Find enclosed my view on your obeservations:
1) While I agree that we do not know whether the company actually discplined to acquire movies to generated 18% IRR, I would look at Historical RoNW for the company to get some comfort on same.
As per Screener Data, the compnay has generated RoNW of aroud 17% over last 5 years, with marginal decline in last twelve month to 16%. The number are reaonably close to 18% Pre IRR number stated by the management in my opinion
2) The artcile on ET was suggesting about Hindi GEC and Hindi Movies channel reach has been same among Indian market. Having said that, I concur with you that viewership on Hindi GEC is more stable and higher as suggested by BARC data.
However, the advertisement share which Hindi GEC channel are getting as against Hindi Movie channel is significantly higher. I am not an media expert and also do not know whether same being global practice as well. As per BARC Data, Average Top 10 Hindi GEC of Week 40 is around 4,61,242 while data same for Hindi Top 5 Movies is around 3,04,802; i.e. 51% lower than GEC Channel.
The estimate for 2015 advertisement on Indian Television on Hindi GEC is around Rs 5,000 Cr while same is around Rs 800 Cr for Hindi Movies. So, difference between advertisement revenue is huge, even after considering sticky and quality audience for Hindi GEC channel, in my opinion. Please refer to Page 5 table in enclosed file for my working.
3) On youtube revenue for Shemaroo, I do not have any opinion except that only one observation that how one differentiate CSM for 5 minutes video and 2 hours video? Probably that could be one reason for higher CSM for Shemaroo.
Also, find enclosed estimated rate for Youtube from website: http://youtubemoney.co/
The screenshot for 1.1 billion view is given as under
As per above estimate/guestimate: the expected realisation are in range of USD 1.36-3.4 with revenue of USD 1.5 million to USD 3.7 million, which is very kind of matches with range of USD 3 million you have estimated. Please let me know in case I made any mistake in calculation.
We need to get some more insight from company/media expert to come to any conclusion on same.
4) While your point is valid, I believe there is market for various class and demography in the society. While, money is important parameter at lower income section, the higher income group is more appealed by convenience and quality then price. For simple analogy, why even in DTH service, one paid higher amount for HD channel? I think at higher income level, superior quality of telecast would also matter. So If I am big fan of Amar Akbar Anthony and wanted to watch on my home theater with 80 inch screen, Would I mind paying 4K quality on Netflix Rs 25 vis a free youtube version?
So, in my opinion, it would be individual choice which would matter and there is sufficient market for each class at correct price.
Do look forward to your counterview on same. It is really becoming an interesting discussion thread.