The company, which released 23 films in the financial year ended March 31, is looking to more than double that to 48 in the current year and is eyeing revenues of Rs 2,000 – Rs 2,500 crore from the movie business alone, said chief financial officer Rohit Gupta.
“Movies have been an extremely important part of our overall content strategy. By investing into a studio business, we have ensured that there is content available to our broadcasting and OTT business,” Gupta told ET.
While it may look like the company is making a huge investment in the film business, that is not accurate, he added.
“We have earmarked about Rs 500 crore and maybe at peak it could go up to Rs 650-700 crore. The important thing is rotation of money and striking the right balance between revenues and investments. We are looking at doing anything between Rs 2,000 to Rs 2,500 crore of topline in FY23 with the overall return on capital employed (ROCE) of over 25%,” Gupta said.
Headed by Shariq Patel, who is its chief business officer, Zee Studios is expected to be a big contributor to ZEE’s overall business in the fiscal.
In FY22, the company co-produced or released 23 films across six languages. While some may not have worked at the box office, the small budget ‘The Kashmir Files’ and a few regional films made big money for the company.
“No one could have imagined that ‘The Kashmir Files’ would add such a significant amount to ZEE’s bottom-line in the last quarter. So, yes, the chunkiness is always there. But the success of a movie is not just derived from the box-office,” Patel said.
If a big-budget movie does extremely well, it can barely break even, he said, while it is the mid- and small-budget films that give major returns on investments.
“That’s why we have a portfolio strategy. We will continue to invest in small Rs 10 crore films, as well as mid-size films of Rs 30-40 crore and a few big ones,” Patel added.
Citing the reason behind scaling up, both Patel and Gupta said that it helps in ensuring a flow of content for the company’s broadcasting and digital verticals, as well as controlling costs.
“The cost of acquisition of a movie with digital, satellite, music and other ancillary rights is almost 80-90% of the cost of an average movie. And you won’t even own the IP. We would rather produce and keep the IP,” said Patel. “The advantage of the studio is that by virtue of being involved from Day One for most movies, you start at the building block, the cost price. You are owning the IP and getting the visibility of how the movie is shaping up while shooting and editing. Even the control of when to release it is with you.”
Incidentally, while the studio business is independent and is allowed to syndicate movies to other broadcasters or OTT services – for instance, ‘Article 15’ was sold to Netflix and ‘Manikarnika’ to Amazon – Gupta said the company would like to keep the movies within.
“We don’t believe in doing syndication. It’s mostly for our satellite and OTT businesses. So, for this business, it is never going to make a loss because you’re captive to your own company,” he said. “We will need an X number of movies for our business in any case. So, instead of relying on others to produce it, we will invest into our production.”
Globally, the top OTT players combined are expected to invest more than $115 billion in original content this year. In India, too, the top six players will need at least one original show or movie per week, which makes it to around 300 pieces of original content per year.
Including post-theatrical movie releases, the demand is close to 500 movies/series soon.
“So, if the demand is of 500-odd premium products, who will make those?” Patel said. “As a big studio, we should be aiming for at least 10% market share of production, hopefully it will translate to 10% of revenue also.”
Patel’s biggest grouse is that when a global company announces a big-budget slate, they are rewarded, while analysts question the decision whenever ZEE says it has a big budget for films.
“We clearly see the benefits of investing into Zee Studios and we will make it one of the largest production houses in India,” he said.