ALTBalaji’s content deal with ZEE5 signed in July 2019 is aimed at getting a committed amount of revenue and increasing direct subscriptions, said company executives, Sanjay Dwivedi (Balaji Telefilms group CFO) and Nachikhet Pantvaidya (group COO and ALT Digital CEO) on an investor call last week. The two will co-create over 60 originals, to be streamed exclusively on the two VOD services, behind a paywall. So, ALTBalaji will transition from a multiple-party free model it currently offers its content on 6-7 partners, including all three Indian telcos to a single-partner paid environment.

The company management said that customer acquisition costs today are prohibitive, and it will likely lose money on every consumer it acquires unless it mixes direct acquisition with partnership acquisition. “We are therefore trying to move the group, which was like about Rs. 90 Crores in loss last year including ALT, to an almost breakeven situation by March 2020, so that the TV plus movie profits and ALT losses all cancel out each other. This will move to a positive number in the next financial year starting March 2020, ending March 2021. So we want to make this business profitable,” said the management.

It’s worth noting that ALTBalaji is operating at losses of ₹36.8 crore this quarter, which is up 28% YoY from losses of ₹28.76 crore. ALTBalaji registered a loss of ₹30.07 crore for Q4FY19 and a loss of ₹114.92 for FY19.

ALTBalaji will get money from ZEE5: The deal  currently for two years  will ensure that ALTBalaji doesn’t have a cash insufficiency, because a percentage of its cost will be compensated via the deal, with the aim of breaking even on both cash and P&L, said the management.

And it will get more direct subscribers: Everything new produced hereon (with ZEE5) will be behind a paywall on both the apps, and old ALTBalaji content will also go off of telco apps starting October 1, 2019 (H2 FY20), essentially needing consumers to pay if they want to stream ALTBalaji content. As an investor pointed out, a customer will have the choice of watching ALTBalaji content on ZEE5 by paying a slightly higher amount or get ALTBalaji directly by paying a slightly lower amount. “The pricing will evolve as we go through the deal,” said the management.

Notably, the deal isn’t reciprocal meaning ZEE5’s content will not be available on ALTBalaji, “you must understand that the movie library and the degree of investment that Zee network has is pretty large,” said an executive. “The partnership would allow us to conserve our cash burn by way of co-production and move towards faster breakeven on an EBITDA basis. The first set of shows as part of this arrangement will begin streaming very shortly.”

Also read: JioFiber’s First Day First Show a “very positive development”: Balaji Telefilms

ZEE5 payout will be more than losses from telcos

The company expects the ZEE5 payout to cover the losses from losing the telco partnerships, in fact it expects ZEE5 revenue to be higher than this loss starting H2 FY20. As the management explained, in FY19, Rs 25 crore out of the Rs 40 crore ALTBalaji made came from the telcos and the rest Rs 15 crore came directly. “We will get a considerable chunk of money from ZEE5 that will ensure that losses go down considerably” since everything is going behind a paywall, “our top line is likely to more than double from last year or just about double from last year”. “You will be surprised to see the number in March,” said an executive.

Why will ALTBalaji get more subscribers, when ZEE5 has a larger library?

ALTBalaji content has been offered on telcos since the beginning, but the service still has a 1.5-2 million direct subscription base, said the management. “So people do subscribe to ALT Balaji despite content being offered free on Telcos”. In FY19, ALTBalaji earned 40% or Rs 15 crore out of Rs 40 crore, via direct subscriptions. Since the service is doing away with the free-pricing model, and making its library of 28 shows exclusive to ALTBalaji, it would get new subscribers, per the management.

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