to play in marketing communications. But the art is understanding how it is used and then how and where can it be used in the mix. And this is dependent upon the product or service at play. Not a one size fits all approach.
Source - Mobile. So Many Great Uses. Shame Advertising Isn't One - B&T
Now let me try to bring some data points on what is the actual market potential? Does some channel having over 10mn subscribers mean a lot to advertisers?
1st data point could be too see the market size from ecommerce market potential because there is a high co relation between people who buy online and consume online media
The market that vanished
The little known truth about India’s e-commerce market was uttered at a conference in Delhi a few weeks ago. Flipkart’s chief executive Kalyan Krishnamurthy said that there are only 10 million monthly active buyers on e-commerce in India. This confirms what I have been saying for two years now—the market is simply too small.
The fallacy is that we compare per capita incomes with other markets. That is, we are a billion consumers, a $2.25 trillion economy, have 450 million internet users, and we take our smartphone penetration (300 million and growing) as a proxy for spending power.
In an earlier piece titled “How India’s digital economy can rediscover its mojo” I had talked about how India needs to be seen not as one country but three. Simplifying it even more—I call it the 1T, 2T and Zero economy.
• The top 15% (India One) constitutes a $1 trillion economy that has disposable income and ability to spend. The desire and charm of online shopping appeals only to the India One audience, and that’s where it will be viable to service them. They are the perfect audiences to sell convenience and selection to—the real promise of online commerce. They are comfortable using English, and are time-starved, well-paid, confident-of-their-future Indians.
• Another $1 trillion is spread across the next 40% of the population (India Two), which supplies and services the India One economy. The India Two customers will take longer to cotton on to online shopping—and they will shop for basic needs and deals. Flipkart and Amazon will both find that expanding in this market will prove to be a drain on their resources with little payback. It will be unviable to service them unless they start leveraging the power of the existing traditional networks (kirana shops, wholesale trade routes and the neighbourhood entrepreneurs).
• The final half of our nation barely gets by. They live on the periphery of our economy—calling them consumers itself is a travesty. They have negligible disposable income. Any growth in their incomes goes entirely towards sustaining their lives—roti, kapda and makaan. The India Three customers are serviced poorly even by our traditional networks—tiny hole-in-the-wall shops with limited supplies service the poorer villages. Their lot will improve only once the nation uses digital tools to leapfrog the chasm created by lack of physical infrastructure and decades of neglect,
How this changes Amazon’s and Flipkart’s plans
Clearly, they both realise the waste has been colossal. The math is staggering. The players have pumped in over $15 billion so far to woo a customer base of 10 million regular monthly transacting users. And most of these consumers simply “substituted” e-commerce for traditional retail because of the massive discounts on offer. Many of them will remain unprofitable customers—and their cost of acquisition may pay back only over a decade. I can wager that there is no other market in India that has absorbed so much capital and yielded so little by way of value.
To spend wantonly on penetrating India Two will be foolhardy. It will be an expensive exercise. So while it is crucial to win that market, you will have to calibrate your ambitions and grow it slowly. Else this market can keep absorbing billions and give no returns.
The consumption basket for India Two will be markedly different. The first spending after any growth in their incomes will be on kids’ education, on better food and groceries before they graduate to buying into the choice and conveniences that modern e-commerce offers. They require a different mindset to service—one that is focused on language, use of video to help them make choices and helping them discover ways of creating a better life for themselves. It would do well for Amazon and Flipkart to both think like home-shopping networks for this market—education, discovery and sales all rolled into an easy-to-consume offering
Source - Ecommerce market size Welcome to Tencent’s Flipkart, Amazon’s new adversary | Founding Fuel
Another way to look at potential market is to look at which part (live vs OTT vs social media) of digital media spend is growing fastest
1st data point could be that most of the OTT apps are offering latest or live content and the way they are growing would mean they are occupying a good portion of people’s online time which mean lesser time for other digitial platforms.
Source - Growing ad-rates of hotstar With the rise of OTT platforms, will digital rights for IPL become more lucrative than broadcast?
Another point is to see that we can look at how netflix has done in India. Although Shemaroo doesn’t have subscription based revenue stream, it is interesting to see that having subscriber count and actual people ready to pay can be very different figure (which is very important data for advertisers as advertisers who pay high CPM need to be very sure that thy are getting right customer who can actually afford the product).
Netflix claims to have 4.6mn subscribers but if you look at actual customers who pay, it will be way lower. The LTU (large taxpayer unit) responded that Netflix paid Rs2.20 crore in taxes for January 2017. We divided this number from the service tax rate that Netflix charges for their most expensive plan, and the rate they charge on their least expensive plan. With this, we arrived at a range of subscribers, between 211,500 and 337,300. Since there are three separate plans, it is unlikely that either extreme in the range is close to the number of subscribers that Netflix has in India, so we are assuming that the number is somewhere between 2 and 3 lakh.
From https://thereel.scroll.in/832799/india-isnt-netflix-and-chilling-as-happily-as-hollywood
Talking to people from content creation industry, the general feedback is the commercial life of content is reducing with years. With so many options available to capture our time share, there are very few people who are ready to pay or watch old content however good it was back in it days. For example – on average TRP for top prime time Bollywood series/serial in early 2000 was 16-17 while nowdays the top serial doesn’t go above the TRP of 4-5.
Lastly the whole business model depends on being able to keep acquiring new content at reasonable prices. Although in short term aggregators may benefit by the likes of Amazon and Netflix spending huge money in India, but in long term they may bypass content aggregators altogether. The counter-reasoning that they are in different life cycle won’t matter if the content is not commercial valuable after 5 years (see above point) and if people like Amazon start buying perpetual rights. The general feedback from industry is it’s becoming increasingly difficult for independent content aggregators to get quality content at reasonable prices.
Disclosure - No investments. Always do your own analysis. Remember that a multi-baggers journey is filled with the corpses of highly intelligent-articulate naysayers.
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Hi Aman… Good analysis… You must have spent a lot of time on this… We
are riding on it. Tks again.
First let me appreciate your efforts and bringing a very valid point home, whether there is growth first, secondly if there is growth whether it is profitable, thirdly if is profitable, is it cashflow positive.
I shall try to attempt to address the valid point raised by you to my limited understanding and would ask all members to provide their view point.
The first and second point about subscriber base and Youtube advertisment issue (slow down as well as inappropriate content being shown and customers are not happy in US). I would say that in past, youtuve viewership and revenue growth in New media appears to have linkage and the company has converrted revenue for subscriber/viewership. Whether youtube facing issue would affect Shamaroo? Definitely yes in short term in my opinion. However, what I see Shemaroo as content owner. When youtube was not there, it was distributing content through TV channel, and when private TV channel were not there, it was marketing content through CD/VHS formate. So the mute point to me is content is key and that drive revenue. In yesteryears same have changed form from VHS/CD/DVD/Blueray/TV Channel/ Streaming on Youtube/ ??? The technology would change but content would continue to drive importance. So in short run, in case youtube face issues, Shemaroo (assuming it get nearly 50% of new media revenue from Youtube) would have issue about 10% of topline. However, same advertisement budget would the advertiser stop advertising? No, show must go on. We do not know currently which forum/platform would be gainer but I personally feel, any form would respect content. It would not directly translate into revenue and management need to put its own efforts. However, such challanges and changes are well faced by Shemaroo management in past to give me such confidence.
Third point about Ecommerce potential of Indian market and increasing share of live stream/OTT companies. Since Shemaroo has no sale from E commerce market, I do not see any issue on the company on that front. In new formate like OTT, again, there is first mover which are generally generation Z (currently kind of 20+) always take lead in any new form. Even youtube would have first more content related addressed to Gen Z. The bad part with Gen Z is always looking forward to new things and hence non-sticky. Today none of OTT find need to get old movies as target audience Gen Z do not demand. However, if they want where business to achieve scale, can they ignore 40-50+ age population? My answer would be no, as these group; may to slow to adapt; its relative stickiness make very good target audience for any media business in medium term. Hence, after a point, when OTT/Social forum/ Liverstream platform need to grow and sustain stable revenue, they would have to look at even content which is old and required by 40-50s audience class. There would be time lag in that which nobody can predict. Second risk is whether it is Shemaroo which fulfill that gap or some other content provider is also a question. However, with 400+ perpetual rights and 1300+ limited rights for Hindi Film, Shemaroo has better chance to gain from this migeration. In fact, one major point made by Shemaroo in the AGM was that Ecosystem in India Adertising is changing. When content distribution is supported by free advertisement, value of conent is significantly low, say X, but when paid content get popular, value of content increased to 5-10X depending on quality and other factor.
Fourth point raise a question about whether Nostlagia has any value or not, is subject/ive and every one would have personal view. While Shash Bahu may not repeat audience, “Yeh Jo Hai Jindagi” i still watch alongwith my 10 year old son on Shemaroo youtube channel and both of us enjoy watching that serial. This serial is almost 30 years old. I equally like to watch “Bharat Ek Khoj”, which was telecased again in 1990s. So, it has value, at least for me.
The increased competition in new content would push price of new content. It may not have direct impact in short term, but definitely increase value of Shemaroo liberary in long run in my opinion. Shemaroo management was actually very proactive when they aggressively increased spending in last 3 years on content and increased perpetual Hindi movies liberary in my opinion. During FY10 to FY16, Hindi movie perpetual rights increased from 165 to 423, 17% CAGR during the period. They have been now talking about monitisation of content as nicely explained in Dhwanil note on the post.
Once again, thanks for bringing out all potential risks to business model. You have put phenomenal efforts to put down all relevant points in cohesive manner.
Discl: Since I hold Shemaroo share, my view may be biased and I suggest all investor to do their own due diligence before invsting.
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Excellent data points and insights into evolving industry dynamics. I think your analysis alludes to some very critical aspects of the industry dynamics that is directly relevant to Shemaroo’s business model. My point wise views on the same.
Will big spike in number of subscriber lead to similar growth in revenues?
I agree, in the short term, there is hardly any impact. I think even Shemaroo management has been consistently saying that, the recent spike in subscribers/views will not translate into revenue immidiately. However, at the same time, I feel advertisers will also acknowledge that the whole ecosystem is on the cusp of change. Faster speed and cheaper data rates, will mean people are willing to spend more time on digital platform than they used to be. This, translates into, for a finite amount of disposable time(if I may use these word with respect to time too!
), larger share of attention/eyeballs to digital media and especially video. So, wouldn’t advertiser reorient their budget eventually towards where the eyeballs/attention is moving? I think, gradually, advertising budget will gravitate more towards digital video. Hence, I consider this as tide that will lift all the boats!
Now let me try to bring some data points on what is the actual market potential? Does some channel having over 10mn subscribers mean a lot to advertisers?
I think it is a very valid point. No of subscribers on youtube may have very little meaning for advertisers as it is not sticky thing as such. The only thing it may possibly do is- show the preference of the watchers to an extent. So, I personally feel, people subscribing to Shemaroo/Filimi Ganne or any channel- is only a testament to the fact that, in a diverse country like India, there is enough traction for consumption of all kind of content and the notion that old content is not preferred may be a bit overdone…
Another way to look at potential market is to look at which part (live vs OTT vs social media) of digital media spend is growing fastest
I slightly differ here because the data point that is being used to demonstrate the point contradicts with our earlier inference that subscription/views may not translate into advertising revenue because the article emphasizes that it is the viewership that drives the advertising revenue and in digital media it can be much more targeted. Then, the same logic may still be applied to Shemaroo’s or any other digital content too…though with a lag effect as it is not live streaming!
Another argument that is being made is that players like Amazon/Netflix are changing the rules of the game by cutting exclusive deals and providing large collection of high quality premium content and hence older or average content may not have many takers. However, as an amazon prime member, when I ran through their 1000 odd hindi movie content- I was startled to see that hardly 100 titles were recent movies with any kind of “exclusivity”/premium attached to it. Rest 90% of the list was almost like a catalog that broadcasters build - spread across the large range of movies across 1940s-2000- and many of the movie names we would have never even heard of.- So, the notion that these platforms running premium content - will mean less takers for the oldish/not so popular content- seems overdone to me. In fact, when a platform positioning for the “premium” content too has to rely on a catalogue, further buttresses the point that even within that attractive “cream” segment- too exist demand for variety of content spread across genres. I have observed the same for Vodafone/Jio too with even lesser proportion of premium content on hindi movies and very large portion of catalog content
Talking to people from content creation industry, the general feedback is the commercial life of content is reducing with years
Though this may be true for TV Series/serials- is it also applicable to movies? If I recollect accurately, Shemaroo management had mentioned in one of he concalls, that earlier, almost 95% of the monetization of film used to happen in the first cycle (i.e theatrical release and first 5 years) and rest 5% in second cycle and thereafter. However, in last few years the trend has changed and only 80% monetization happens in first cycle while in second cycle and through digital platforms, the share of monetization has increased to around 20% (this is from memory, so numbers may not be exact). Now this is contrary to the overall feedack. Hence, I feel, it is an important point to check with the management.
On your last point of OTT players and others buying content directly from the content owners- is very relevant risk and must be probed further with the management as to seek their response on the same.
Once again, thanks for bringing in lot of relevant points to the table, a healthy debate around which may help us take a more reasoned view on the business.
Disclosure: Significant Investment in Shemaroo from much lower levels- hence my views are obviously biased.
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Interesting.The monetization ratio is directly related to the valuation we ascribe to shemaroo. One must also keep in mind that that shemaroo is also play on indian culture. There is no better way to understand culture than through the eyes of history. Shemaroo with its domination of historical titles owns a slice of indian culture. I think its a tremendous moat.
Harvard university press has released a book on amar akbar antony recently.
The cultural evolution of a country as multifaceted as india can be best understood through the eyes of the movies it has produced in the past
I had taken a position earlier on in Shemaroo , but have sold it lately and I hold no position as of date
Reasons for sell off being
a. Shemaroo is betting only on Youtube and Traditional TV , which itself is facing decline (https://medium.com/startup-grind/how-google-collapsed-b6ffa82198ee)
Relvant Extract from the report
A key platform where Google served ads was YouTube, which it bought in 2006 and quickly turned into one of its biggest entities. But even with a sixth of the world visiting this video-sharing behemoth every month, YouTube never became profitable. In an attempt to combat the effect of ad blockers, YouTube launched an ad-free subscription model in late 2015, but the subscription numbers were underwhelming.
YouTube’s already insurmountable problems multiplied in early 2017 as advertisers began to pull out amid ad placement controversies, and huge revenue generators began to leave the site.
Even those who weren’t blocking ads had trained themselves to ignore them entirely. Researchers dubbed this phenomenon “banner blindness”. The average banner ad was clicked on by a dismal 0.06% of viewers, and of those clicks, roughly 50% were accidental.
b. While Youtube is fast losing market share, its place is being filled in by Amazon/Netflix who are doing exclusive deals with Producers to get access to new content/original content
c. Shemaroo has an old good library catering to a niche audience (typically will appeal to people who are born prior to 1980). It has not been getting much traction in getting new content.
d. I dont feel they will now be getting hand on good content , because all major producers are now selling directly to Amazon in the second cycle (http://indianexpress.com/article/entertainment/bollywood/amazon-ties-up-with-dharma-productions-for-digital-streaming-rights/)
Note the words exisiting as well as upcoming
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Some key questions
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Why will a producer, going ahead sell movie in second cycle to Shemaroo (instead of Amazon/Netflix). Amazon has better reach, better pockets and offers better terms.
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With a library of old films only , will Shemaroo have a growing market ? At max, I feel it will be getting a larger share of a declining market (not many people born after 1990’s want to see old movies).
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With no access to movies of stars like Alia/Hrithik etc will there be any library in future for even the smaller clips it has
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Why will it not meet the fate of a Saregama. Music is more timeless than movies.Music can be remixed and re-used unlike movies, but Saregama with all its classic old library has still not been able to do much.
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Growth in Shemaroo is a combination of
- Growth in database(library); and
- Growth in people accessing the database
so while I feel, there could be Growth in people accessing the database, but the overall database in itself will face stagnation
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First of all, thanks to all the folks in this thread for an awesome discussion.
As we know Shemaroo gets content in the second cycle only after assessing if it can generate an IRR of 18%(if i remember correctly from older posts) which suggests that the content must be of proven quality in terms of its appeal to the respective generation - 70s/80s/90s/2000s etc. So, if Amazon/Netflix decide to buy each and every release in the first cycle wouldn’t they realize the pit falls, which include loss of premium paid if the film is a dud, sooner or later? And if assume they are in the market for the second cycle, is it not contradicting the theory that the OTT players are aiming for larger growth and are aggressively on boarding content relevant for the current gen.? And if they want to scale up and increase their viewer base, they invariably have to target the older gen., in which case they will need to offer a broad base of collection, which can be sourced from an aggregator much more easily compared to individual production houses.
I think Shemaroo’s library of quality content, relevant to generations across 60s to 2000s will always help it retain the viewership base… and its continued focus on picking up more and more digital(perpetual/otherwise) rights every year will constantly refresh its database.
Disc: Invested from current level. Views can be biased.
Shemaroo has came out numbers can senior member help me to understand this inventory build up and reduction accounting in p&l
Degrowth of almost 19% in traditional media business, however the company could able to grow 40% in new media buisness…not able to understand such a massive de-growth in the traditional media, this does not seem to be the case for other media companies.
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Question
Why is Traditional Media business showing such a consistent de-growth. Certainly no of TV Channels remain the same (have only increased)
Irrespective of whether a person watches online or offline, a Zee Cinema or a Sony Max will still have to run a 24 hour channel and pay Shemaroo the charges for displaying movies of Shemaroo library.
So if I put it other way its not viewership but display on a TV channel which drives bulk of Shemaroo’s traditonal media business. And if I am correctly reading, this display of Shemaroo library is reducing.
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Balance Sheet wise
Shemaroo has outstanding of almost 180 days of Sales…Q3 + Q4 sales were close to 210 crores of which almost 190 crores is outstanding as on date
Further the borrowings are increasing rapidly now at 261 crores . In past 5 years it has grown from 110 crores (in 2012) to 261 cores (in 2017), which we can safely say has been spent on buying new inventory. Look at inventory figure. This has gone up rapidly from 150 crores to 500 Crores.
So can we say, Shemaroo has to continously re-invest in buying new inventory in order to shore up inventory, so that they can have access to more new and recent content - which will drive Sales. Isnt this a dangerous cycle
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Anyone has concall details?
Q4 FY17 Earnings Presentation and Concall details
Concall Today, 10th February 2017, at 2:00 pm
Shemaroo Entertainment’s Management will be represented by:
Mr. Hiren Gada – Whole Time Director & Chief Financial Officer
Mr. Jai Maroo – Director, Head – New media business
Dial in details:
India
Primary: +91 22 3960 0894
Local Access Number: +91 22 3940 3977