Shemaroo’s streaming service looks past Netflix model for growth

Shemaroo plans to launch online streaming application in direct competition with Netflix and other rivals


shemaroo

Shemaroo Entertainment Ltd. is planning to start its own streaming application in the next 6-9 months, throwing it into competition with Netflix and at least six other local and international rivals.

Shemaroo currently holds the rights to 3,500, mostly older Bollywood films, through which it earns TV licensing fees as well as advertising revenue from nearly 40 YouTube channels. It is currently transitioning from renting DVDs to streaming movies online. Shemaroo intends on going beyond by licensing its library to other online platforms and thereby aims to grow its movie catalogue 3 to 5% every year.

Why is this important

  • India’s media and entertainment market is estimated to expand to more than Rs 2 trillion ($30 billion) by 2020 from Rs 1.5 trillion in 2017, buoyed by robust growth in digital formats.
  • Major chunk of the demand is now driven by online streaming services. Shemaroo with its exclusive content can immensely benefit by leveraging the content and making it available for online streaming.
  • Besides, licensing it to other online platforms will help generating additional revenue.

How will the stock be impacted

Shemaroo Entertainment Ltd’s (CMP: Rs. 495, MCap: Rs. 1,346 crs, FY2020 PE: 16.3x ) annual revenue has risen by an average of about 18% over the past five years, helping its share price triple since its October 2014 listing.

With focus now shifting towards the booming online streaming segment, Shemaroo has evinced interest in this fast growing space. While Shemaroo does not have experience of creating original content it does have a keen understanding from its existing online business on what works in the digital economy. It remains to be seen whether Shemaroo will venture into original content creation or continue to rely on acquisitions to grow its content library.  This will be in stark contrast to the current trend of streaming channels owning original content.

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