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Demonetisation punctures ZEEL’s ad wallet in Q3; sports biz reports operating profit
TV broadcasting major Zee Entertainment Enterprises’ advertising revenue growth has plummeted to single digits in the October–December quarter due to the government’s abrupt decision to demonetise higher-value currency notes, which led to cut in ad spends.
Despite ad revenue growth being weak in the fiscal third quarter, ZEEL’s EBITDA grew 20.1% over the year-ago period due to higher subscription income, sports business reporting a profit of Rs 7.7 crore and placement and marketing costs being under tight cost control.
Muted ad growth
ZEEL’s domestic ad revenue grew by 3.7% to end the quarter at Rs 873.7 crore compared to Rs 860.7 crore a year ago. This indicated shrinkage of ad volume for the TV broadcasting industry as a whole following the government’s demonetisation of Rs 1,000 and Rs 500 currency notes.
ZEEL’s ad revenue had shown some signs of softening in the fiscal second quarter ended 30 September, which grew 15.7% compared to 34.7% in the year-ago period.
Consolidated ad revenue including international markets grew 3.4% to Rs 955.4 crore as against Rs 923.7 crore in the previous fiscal year.
International advertising revenue stood at Rs 81.7 crore.
The demonetisation move had led to a drop in consumption, prompting advertisers to recalibrate their marketing strategy. FMCG advertisers, the biggest spenders on TV channels, had pulled back marketing spends as sales saw a dip during the quarter.
Generally, media companies do well in the third quarter, thanks to the festive season. However, the gains made by the media companies were washed away by the demonetisation move of the government.
Said ZEEL MD and CEO Punit Goenka, “The deceleration in our advertising revenue growth during the quarter is largely attributable to demonetisation.
Advertisers’ willingness to invest in their brands remains intact. However, the timing of spends has been recalibrated to an extent to suit the change in dynamics due to demonetisation. As economic situation is normalising, ad spends have already started moving up from December levels.”
Subscription revenue
Subscription revenue registered a growth of 13.7% to Rs 593.5 crore compared to Rs 521.8 crore a year ago.
Domestic subscription revenue stood at Rs 481.8 crore in the quarter ended 31 December 2016. International subscription revenue stood at Rs 111.7 crore. Income from other sales and services fell 35.5% to Rs 90.2 crore from Rs 139.9 crore.
The company said that the strong growth in domestic subscriptionrevenue is attributable to closure of content deals with a few large distribution platform operators during the quarter. Accordingly, Q3 subscription revenue includes catch-up revenue for the
previous quarters.
Revenue from international business stood at Rs 253 crore.
ZEEL’s consolidated revenue increased by 3.4% to Rs 1639.1 crore from Rs 1585.4 crore in the previous fiscal.
Net profit and EBITDA
The company’s net profit grew 10.1% to Rs 254.9 crore from Rs 231.6 crore a year ago.
EBITDA rose 20.1% to Rs 515.8 crore from Rs 429.5 crore. PAT and EBITDA margin stood at 15.6% and 31.5% respectively. Ex-sports EBITDA grew at 14.3% year-on-year while margin was at 33.9%.
Tight control on costs
Expenditure decreased 2.8% to Rs 1123.3 crore from Rs 1156 crore.
Operating cost remained flat at Rs 703.5 crore compared to Rs 699.9 crore. Employee cost increased 13.2% to Rs 141.9 crore. Advertising expenses dropped 12.4% to Rs 104.9 crore. Other expenses saw an 18% dip to Rs 173 crore.
Sports biz
ZEEL’s sports business under Ten Sports Network made an operating profit of Rs 7.7 crore on revenue of Rs 141.1 crore while the expenses stood at Rs 133.4 crore.
In the year-ago period, the company had incurred an operating loss of Rs 15 crore on a revenue of Rs 191 crore and expenditure of Rs 206.4 crore.
The key properties during the quarter included the telecast of Zimbabwe vs Sri Lanka, South Africa vs Australia and Pakistan vs West Indies.
ZEEL had in August agreed to sell its sports business under Ten Sports to Sony Pictures Networks India for $385 million. The deal was recently approved by the fair-trade regulator Competition Commission of India (CCI). Other regulatory approvals are awaited.
Other biz activities in Q3
During the quarter, the company got into an agreement with Reliance Broadcast Network Ltd (RBNL) to acquire its television broadcasting operations. Upon conclusion of the transaction, RBNL’s two channels—Big Magic (Hindi GEC) and Big Ganga (Bhojpuri GEC)—will form part of ZEEL’s portfolio along with four television broadcasting licences.
In the quarter, ZEEL also launched HD feed of three regional channels, Zee Marathi, Zee Bangla and Zee Talkies, taking the count of non-sports HD channels to 9.
“Acquisition of broadcasting business of RBNL is in line with our strategy to expand our offering in key genres and focus on regional space. BIG Magic, a comedy channel, will complement our Hindi GEC portfolio. BIG Ganga, the leading Bhojpuri channel, will give us entry into the attractive Bhojpuri market. We are confident that these two channels will benefit immensely from the strength of our network,” Goenka said about the RBNL acquisition.
Demonetisation punctures ZEEL’s ad wallet in Q3; sports biz reports operating profit | TelevisionPost.com