Sun TV Network’s OTT platform Sun NXT turns profitable, subs base grows to 15 mn

MUMBAI: Sun TV Network’s over the top (OTT) platform Sun NXT has turned profitable and has amassed 15 million subscribers, the company’s management said during Q3 FY20 earnings conference call.

“Our Sun NXT platform is forging ahead with subscriber count reaching about 15 million people. And I’m also proud to share that our OTT has turned the corner and has now started making profits. So in the last couple of years, we were in an investing phase and now I’m delighted to share with the group that it has moved from red to black,” the management said.

The company had earmarked Rs 150 crore investment plan for Sun NXT, however, it has not yet started spending that money. “We are basically using the same content except that our revenue streams have started moving up. We had indicated an Rs150 crore investment between October 1, 2019 and March 2021. We have not spent anything till date.”

Sun TV Network Group CFO SL Narayanan said that the main revenue contributor for Sun NXT is the subscription. The company is following the SVOD model for Sun NXT.

The company has negotiated a flat fee for the next one year with Reliance Jio’s Jio Cinema. The income from that deal has started coming in.

“See, there is a mix of revenues coming from the telecom companies and there is also revenue coming from this large OTT player and we will soon start earning revenues from a large fiber player also. But this is so strategic, we don’t want to disclose numbers now. Suffice it to say that our subscription revenues are on a tear. It will only accelerate from these levels,” he stated.

In his opening remarks, Narayanan had stated that the company’s flagship GEC Sun TV has seen a turnaround in its fortunes in the last six months.

He said that the Sun TV’s GRPs have grown from 900-odd points in June 2019 to consistently above 1,200. In fact the GRPs on Pongal day reached a staggering 1,600 in the state of Tamil Nadu with Chennai city breaching 2,000 GRPs.

“I mean, this has not been seen in a long, long time and we are absolutely gratified. Clearly, the high-quality festival specials have proven beyond doubt that Sun TV is now firing on all cylinders,” he stated.

He also noted that the company Kannada and Telugu channels have also seen growth. “So all said, the investments in programming and the investments in a new kind of go-to-market is clearly paying off.”

Providing the break-up of Q3 revenues, the management stated that the ad revenue is around Rs 341 crore, pay channel revenue is around Rs 205 crore, DTH revenue is around Rs 207 crore, international revenue is around Rs 41 crore, movie revenue around Rs 15.6 crore, and broadcast revenue is around Rs 5 crore.

Narayan also noted that the company had one movie release in Q3 FY19. The company had released ‘Sarkar’ which generated a revenue of about Rs 109 crore. “Compared to that, we’ve had only about Rs 15.5 crore in this quarter. So if you remove those one-offs, our revenues have actually increased by about 0.5% and not the decline of 9.8% as it’s seen from the top line.”

The management stated that the domestic cable subscription revenue is driving the subscription revenue growth as DTH income has stayed flat. “See with reference to cable subscription, we are already seeing big growth in the domestic cable subscription. If you’ve noticed, I think this quarter as compared with the previous year, overall, there is a growth of close to sort of 70%.”

The management also stated that if there are no further disruptions because of the new tariff order, the cable subscription income will stabilise in the next 6 to 9 months. “Because we have more or less done deals with all the major MSOs and networks in all the key markets, also keeping an eye on not having any disruption on the distribution in terms of visibility of our channels.”

On the uptick in the ad revenue on the back of the improvement in the rating, the management said that the company has seen some relatively better growth in terms of the ad revenue. The company also hopes that the ad spend situation will improve by the second or third quarter in FY21.

“That’s why I think our degrowth in the ad is, to a great extent, not in sync with what the market is. I think if you are able to maintain the share where we have gained substantial share in some of the key markets, I think in the next — I think, overall, we are seeing some growth in the spend levels, I think which — we should see some positive results in Q2, Q3 of the next financial year.”

The management noted that there is no change in the ad environment as there is a negative sentiment in major sectors like FMCG, automobile, and telecom.”So unless we see some revival in the overall economy and the GDP, I don’t think we are — we will be able to grow at whatever double-digit, even whatever is the predictions given by some of the ad agencies like Pitch Madison is projecting a 6%, 7% growth for the next financial year. So I think we are hoping that we will be in sync with the market growth.”

Narayanan stated that the company’s free cash flows are accelerating and cash and cash equivalents at the end of December 2019 is well over Rs 3,000 crore. “And we’ve also adopted a very judicious strategy of sticking to safe investments, stable investment, which is borne out by the fact that we’ve had 0 shocks in the last 1.5 years when we’ve seen several financial institutions, NBFCs and banks getting into all sorts of difficult situations.”

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