We are witnessing the rules of the game are being written and re-written every day. This is the fastest-changing phase of the M&E landscape that we have witnessed. Thirty years ago, we did not have access to a gamut of content across devices. Today, we cannot imagine a life without fresh, original content being served to us on a daily basis. This change is being driven by a confluence of content, technology, opportunity, reach and demand.
In order to succeed in this new context, we must strike the right balance between heterogenous content and immersive technology to harbour the ability to constantly serve the several consumer cohorts that exist. Rather than treating it as an external disrupting factor, we have embraced change as a core business capability.
We have consistently been taking strategic steps towards this transformation, and we took a big leap in this direction during the year by announcing the proposed merger between your Company and Culver Max Entertainment Private Limited (formerly Sony Pictures Networks India Private Limited). I firmly believe that this merger will enable us to drive scale and build a more sustainable, innovative and profitable M&E company from the emerging markets. The content consumption and creation ecosystem is also witnessing mega-shifts and a powerful merged entity will allow us to compete more effectively, especially in the realm of digital entertainment, where increasing adoption and technology-led innovations are driving higher growth. Together, we will create a scalable business model focused on creating engaging content, helping advertisers reach their audiences across multiple touch points, driving customer acquisition across linear and digital platforms, synergistic distribution, and effective monetisation streams across markets. Even as the teams work incessantly towards seeking the necessary legal and regulatory approvals, we stay committed to building the merged company with customer focus, value generation, profitability, and talent as the core tenets.
Over the last thirty years, we have created a rich legacy—a bedrock of principles that guide us to work together and navigate our choices in doing more for all our stakeholders. This has ensured we deliver higher value for the consumers’ time and wallet share across the business. Our prudent approach towards investments has set us apart in the industry, as we continued to generate higher returns to our shareholders, even during tough times. The journey has been invigorating, shaping ZEE into a resilient, and fundamentally strong company.
ZEE has been an early adopter of emerging technologies in the sector, but we need to continue building newer capabilities to harness the full potential of data in the evolving technological landscape around us. Taking a firm step in this direction, we set up a Technology and Innovation Centre in Bengaluru to enhance the security of our assets in the digital ecosystem and build robust capabilities to augment user experience across our platforms. We are also sharpening our data analytics and its interpretation to get a better understanding of consumer preferences and create personalised experiences that build brand loyalty and create an ongoing revenue stream. We are spurring experimentation and innovation, by capturing new opportunities and attracting the best of talent and partners to be a part of our family. To sum it up, we are devising a winning strategy for this new landscape, where consumers wield enormous power through the multitude of entertainment platforms and content formats at their disposal.
Our vision for the future is crystal clear. We aim to build a better tomorrow by redefining entertainment for consumers, maximising value for shareholders, enhancing the opportunities for employees, delivering innovation to our partners, and taking purposeful steps for the society at large. Our intent will always be to pass on the benefits of our business to the people, whether it is through purposeful entertainment or continuing to support vulnerable communities and enabling positive societal impact.
The financial year 2021-2022 was a challenging one wherein we not only had to navigate multiple waves of the COVID-19 pandemic, but also the macro-economic headwinds and inflationary challenges towards the end of the financial year. Amid this scenario, the fundamentals of our business remained strong, enabling us to post a satisfactory performance in these extraordinary times. We registered a robust operating and financial performance, and FY22 overall was a healthy year for ZEE marked by recovery across all key segments.
During the year, we continued to be among India’s strong and leading TV entertainment networks. We built on our strong language leadership to be among the top TV entertainment networks in 7 out of the 9 local markets where we are present. We continued to focus our energies on sharpening our content offerings to reflect the changing consumer preferences, and significant efforts were directed towards key markets including Hindi, Marathi, and Tamil with an aim to further strengthen our linear viewership share.
During the year, ZEE’s operating revenues were up 5.9% YoY. Our revenue growth was largely driven by higher advertising sales and a surge in the theatrical business. Advertising revenues during the year increased 17.3%, underscoring the compelling value proposition we offer to advertisers in their brand-building endeavours. Our theatrical business witnessed good growth on the back of an encouraging response for films across multiple languages, including ‘The Kashmir Files’ (Hindi), ‘Valimai’ (Tamil), ‘Qismat 2’ (Punjabi), ‘Pandu’ (Marathi) and ‘Bangarraju’ (Telugu). Films from Zee Studios featured prominently in the list of highest grossing films in each of these languages, with ‘The Kashmir Files’ being among the most profitable films ever made in the history of Indian cinema. Significant investments have also been made to harness the power of digital and transform ZEE into a formidable player in the digital entertainment space through ZEE5. We are encouraged by the healthy usage and engagement trends for ZEE5, which further affirm our investment rationale. During the year, we launched ZEE5 in the U.S. and received a very encouraging response, becoming the No. 1 South Asian OTT player in the market.
Subscription revenues during the year remained flat, and growth in ZEE5 subscriptions were offset by the decline in television subscription revenues. The embargo on change in channel pricing continued to impede our television subscription revenues.
The Technology and Innovation Centre in Bengaluru will help us add value to our linear broadcast as well as to digital audio-visual entertainment.
‘The Kashmir Files’, one among the most profitable films ever made in the history of Indian cinema.
That said, we are enthused by the momentum in our adjacent businesses—Zee Studios and Zee Music. These businesses form a very strategic part of our portfolio, playing a synergistic and complementary role in the success of our linear and digital businesses. We continue to realise significant synergies in both cost and revenue due to our presence across markets and platforms.
During the year, we also continued to invest in boosting our capabilities across content, digital and technology to better serve and delight our customers. These accelerated investments in a challenging operating environment resulted in EBITDA margins of 21% during the fiscal.
The M&E industry in India is on the cusp of a strong phase of long-term structural growth driven by rising consumer demand and improving macro enablers, such as digital reach and content accessibility. At ZEE, we are driving our businesses to capture a significant share of this growth through our focused investments. Our successes so far have given us the confidence to be front footed in our investment approach to improve our longer-term relevance. As we scale our investments, we will continue to be focused on driving returns from these investments with fiscal prudence, which has been the core DNA of ZEE.
In this long and memorable journey of ZEE, you have played an intrinsic part, and we have only nurtured our relation together as one family. I remain eternally grateful to you—our shareholders, partners, and all my colleagues—for weathering all seasons with us and displaying your faith and commitment not only in me, but also in this valuable asset we have created together. I assure you that the family we have created within the organisation and the unwavering passion that each one of you brings to the business, has personified ZEE in every household across the country, and is firmly entrenched in the hearts of the diaspora across the globe. This essence of ZEE will remain sacrosanct as we transform for the better. Our focus is not just on the results, but on driving the change that will get us these results.
We are cognisant of the fact that ultimately, success in this new ecosystem will come from providing a holistic customer experience—one that is built on a strong foundation of business growth and positive societal change.
The choices that we take in life shape our destiny. Similarly, it is the decisions that we take today to strengthen the business that will shape the next chapter of this Company. We remain determined to create a better and stronger version of ourselves, together!
Sincerely,
Managing Director & Chief Executive Officer ZEE Entertainment Enterprises Ltd.