ZEEL Q3 net down 37.9% due to decline in ad revenue

MUMBAI: Media conglomerate ZEEL’s net profit for the quarter ended 31st December was down 37.9% at Rs. 349.4 crore compared to Rs 562.4 crore in the same quarter of the previous fiscal due to a drop in ad revenue.

EBITDA for the quarter declined 25% to Rs. 565.8 crore from Rs 754.3 crore while the EBITDA margin stood at 27.6%. Consolidated operating revenue declined 5.5% at Rs. 2048.7 crore even as expenditure increased 5% to Rs 1482.9 crore.

ZEEL’s consolidated advertising revenue declined by 15.8% YoY to Rs. 1230.8 crore from Rs 1462.6 crore. The domestic ad revenue for the quarter has declined by 15.7% YoY to Rs. 1157 crore compared to Rs. 1371.9 crore. The international advertising revenue for the quarter was Rs. 73.8 crore.

The company stated that the domestic advertising revenue was impacted by the continued slowdown in key consumer sectors. As the volume growth for most consumer companies did not see any uptick during the quarter, they cut advertising spends to protect their margins.

While the festive month of October saw a pick-up in advertising spends, the growth slumped post that. The growth was also impacted due to a higher base and the effect of the conversion of two channels from FTA to pay in March.

ZEEL’s consolidated subscription revenue grew by 15.4% to Rs. 713.7 crore during the quarter. Domestic subscription revenue grew by 21.7% YoY while the International subscription revenue declined by 17.4% YoY.

The domestic subscription revenue growth rate saw a sequential decline due to the impact of a higher base and reduction in a-la-carte prices of some of the channels during the festive period.

During the quarter the regulator announced changes to the Tariff Order which are proposed to be implemented from 1st March. All the major broadcasters, under the aegis of Indian Broadcasting Foundation (IBF), have challenged the proposed regulation in the Bombay HC.

ZEEL MD and CEO Punit Goenka commented, “Third quarter is normally a strong growth period for us, however, the tough macro-economic environment led to a decline in our ad revenues. Most of our advertisers are going through a slow-growth period and that has led to a cut in advertising spends. I believe that the worst phase is behind us and we will start seeing an improvement from the next quarter. The proposed changes to the tariff order by TRAI are being challenged in the court and we are awaiting the final verdict. However, I am confident that our strong portfolio of channels across markets will enable us to navigate any regulatory changes in the most efficient manner.”

Considering the weak revenue scenario, the company took measures to control cost during the quarter which resulted in only a 5% YoY increase in total cost, despite a 6.2% increase in programming cost.

The programming cost increase was led by content cost for ZEE5 and higher movie amortization costs for our movie channel portfolio. Other expenses have a one-time expected credit loss charge of Rs. 376 mn due to the expected delay in receiving payments from some of the distributors.

ZEE5 performance

ZEE5, one of India’s leading digital entertainment platform, recorded a peak DAU (Daily Active Users) base of 11.4 million in December 2019. ZEE5 users watched an average of 140 minutes of content every month on the platform during the quarter. 26 Original shows and movies in 6 languages released during the quarter.

With a strong content line-up across genres and languages, ZEE5 is on track to release 70+ originals in FY20, said ZEEL.

On the product side, a refreshed ZEE5 Progressive Web App (PWA) was released in December to enable a seamless user experience on the mobile web. ZEE5 was launched on Tata Sky Binge, further widening the distribution reach of the platform.

“We also continue to invest in original content for ZEE5, to create a rich content library that will make it a really compelling offering for consumers. These investments will help us grow ahead of the industry once this transient slowdown phase has passed,” Goenka stated.

Expansion of regional portfolio

ZEEL’s regional portfolio has been strengthened by the launch of three channels – Zee Punjabi, Zee Thirai and Zee Biskope, in the month of January. Zee Punjabi, hybrid GEC and movie channel, aims to become the entertainment destination for the Punjabi speaking audience of Punjab, Haryana, Himachal Pradesh, and Delhi.

With the launch of Zee Punjabi, ZEEL’s regional footprint has expanded to 9 languages. Movie channels – Zee Thirai and Zee Biskope, will enhance ZEEL’s regional movie portfolio in the markets of Tamil Nadu and Bihar, respectively. The network is preparing for the launch of 2 more regional channels in the next few months.

“Despite the slowdown, we continue to make investments in businesses where we see potential for growth. Working with our strategy to entrench ourselves deeper into the regional markets, we have launched 3 regional channels that will make our content more accessible to audience across the country. India’s first Punjabi GEC will surely help further strengthen our viewership share and brand in the north Indian markets. With the addition of two new regional movie channels, we now have the biggest movie channel portfolio in the country. We are preparing for the launch of two more channels over the next few months,” Goenka noted.

Domestical broadcast business

During 3QFY20, ZEEL’s television network had an all-India viewership share of 18.2%. While our regional portfolio increased its viewership share, share in the Hindi speaking markets declined.

Zee TV maintained its weekday primetime leadership, but lost weekend prime timeshare and was the #3 channel in the pay Hindi GEC segment during the quarter. Our Hindi movie cluster continued to be the #1 movie portfolio in the pay Hindi movie genre.

The network’s regional portfolio had a mixed performance during the quarter. It maintained a leadership position in the Marathi, Bangla and Kannada markets, with Zee Kannada further strengthening its leadership position, widening the gap over the nearest competitor. Viewership shares in Marathi and Bangla markets declined during the quarter.

While Zee Tamil improved its viewership share, Zee Telugu witnessed a marginal decline. Zee Keralam, continued to gain share in the Malayalam market establishing itself as a strong contender for the number two position. Zee Sarthak regained leadership in the Odiya market towards the end of the quarter.

International business

During the quarter, ZEEL’s International business revenue was Rs. 1,665 million. The advertising and subscription revenues declined by 18.6% YoY and 17.4% YoY, respectively. The advertisement and subscription revenue stood at Rs. 73.8 crore and Rs. 82 crore respectively. Other sales and services revenue was Rs. 10.7 crore.

Movies & Music Business

Zee Studios, the company’s movie production, and distribution business, distributed 2 movies in India and 5 movies in the international territories during the quarter.

Zee Music Company continued with the library expansion of both Bollywood and regional music. The music label registered ~7.3 billion views on YouTube in Q3. Zee Music Company is the second most subscribed Indian music channel on YouTube with over 49 million subscribers.

Live events

Zee Live extended its Supermoon IP to music events with shows featuring one of India’s most promising music artists around the country. The second edition of Zee Educare, held in Mumbai, engaged with students through panel discussions and workshops on alternate career choices.

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