OTT won't match TV's reach for next 5 years: Zee MD & CEO Punit Goenka

In 2006, Zee was down in the dumps. That is when founder Subhash Chandra’s son and managing director and now CEO Punit Goenka took over. He built Zee into a Rs 8,130-crore cash-spewing growth engine. Last year, the promoters of Zee’s debt-ridden parent Essel Group sold a chunk of their stake. Just when Zee was settling down, came the pandemic and lately rumours of investors losing confidence in Goenka. A day before announcing annual results, Goenka issued a sentimental open letter talking about the way forward for Zee. After an intense earnings call, Vanita Kohli-Khandekar spoke to Goenka. Edited excerpts.
 

What was the trigger for the letter?

That was me penning down my thoughts on all that I was not able to say to my stakeholders. I wanted to write the letter two to three weeks back but wondered if it would be seen as a ‘metoo’ (Chandra penned an open letter to shareholders during the debt crisis in 2019). When I came into the company in 2006, investors asked me ‘how long it would take to fix the problem.’ I said ‘I don’t know. But it will be long and painful.’ People had patience. Today’s analysts and investors have no patience.

In the earnings call not one question was on the 2-3-year strategy. The long-term vision hasn’t changed. It is clear that OTT will be a subscription-driven business and not ad-driven unlike broadcasting. Zee5 will contribute 30 per cent of the top line in 3-4 years.

What are your priorities from here on?
 
We have to continue to grow our market share in the verticals we exist in. After so much time, I can focus back on being hands-on. So, my focus will be wherever we have lost market share or wherever the audience is not excited by the Zee brand. The biggest place for my attention is Zee5.

Can OTT be profitable without hitting the scale of linear broadcast?

On reach, OTT won’t match TV as a platform for the next five years. It will remain a platform for people who have evolved from the current context of TV. It is an ever evolving ecosystem  — from theatre to theatre plus satellite TV and now theatre plus satellite TV plus OTT.

How does your becoming a minority shareholder (from 42 per cent to less than 5 per cent) change things?

The important question is whether we are building value not whether my interests are aligned or not because of minority shareholding. My value is not judged by how much stake I have and what it is worth. It comes from ‘I am saying this’, and the fact that everybody is sure I will do it. If there is a question mark over that, I will eradicate it in the next few months. Goodwill is not about valuation and money.
 

There seems to be a lack of confidence... wasn’t the open letter about that?

Exactly. Whatever lack of confidence there is, I am willing to commit, stick my neck out and admit we made mistakes in the past, that is why we are taking those write-offs (Zee’s costs in FY20 jumped by 18.3 per cent on account of write offs that analysts are questioning). There has been a shock to the system over 18 months. I am ripping the band-aid off in one shot.

One school of thought is why not do it over 4-5 years. There is a mismatch of the real value of assets versus what is on the balance sheet. From here on my books are clearand clean.

There is a talk of your going at the AGM in September…
 
Until that is approved it is always a question mark. We will know that at the end of the AGM.

There are a lot of questions on your content costs...

People think of us as a broadcasting and OTT company. But, we are a content company. We have Zee production, Zee Music, Zee5. The people questioning the cost structure come from the perspective that broadcasting revenue is dead. The questions on the inventory are because they believe the business will die. So ‘If Punit Goenka spends money on inventory is it worth it?’ But by Q1 or Q2, the monetisation will kick in. By next quarter when we give inventory by vertical, things will be clearer.

How is Zee positioned… there is Jio, Disney Star, and giants like Amazon, Google, Facebook investing in media.

We are positioned very well to be a strategic partner to any of these firms. But for that to happen we need to get the buy-in of existing investors. So they (a strategic buyer) will have to go to many stakeholders to get a 26 per cent shareholding and they won’t get that at Rs 150 (The current price of Zee share).

If I was the CEO of a company like Amazon in India, I would like to have an asset like that (Zee).

It is disappointing that a strategic investor didn’t come in during the stake divestment last year...

It is. Our expectation may have been unrealistic.

What are the big challenges to growth?

We have great content people, great tech people. But not a combination of them (both tech and media skills). People who try, come up with solutions from international companies. But no international company has made a successful transition from traditional to digital. Not Disney or others.

It is easy to say tech firms are doing well. Netflix, Amazon, their whole ecosystem evolved from tech. Our ecosystem has to evolve from broadcast to a multiplatform way of thinking. There aren’t people who understand that. My conclusion is that these type of people have to be created.

The New York Times (NYT), BBC et al shifted successfully to digital. Would getting a CEO from outside work?

NYT did it when their print business was on death row. The difference between NYT and Zee is that I have a successful traditional business that is delivering. If we bring an outside CEO, shift to tech and digital and my entire cash cow dies? Tomorrow if my linear business started going down I would have said ‘let’s go whole hog on digital, put all our dollars there’.

Except for the pandemic, our broadcasting business has shown phenomenal growth. Once this is over it will be back to delivering growth.

If you were an outsider, how would you view the firm?
 
If I were an outsider, I would wish I had Rs 15,000 crore to buy the firm. You don’t find so many bets even in a casino where you get three to four times.

Would the family pick up more stake if it could?
 
So far there are no plans for the Essel Group or the family to buy stake. Would we like our stake to go up? Yes, but not at the cost of the company.