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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, and welcome to Zee Entertainment's 4Q FY '21 Earnings Discussion. Hope you all are well and taking good care of yourself. We have with us today our MD and CEO, Mr. Punit Goenka along with our Chief Finance Officer, Mr. Rohit Gupta. We'll start with a brief statement from Mr. Goenka, followed by a statement on operating and financial performance by Mr. Gupta. We will subsequently open the floor for questions. Before I begin the call, I would like to remind everyone that anything we say during this call that refers to our outlook for the future is a forward-looking statement and must be taken in conjunction of the risk that we face. We will begin the call now. Over to you, Mr. Goenka.
Thank you, Bijal. Good evening, everyone. First and foremost, I hope you and your loved ones are safe and taking good care. These are indeed trying times to say the least. We are all ended together and as a responsible corporate citizens we have been at the forefront in helping the nation fight against this pandemic. Now let's move ahead to the agenda of today's call. While Rohit will take you all through the operating and financial performance, I would like to update you on the overall business environment and would also like to elaborate on the investment plans, which were outlined during the previous call. As we all have experienced, the last financial year was impacted with the pandemic and the consequent lockdown. That said, the year was also a blend of impact and recovery. Our revenues and operations were significantly impacted during the first half of the financial year. However, the second half witnessed a sharp recovery with the advertisement revenue growth rising close to double digits. At the start of the calendar year 2021, the outlook for financial year 2022 was quite promising. But the second wave of the pandemic across the country and the consequent lockdown have impacted advertising spends. As a result, even our advertising revenue in the first quarter of financial year 2022 will be impacted to some extent. That said, it will be significantly better as compared to first quarter of financial year 2021. The underlying demand for advertising continues to be strong. We are hopeful that part of the lost advertising revenues would be recouped in the subsequent quarters, providing the lockdown restrictions do not spill over the second quarter. Moving on to our investment plan. As stated in the previous call, we will be increasing our content investment in FY 2022. Our approach has been further sharpened with the 5-year business planning exercise implemented. From an investment perspective, our focus will be on 2 key businesses: broadcast and digital. For the broadcast business, we would like to achieve clear leadership position with an ambition to be India's #1 network. This will be achieved through a blend of enhanced content offering, broad channel portfolio and an increase in original programming. In the short term, our focus is to raise the network share in general and entertainment genre and to recover losses which we incurred -- which were incurred in some of the regional markets. For the digital business, ZEE5, the youngest OTT platform in India, has been scaling up well, but we see scope for significant improvement. And our team is working around the clock on the same. Over the past few months, we have reworked at the digital strategy and product offering in detail. Our primary focus will be maintained on 2 aspects in the coming years. First, increasing the value proposition of ZEE5, which will be achieved through a combination of compelling content and competitive pricing. We are in the process of creating a very strong lineup of movies and digital originals. As a part of this strategy, ZEE5 releases its first mega movie, Radhe. ZEE5 will premier several good movies and original content across languages in the coming year. Additionally, you may have noticed that we have reduced the price point of our annual pack to INR 499. This approach will help us in reducing the customer churn and is in line with our long-term strategy of increasing share of B2C subscribers. The second aspect is to work on enhancing the user experience, where we have been behind the curve. We have drawn up technologies and product road maps in order to upgrade the digital platform to the next level. I believe ZEE5 certainly see an all-around improvement in performance over the next few quarters. We are also in the process of ramping up our movie production business. The primary objective of scaling up this business to realize the synergies across television, digital, movie distribution and music publishing businesses. All these businesses are dependent on acquisition of different rights of movies. Considering our presence across multiple formats and geographies, we acquired most of the rights of our movie. Our strategy of co-producing movies with renowned filmmakers allows us to build a strong movie catalog that can be monetized across the different businesses that I just mentioned. This strategy allows us to refrain from entering into bidding wars for movie rights on several fronts. Since as you all must have noted, in the recent years, the cost of OTT movie rights has seen a substantial inflation. While our investment in movie productions are going up, the incremental investments, after adjusting for the various rights that we would have bought in any case for our other businesses, is not really that large. I would also like to point out that the scale of our movie production business will lag our guidance for financial year 2022 due to the impact of the pandemic. Considering the opportunities that lay before our 2 core businesses, we are prioritizing content investments in digital and television. Additionally, the prolonged uncertainty due to the pandemic has made the operating environment quite volatile. In light of these factors, we are reevaluating our investment in SugarBox, and we will be scaling it down for the foreseeable future. We believe this investment phase of ZEE 4.0 will last for a period of 2 years. As we had indicated earlier, we would not be able to hold margins at 30% as we invest for future. During the investment phase, our EBITDA margin would be around 25% plus. Once this phase is over, we should move back to 30% margins. During this period, we are targeting free cash generation of approximately 50% of profit after tax. Also, you must note that the impact of these investments on our margins would have been lesser had they have not been in embargo on the subscription price hikes. The loss of more than a year of subscription revenue growth is one of the most important reasons for the 5% reduction in our margins as we make investments. Many of you would remember that at the start of the decade -- start of the last decade, when we have embarked upon our journey to invest in regional markets, we have sacrificed margins. However, as those businesses scaled up, not only did those margins return to normal level, but we also saw multiple years of higher-than-industry revenue and margin growth. We believe that our investments over the next 2 years will build a solid foundation for the next phase of growth for the company. On that note, I would like to hand over the call to our CFO, Rohit Gupta, to take you all through the operations and the financial performances. Rohit, over to you.
Thank you, Punit. Before I take you through the operating and financial highlights for the quarter, I hope all you guys are keeping safe. The second wave of COVID has taken pretty much all of us by surprise, both at a personal level as well as from business point of view. Our business had seen a sharp rebound in the third quarter, and that recovery continued in the fourth quarter as well as things on ground became close to normal. This is also visible in our ad growth numbers where we have seen 9% growth on Y-on-Y basis. The spike we have seen on account of festive season in Q3 normalized, but the demand from advertisers continued to be strong during the last quarter. However, the demand has softened a bit during the current quarter as lockdowns have come into effect in a staggered fashion around the country. But looking at the demand we saw during the fourth quarter, we are confident that as soon as these restrictions ease, we will see a rebound as we had seen last year. We had contingency plans in place for shooting in case of lockdowns were implemented, and we were able to execute those in Hindi and Marathi markets. These channels have continued with original programming, since the lockdown in Maharashtra was announced. However, such mitigation strategy might not work now in some markets, as most states have announced lockdown and there might not be feasible locations to which shoots can be shifted. However, we are trying to minimize the impact of lockdown on our programming. We are happy to spend more on content on account of change of shoot locations, maintaining bio bubble and taking other safety precautions. During the quarter, our television network improved its all India viewership share by 70 bps to 18.9% and continued to be India's #2 TV entertainment network. While the performance in markets like Bengali, Kannada, Telugu and movies were strong in markets like Hindi General Entertainment, Tamil and Marathi. We believe there is scope for improvement and our teams are working to fix the gap in content that their research have identified. The new channels we had launched around 4 quarters ago have already established strong positions in their respective markets. Now coming to ZEE5. Global MAUs and DAUs for the month of March were 72.6 million and 6.1 million, respectively. During the quarter, ZEE5 released 14 original shows and movies. Over the last 12 months, despite the pandemic halting production for around 3 months, ZEE5 has released 75-plus original shows and movies. ZEE5 is home to biggest Indian language digital exclusive content libraries, and it further enhanced consumer value proposition with the new pricing of the annual pack. We expect that it will enable us to upgrade consumers to their 12-month pack instead of monthly subscriptions. The revenue and EBITDA loss of ZEE5 for the quarter was INR 1.1 billion and INR 1.6 billion, respectively. The plans of Zee studios continue to be impacted due to varying degree of restrictions on cinema halls during the quarter. Zee Music Company continued to be second most subscribed in the music channel on YouTube and the label witnessed a 50% growth in YouTube video views on a Y-o-Y basis. Now coming to the financial performance for the quarter. Like I had mentioned earlier, domestic advertising revenue grew by 9%. Domestic subscription revenue saw a like-to-like growth of 5.6% year-on-year and the EBITDA for the quarter was INR 5.4 billion, with a margin of 27.5%. For the full year FY '21, while the first half saw a domestic advertising revenues declined by 46%, the second half grew by 8.2%, resulting in a full year decline of 20%. Subscription revenues grew by 6% on a comparable basis, driven primarily by the digital business. The EBITDA for the year was INR 17.9 billion with a margin of 23.2%. The cash and treasury investments for the company was INR 18.8 billion as on March 31, which includes bank balance of INR 7.5 billion, fixed deposit of INR 3.4 billion, mutual fund investments of INR 7.4 billion and NCDs worth INR 505 million. Thank you, and over to you, Bijal.
Thank you, Rohit. We will now proceed to question-and-answer session.
[Operator Instructions] The first question is from the line of Abneesh from Edelweiss.
My first question is on SugarBox...
Sir, I'm sorry to interrupt, but may I please request you to use the handset mode while speaking. Your audio is not audible.
Yes. Yes, sure. Punit, my first question is on SugarBox. So in Q3, you had said that you will give numbers for FY '22. And also, you'll commence the investment in SugarBox from Q1. Because of the pandemic, is there a change in plan? Or is there a more structural reason? And versus initial plans, what is the current status?
So Abneesh, as I mentioned in my opening remarks, given the current pandemic and the uncertainties around it, we will be not investing very aggressively behind SugarBox. In fact, from our original plan itself, it will be scaled down significantly for the foreseeable future.
But Punit, versus Q3 to now the pandemic Wave 2 has happened and now Wave 2 is coming down also in, say, Maharashtra, Delhi, so it is something which will keep happening, and it will come down. So wanted to understand, is there something, say, after 3, 4 months, Wave 2 and Wave 3 and vaccine, et cetera, issues get resolved, then what would be the take on SugarBox? So is there any structural reason, I wanted to understand because Wave 2, Wave 3, vaccinations are also happening?
Yes, Bijal.
Yes. Abneesh, see, at this point of time, I mean, first of all, the project has been delayed significantly. We were expecting it to roll out some -- start rolling out in February of last year. And it has been delayed. And still, there will be much more delay. So that is point number one. Secondly, we are still not sure that how long pandemic will last. So let's say, today, there is -- I mean, some time back, we were not expecting Phase 2, but Phase 2 came in a very bad way. So that is another thing. Third and more important thing is that even after everything stabilizes, how the traffic will build up. Traffic assumptions might be very different when we were thinking about the project. So those are the things which needs a thorough reevaluation. So if there is anything -- if we were to go ahead with investment or do anything, we'll let market know at least 6 months in advance. So at this point of time, what we can say for FY '22, very clearly, we do not see that kind of investment, which we were talking about earlier.
Sure. That's helpful. My second question is on market share. You said you want to be #1. I want to understand what is the current gap? 18.9% is your share. Second is on channels where you improved market share, so Bengali, Telugu, Kannada, are these more sustainable in nature or more because you have shown some movies or some one-offs?
So I'll take the second part first, Abneesh. Normally, when we do one-offs, I don't account for that when I talk about improvement in market share. And consistently, I've been doing that since I have been part of this company. So any share improvement that we talk about are always consistent improvements. In terms of the gap today, I think the clear leader is about 24%, and we are at about 19%. So that's the current gap that exists, which we have taken a target to bridge over the period of next 5 years.
One follow-up to that is Hindi, especially seen top 10 programs, our market share is much lower versus historical part. And secondly, in Tamil because of the movie channel, are you getting a bit more traction in closing that gap versus earlier?
So Hindi, certainly, you're right, Abneesh, and we are putting plans in place to change those, get more new programming in. Unfortunately, the second wave is not helping. We are only -- the mitigation plan was only for what is on air. And therefore, new shows plan has kind of taken a little bit of a hit. But hopefully, soon, we'll be activating that as well. The Tamil movie channel has certainly given us more traction in the market because now we have a bouquet offering in the Tamil Nadu market from a subscription point of view. Unfortunately, because of the NTO 2, the pricing has not changed because the inclusion of the movie channels is currently not priced. And therefore, that benefit is not yet flowing to us.
Sure. And one last quick question on ZEE5. You have done all the right things. The MAU, DAU, minute, everything is improving. Revenue has fallen around 8%, 9% quarter-on-quarter, if you explain that. Second is, Radhe, I would say, the new innovation that we have done. The INR 499 entire year and Radhe's free. So Radhe's entry part of that, so almost Radhe is free and very aggressive pricing. So what else is needed? You have been doing all the right stuff, but we don't see any meaningful movement in revenue as we speak. So are you saying we are too early in terms of judging? And second, this kind of experiment of Radhe on -- at INR 499. From a P&L perspective, it will be quite tough, right? Such a big budget movie at INR 499, 12 months included ZEE5.
No. I think, firstly, Radhe has done what we had expected it to do for us. I think the price point of INR 499 and Radhe is not linked to one another. I think INR 499 was independent of that. The bundling that we did because this was the first off experiment of pay-per-view to be launched in this country was the innovation that we did, and it was quite successful. In terms of numbers, it's been only 7 days since the movie released. Abneesh ,It's difficult to start talking about numbers right now. But in my view, we look at moving as a bouquet. And as a bouquet of services, this will also make money for us. And Radhe will, certainly, over a period of time, contribute to the bottom line through the various rights that we own. What is your first question?
Yes, fall quarter-on-quarter in ZEE5 revenue?
So the fall is largely on account of advertising, which is cyclical in nature. And also that there is one telco renewals that's pending since third quarter of last year.
So that has been -- okay, Abneesh, one is that last quarter was festive also. So we are actually seeing some bump up, which is not there. And a couple of telco renewals, which are still -- work in progress and were concluded only in 1Q.
The next question is from the line of Kunal Vora from BNP Paribas.
First one on ad revenue. Do you think you can get to FY '20 level of ad revenue in FY '22? And can you talk about the trends which you are seeing in March, the extent of interruption which you are seeing in content production? And on the ad side, what's out there?
So we believe that the market was tracking well to reach towards a double-digit growth for FY '22 as an industry. Had it not been for the second wave, that would have certainly been achieved. If the wave doesn't continue beyond the first quarter, I still believe the prospects of the market hitting double-digit number in growth is possible. And as usual, we will endeavor to be at the top end, if not higher than the market growth in our growth trajectory.
Are you talking about double-digit for FY '21 because such a very low base. To get to, let's say, growth over FY '20 would require almost 20% higher growth to...
It's actually growth over 20%.
Over 20%, okay. You're so talking about double-digit over FY '20, okay.
Yes. FY '21, we are not referring to in any of our growth numbers.
Sure. Sure, Sur, sir. Second one on international subscription and like with the number is down to almost INR 55 crores from INR 80 crores last year, and it used to be INR 100 crores a quarter, a couple of years back. So was there some one-off or is it because of customers moving to OTT and content piracy? And also, how is ZEE5 revenue tracking in international markets? And how is the reach now?
Rohit? Rohit will take that.
So ZEE5 in international markets have just started, and the numbers are small. I would say it started well, and it's been taken up well, but the numbers are pretty small to take it up. Can you -- Kunal, can you give me your first question, please?
Yes. On the international level, subscription revenue, you've seen the number come down to about INR 55 crores. It was INR 80 crores last year in same quarter. And it used to be INR 100 crores 2 to 3 years back. So just the international subscription revenue, how do we look at it? Was there some one-off or is it because of consumers moving to OTT and because of increased content piracy? So wanted to get some sense on international subscription outlook.
Okay. Well, see, the drop in international subscription revenues is primarily on account of -- some accounting. So from this quarter, we have started recognition of subscription revenues, net of certain costs associated with the earnings of the same. So accordingly, our costs are also lower, and there is no impact on the EBITDA. Additionally, during the previous quarter, our international subsidiary revenues were slightly on a higher side and a part of this decline on a Q-on-Q basis can be attributed to that.
Okay. Okay. Okay. You're saying INR 55 crores is the number we should be looking at? Or it's like a number which is adjusted downward because of some one-off?
Yes. Like I said, there is some accounting adjustment that has happened and some netting off from the gross and the net. So on a like-to-like basis, it will remain the same, and there is no impact on the EBITDA.
Understood. Understood. And lastly, on ZEE5 losses, what you indicated seems to be that content spending will increase and pricing is going to be lower. So obviously, unless customer additions are much higher, we are looking at higher losses for ZEE5. So like this year, you had INR [ 450 ] crores to INR 700 crores of loss, how should we looking at FY '22 on ZEE5 losses?
So we are looking at an overall guidance, Kunal, for the company that I've just given. We would not be looking at giving a guidance for specifically, but it will be in the same range, marginally higher than what we have spent in the last year. Bijal, you want to add?
The next question is from the line of Vivekanand S. from AMBIT Capital.
So a couple of questions. One is on the subscription side. Punit, you mentioned that the NTO 2.0 is hurting your ability to monetize. So any thoughts on where this is progressing? Because there were some legal challenges we are implementing this. So if you can help us understand how we should look at the subscription revenue growth? Second question is on the redeemable preference share. Now this is -- 2021 is probably the last tranche of the redeemable preference share. So are we going to tie up any sort of cash commitment to shareholders now after this tranche ends? Any thoughts on cash return would be appreciated.
So for the first part, so the NTO 2 is a matter which is still in the courts. I think all parties have filed multiple affidavits for expediting the order because all hearings have been done. So it's very hard for me to predict when that will be solved. But we are, as an industry, working with TRAI to find an amicable solution to see that this logjam is resolved all as soon as possible for the betterment of the industry. Because I believe this is now even hurting the DPO parts, not just the broadcaster. So that's where we are on that part. The second question was...
Vivekanand, so as you rightly said, that last tranche of preference or redemption will happen around this -- around end of this year. And it is a bit early to talk about our plans, how we are going to go about distribution of cash. But that said, at this point of time, we are working with 30% policy. So 30% of consolidated cash -- sorry, consolidated profit is being given as dividend. And till the time, there is no change, that will be the policy, which will be followed. This policy is reviewed every year. So towards the, say, 4Q of next year when we would not have any preference share payment commitment, that time, definitely, this factor will be also taken into account to decide whether we should change policy or not. But it is a bit early for us to comment at this point in time.
Okay. Okay. So one small follow up, Punit, thank you for the comments on the NTO. So would it be possible to help us understand how we views the subscription market now. You have to assume both scenarios, right? I mean if the legal challenge is not successful, then you have to live with it, right? So how should one see the subscription market evolve?
So currently, Vivekanand, until the tariff order legal issue is not resolved, there's not much we can do. To expect any significant growth to come from that revenue stream is highly unlikely. But if this matter is resolved and have maintained this always at barring maybe a quarter or 2 quarters of disruption till the new tariff order settles down, we should be back to our low teens kind of growth number in the subscription revenue.
The next question is from the line of Latika Chopra from JPMorgan.
I have two questions. The first one was on your movie production. Last time you talked about you were targeting 35 to 40 movies on an annual basis, are these plans still intact? And if so, could you share what kind of allocation of investment would this part of business see over the next 2 years? And the second question was on programming costs. You talked about a double-digit growth that you're expecting on the ad side versus FY '20. But looking at the scenario on the ground today, are you witnessing inflation on the cost front both on the programming side? And of course, any thoughts on employee cost inflation as well?
Yes. So on the content side, we do expect inflation to happen because we would want to continue to go on with original content, in fact, increase original content. And therefore, there will be the regular inflation that is expected in the market. We also do expect that there will be inflation to the manpower cost. Apart from just inflation, there will be additional manpower cost because we are on a recruitment drive for our digital business and that will take some costs up because that is investing for the future again. The double-digit part on advertising revenue, the thing stems from the fact that if this lockdown scenario doesn't spill into quarter 2, I'm quite certain, being an optimist that the double-digit figure for the year can be achieved over financial year '20, not over '21. And on the movie allocation side, as I said, Latika, in my opening remarks, we are buying movies for all of our other verticals in any case, whether it be television, whether it be ZEE5, whether it be the Zee Music Company or even our distribution arm of the business. So our allocation to films is an incremental allocation to produce films. It's not as if we spend money for all those rights, plus we spend money to produce movies. So it's an incremental allocation. Details, of course, Bijal and Rohit can share with you off line. And certainly, we will not be hitting the 30 to 40 films, given the current pandemic situation in the current year. But certainly, once that lifts, we would endeavor to that because it truly acts like a strategic feeder business for all the verticals of Zee and thereby giving us the advantage of not getting into bidding wars with others who do not run these as independent verticals -- sorry, people who run these as independent verticals. So we don't get into bidding wars with them.
Sure. And just one follow-up here on the programming cost inflation. On a like-for-like basis, if you exclude the original content or incremental content on the digital side, just on the broadcasting side, what kind of a like-to-like programming in cost inflation would you anticipate?
See, like-for-like cost inflation as far as part of programming is concerned, it is in line with inflation in India. It is -- again, there will be some improvement in production quality every year. So for television, maybe 5% to 6% kind of inflation, that we see every year. So I don't think that is changing materially.
The next question is from the line of Yogesh Kirve from B&K Securities.
So regarding the investment phase, we talked about the impact on the margin. But could you also talk about in terms of the working capital inventory or generally, the cash flow conversion that would pan out over the next 2 years?
Yes, cash flow conversion, I already said, Yogesh, that it will be 50% of the profit after tax. It will be what will be the minimum free cash generated.
In terms of the inventory, so shall we expect the inventory base to -- the revenue base to increase going ahead or at least in terms for the ratio, it could remain stable?
See, Yogesh, I think when we are guiding for 50% kind of free cash conversion, there will be definitely increase somewhere. Now we are not a capital-intensive business. And as we said that we are actually scaling down investment also in SugarBox. So primarily, the investments which are happening are in our content businesses. And since the investment is happening in content businesses, we will see an increase in inventory. Beyond inventory, there is really nothing to call out. Data should be in line with the revenue, which we report. And there is really no other financial -- sorry, there is no other working capital item which is large. So whatever investment we'll see is in content. And since it is in content, we will see increase in inventory for sure.
Okay. That's helpful. Secondly is regarding -- just coming back to the broadcasting business in terms of the content investment, did we talk about increasing the programming hours given in the broadcasting business as well?
Yes, Yogesh. There are certain channels where we are not yet running at optimum levels, and we will be increasing original hours to reach optimum levels in some of the genres.
The next question is from the line of Sanjesh Jain from ICICI Securities.
One question from my side on the ZEE5.
Sir, this is operator. I'm sorry to interrupt. May I please request you to speak a bit louder?
Yes, sure. So the question is on the ZEE5, MAU and DAU side. So how much of the MAU and DAU, which we report are come from telco? And how much are really the direct customer we own? That's the first one. And the second one related question, we said that we are expecting a few deals with telco to conclude in Q1. Should we see a revenue bump up because of that in the Q1 or we have already recognized based on historical number in this quarter? These are the two questions.
Until and unless the deals are done with the telcos or the partners, we don't recognize revenues. And we did not state that the deal will be closed in quarter 1. We are under negotiation. As and when the deals close, that will be announced. So that -- but you will see a bump up on the revenues on account of ZEE5 in quarter 1 for other reasons or performance, whether it be on the back of Radhe or the fact that our subscriber base is going on its own through the other content that we are releasing. On the first part, Bijal, do you want to cover? What was the first question? Sanjesh, can you just repeat?
Yes. That's about the MAU and DAU, how much of that comes from the telco partnership and how much of them are direct customer for?
I mean, large part of MAU is right now on advertising video-on-demand. Telco partnerships are only for premium content or for subscription service, which is not really that large. So I mean, predominantly, our subscriber -- I mean, our MAUs are coming and DAUs are also coming from our, I mean, own organic growth rather than through telcos.
The next question is from the line of Jaykumar Doshi from Kotak Securities.
Just a bookkeeping question. Receivables have come off by INR 530 crores sequentially, so can you give us some indication what is the extent of reduction in receivables from Dish and Siti? And where does it stand as of FY '21 ended receivable from Dish and Siti?
So Rohit can answer that question for you. Rohit?
Yes. Yes. Sure. So see, you're right. Our receivables have come down. And even though we have revenue growth, and that is because, obviously, we have good collections. And also a large part of old outstanding from Dish has also come through. So this year, we collected not only the current outstanding from Dish, but more than INR 200 crores, including some of the collections, which came post closing, more than INR 200 crores of the old outstanding from Dish has also been collected. And we feel that by FY '22, this would be in line with the other subscription debtors. On Siti, we have been on cash-and-carry basis, and we continue to collect on cash-and-carry business.
Understood. So reasonable to assume that there is absolutely no receivables of Siti anymore and Dish also would have come down to maybe INR 250-odd crores. Because if I recall correctly, because INR 450 crores, INR 500 crores at the beginning of the year.
Yes. That's why, like I said, we have collected overdues of more than INR 200 crores. And the other overdues, we will collect it in the current FY '22.
To clarify, Jay, Siti receivables are still there, but we are running on cash and carry since October. So that doesn't mean the old outstandings are over yet. So just to clarify that to you.
The next question is from the line of Arun Prasath from Spark Capital.
My first question is that on that advertisement revenue. Yes, for FY '21, we have seen the reduction of 20 percentage, largely on account of the lockdown and pandemic. But we have also should have got some kind of advantage by including the channels in the FTA or free Dish. So if not for this, what would be this drop? Can you give some indicator ballpark range?
Sorry, can you repeat that question, Arun. I didn't understand.
So in FY '21, when we included the FTA is back in the free Dish. So that should have resulted in some kind of an advertisement revenue drop up, right? So this number of minus 20 percentage decline on FY '21 is after this inclusion, this FTA revenue inclusion, right?
That's correct. Yes.
Yes, Arun, so that is right. But I mean, basically, there were 2 other FTA channels which we had, which was Ganga and Magic. And which actually did extremely well when there was no other FTA channels. This is kid's channel and another is Bojhpuri channel. So viewership spiked significantly. Also our music viewership had spike during the time we did not have large broadcaster broadcasting FTA channel. So definitely, because of FTA strategy and most cinema has seen an increase in revenue. But on the other hand, we have seen also decline in revenue. I can give you offline what exactly is the number. But I really don't think it is going to be any materially different from 20% decline, which we have seen. So it will not change the growth trajectory -- or sorry, de-growth trajectory for the year.
Okay. No, the reason is that the guidance of 20 percentage over the FY '20, where your FY '20 base didn't have this -- the -- largely the revenues are not there. But now in '21, you will be there. So how much of this guidance -- the 20% growth is coming because of this FTA channels back in the system?
I mean, see, last year, when we were -- I mean, when we were talking in FY '20, that time, I mean, more like 3% to 4% decline in overall ad revenue growth. We said that 3% to 4% decline in ad revenue growth on account of FTA not being there. I mean it would -- that driven that probably lesser because our channel portfolio since then has actually expanded. And so overall, the impact of FTA to growth and the kind of adjustments we are making maybe in low single digits.
All right. And the second question is on -- is there any structure whether there is permanent reduction in the unit costs because of the unit economics or so something like that? If we have to assume say normalcy after the pandemic, even then there's some kind of permanent reduction when the cost will be there. If just -- can you just quantify some -- or give some color on that?
So there has been certain reduction. I mean, we have been actually working very hard on our fixed cost, and we have achieved certain reductions. But just understand the business. I mean our business is where there is production shoots, which are actually going on the ground. And we have to take much more precautions than we used to take. I mean -- in fact, I mean, probably 2 years back, there was really no need to take any specific precaution for infections and all and now there is COVID. So right now, if you go to our site, every crew member is tested on RT PCR test almost regularly because we have to ensure that bio bubble is maintained. So there are certain increase in cost also. So at this point of time, really, I don't think that reduction in our overheads would overwhelm those costs. In fact, we might see in the short term, some increase in cost per hour basis. But overall, it will be pretty much maintained within larger, I mean, programming cost to revenue ratio. So nothing -- no really big day. No really -- there won't be any deterioration, no gain kind of situation we are in.
Okay. That's very helpful. Just a final question from me. Globally, we see some trend from some other broadcasters where they say that people come in to their digital app for catch-up purpose. But eventually, they start seeing the other original content for the OTT app. So are you beginning to see such kind of a trends with your ZEE5? Because you said that largely you are on AVOD. So how is the trending trend is evolving? Because once you go through the shift probably, probably we can build in more DAUs and MAUs conversion. So how do we -- how we should look at it in this trend?
Arun, firstly, the way India operates, which has an AVOD and an SVOD strategy, the international markets are tailor-made for each market independently. And I can tell you that apart from Asia-Pac or the SAARC region and parts of Middle East, we do not run anywhere AVOD service independent of SVOD. It's only a few select markets where AVOD also is available. Markets like Europe, U.K., U.S.A., where we are yet to launch ZEE5, will have only a SVOD service because we are a paid service in those countries. And once we get off the linear platforms, we will be only available on ZEE5. So we will be running an SVOD service only. Our majority of AVOD customers today are India based. They are not largely in the international market. Almost, I would say, 90% plus are India and the rest would be outside.
So how is the trend in India? Is people willing to go toward the SVOD after spending time with your catch up content or anything like that?
The trend is certainly positive. Arun, we are seeing people moving to SVOD service. It's slow, but it's certainly heartening to see people moving to come to the funnel of catch-up TV and then move to paid services. Of course, every individual has their own preference of genre of content. And as and when you populate more genres of content, you get more traction.
The next question is from the line of Rohith Potti from Marshmallow Capital.
Thank you for the opportunity, and thank you for a generous dividend, I'm a shareholder, and I'm happy. My only question is on ZEE5. So if I see over the last 1.5 years, I mean what I see that we entered e-learning and e-gaming when they were trending, but we don't see any updates on that. We spent a lot of time on launching HiPi, our short video platform, but I don't think that's doing well. We are the largest creator of original digital content. But I mean, I see us reducing our pricing because I don't think -- as we said, we're not getting as much traction as we want. And over the last year, I believe there has been a lot of attrition in that business as well, which seems to be continuing over the last quarter as far as I understand. So it doesn't seem like there is a clarity on value proposition to the customer. So if you could help us understand over the next 3, 4 years, what will be the strategy of ZEE5? What is the value proposition you intend to offer to the customer? And what are the key metrics that you would suggest that we observe to understand if you are on the right track?
So first and foremost, I think your observations are right, but with a slight difference. We never got into e-learning ourselves. We never got into gamification ourselves. These are partner-driven. And therefore, people who approached us to bundle these services in and that we created those bundles. Certainly, a lot of our content may not have succeeded or was not for the right audience base that we have seen. But as I said in my last quarter also, we have taken a relook at our entire strategy behind ZEE5. We plan to reduce the pricing INR 499 per year, was in line with what is happening in the market. And therefore, that's the one value proposition. The other value proposition is going to be focused on good quality content in form of films as well as originals across multiple languages that we're going to focus on going forward. And you will certainly see that, that will be what the value proposition will be. Apart from that, we also need to improve our debt platform significantly for us to be really something that we create consumer delight by.
I made this observation because I've been following you for quite a long time. And my observation is that in broadcasting, we have been far ahead of the competition how we design our strategy and we target. We targeted regionals before everybody else. We exited sports and focused on movies before everyone else and that's really paid us a lot of dividends. But in ZEE5, we seem to be more of -- still doing catch-up as compared to leading and hence, that observation. So could you speak a little more on the metrics that you would suggest that we look at to understand. Because the MAUs and DAUs, you're still providing only the end quarter monthly number. So I understand that the investments will be high, and so the revenue and profit numbers are not the right metrics. But if we can have more of idea for sticky customer base or what is the subscription portion of the revenue number and how is that tracking over time. So those would probably help us even further. So if you could elaborate on that a little more to help.
So Rohit, at this point in time, we are not giving those breakups. But give us some time, we'll work on your requests and come back to you. Also you appreciate that none of our competition's data is also available in that detail. So somewhat of confidentiality, we also need to maintain for us not to be exposed.
No, that's fair. So as of now, what would be the best metric to follow to understand the -- if our strategy is working on. So that's the only question I -- I mean, that's what I want to understand.
I think clearly, the MAU, DAU and the revenue number, if it's on an upward trajectory, should be comfort enough for the time being.
The next question is from the line of [ Shalin ] Gupta from Enam Holding.
So I just wanted to check if the company does deliver on double-digit growth in FY '22, what would be the EBITDA margin that you're expecting?
So unless and until the NTO issue is not resolved, [ Shalin ], the EBITDA margin will be about 25% plus.
The next question is from the line of Jaykumar Doshi from Kotak Securities.
I don't have a question. I just want to make a request. Would it be possible for you to, going forward, disclose the movie segment performance separately so that we are able to assess how the return ratios are in the movie production business, maybe once in 6 months or so?
Noted, Jay. We will come back to you.
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher.
I just have one question. In the opening remarks, we mentioned that the shooting schedules can get upset if other states follow a region-wise lockdown strategy. So in that context, can you share, typically for GEC, inventory of how many episodes is already shot and that lies with us at any point in time?
So Jinesh, right now, I'll just give you a situation market by market. In Hindi and Marathi, largely because the lockdowns were actually announced in Maharashta very early, we activated our contingency plan and we had already shift our production, and I think that production will continue for one more month from the locations where the shoots are going on. So in Hindi and Marathi, at this stage, we are not really expecting any disruption in original content. There might be little, but nothing to worry about. That said, as Punit mentioned, our new launch plans are on hold and that will -- we'll be able to do launches only once everything open up maybe a few days or probably a few weeks later. When you go to regional market, it is happening in that in whole of South, there is kind of lockdown. So taking actors and crew to some other place is not possible at this point of time because there is really no near-by location. So right now, we might have -- we do have original content till say, around more or less up to 25th to 30th May, depending upon the market. And till then, we will continue to telecast original episodes. And when we go to Bengali market, again, we would have around -- original episodes till 25th. So if lockdown extends beyond 25th, in some of the regional markets, we might have to pull back regional programming for a while.
And Jinesh, that is the case with all of our competitors as well. It's not isolated to us.
Fair enough. And sir, just one follow-up on this part. I mean, has the suspension of IPL had any impact on our inventory fill rate due to any shift in ad dollars. Because till now, our original programming schedule is pretty much on track during prime time. So has it impacted our fill rate by any chance?
It did improve yield, fill rates no because we were even -- despite IPL, our fill rates were pretty decent. But it certainly had an impact -- a positive impact on our yields. But it was marginal, given that the lockdowns were also peaking at the same time.
Thank you.