Can Zomato deal be next Blinkit story in making?

Zomato, which initially launched in 2008 to showcase restaurant menus in Delhi, has gradually expanded its reach and now commands a 54% share of the food delivery market in India. However, Zomato didn’t stop at food delivery. The acquisition of Blinkit, initially met with skepticism, has turned out to be a significant win. According to a Goldman Sachs report, Blinkit’s contribution to Zomato’s market value has now surpassed that of the core food delivery business. They have played a key role in building the quick commerce infrastructure in India and deliver products far beyond what Kirana stores used to provide. Could you imagine buying a PS5 worth 55k from Blinkit and having it delivered in 15 minutes?

Blinkit’s acquisition proved Zomato’s potential to expand a newly acquired businesses and now they are poised to do it again by going one-up against the biggest player in the event and movie ticketing business- BookMyShow.

Zomato was in talks with Paytm in June to buy their Paytm insider business but recently they have completed the acquisition of Paytm’s event ticketing subsidiaries Wasteland Entertainment Private Limited (WEPL) and Orbgen Technologies Private Limited (OTPL) operating the TicketNew and Insider platforms, respectively for 2048cr.

Let us now dive deep into understanding the market and its Impact on Zomato.

Going Out sector

The going-out business that includes sports, live concerts, movies, and more, has been increasing since the Covid-19 pandemic. The organized live events segment grew 20 per cent, exceeding pre-pandemic levels, to touch Rs 8,800 crore in 2023, as per a FICCI-EY report that was published in March 2023. Ashish Hemrajani, the founder and CEO, BookMyShow reportedly said that live entertainment and sports are rapidly becoming major sources of entertainment for the youth.

We can divide the sector into 2 parts- The movie ticketing business and the Event ticketing business.

Movie ticketing business

In 2024, cinema ticket sales are expected to generate about $551.20 million, with the market potentially growing to $629 million by 2028. The number of users is expected to reach 120.4 million by 2028. The movie ticketing business is currently dominated by Bookmyshow with a 78% market share, while Patym has 13%. The segment currently is closely dependent on relations with Multiplexes because the minimum guarantee of tickets to be sold with advance payment is to be provided to them by online ticketing companies. Moreover, it is a low-margin business and has seen a hit due to OTT convenience emerging among people.

Event Ticketing Business

In 2024, the event ticketing market is expected to earn approximately $1,829 million, with revenue projected to reach $2,058 million by 2028. The number of users could reach 99.2 million by 2028. In this event ticketing space, the competition is head to head with Bookmyshow holding 50% of the market share while Paytm and Zomato holding 45% and 2% share respectively,. With Zomato’s recent acquisition of Paytm's event ticketing subsidiaries, their combined market share now stands at 47%. This industry is characterized by high margins and promising growth prospects, driven by the increasing disposable income of consumers over time.

Zomato’s POV

Following the news, there was a jump in the share price of both Zomato and Paytm. As part of the deal, 280 employees were transferred from Paytm to Zomato. Zomato also announced its new app called ‘District’ which will consolidate its going-out business including dining, ticketing (movies and events), shopping, staycations, and more. The main purpose of the app, as per Deepinder Goyal, is to boost customer engagement and demand in the going-out space. “We want to position ‘District’ as the brand that consumers turn to when they are thinking of going-out,” he added in an investor call.

Zomato's going-out business has shown impressive growth, reporting adjusted revenue of ₹95 crore, up from ₹93 crore in the previous quarter, and significantly higher than the ₹42 crore reported during the same period last year.
To further promote its going-out business, Zomato launched a new Instagram and YouTube channel named ‘Go Out,’ which appears to be a strategic move to market its new ventures.

The thing is Zomato knows their game well, they have outlasted the competition in the food delivery space over the period of time, successfully scaled Blinkit after acquisition and have on point marketing game. They also have a positive cash flow with revenues & profit constantly increasing, which they can direct towards their new customers. To transition Paytm users to Zomato, the company may initially offer discounts over a 12-month period.

Zomato has a competitive advantage of its diverse existing user base over BookMyShow, which they can leverage to build the ‘going out’ business and provide combined discounts for food and events. Imagine getting 20% off on your next order after your first booking with the ‘District app’.

Till the time they launch the new app, they already have a live section in their Zomato app where they are selling tickets for concerts and shows. We can also see that they have started to build connections with PVR with news coming out that Zomato will deliver food orders at PVR Cinemas in Gurugram. Sahibjeet Singh Sawhney, Marketing Head at Zomato, took to LinkedIn and said, "Skip the queue - at PVRs, now order from your seat on Zomato."

Faceoff with Bookmyshow

Started by Ashish Hemrajani, Parikshit Dar, and Rajesh Balpande, BookMyShow has been the go-to place for Indians when it comes to booking movies, events, plays, sports, and other activities.

Competing with Bookmyshow is no piece of cake, they have been in the game for 25+ years and already have exclusive connections with Artists, multiplexes etc. They also had exclusive rights from BCCI to sell IPL tickets this season.

BookMyShow has fought the rough seas in the midst of the dot-com bubble burst, and in 2007 came the big break. Amidst the pandemic in FY21, the company witnessed a significant decline in revenue to INR 74 crore. But they managed to recover it with the total revenue amounting to INR 1,026 crore with a profit of INR 85 crore in FY23.

In 2015 also when Paytm entered this market Bookmyshow faced some competition but since Paytm’s IPO in 2021, they paid much lesser attention to their ticketing business. Eventually, the company was also facing lots of regulatory hurdles, which slowed down its business.

Now, the question is whether BookMyShow's consistent ability to overcome challenges and maintain its market dominance will enable it to outperform Zomato?

By

Aadvik Mittal

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