ZEEL’s Q1 domestic ad rev gets impacted due to DD Free Dish pull-out, TRAI NTO implementation

MUMBAI: Media conglomerate ZEEL’s domestic ad revenue for the quarter ended 30th June has seen moderate growth of 4.2% year-on-year (YoY) to Rs 1132.2 crore due to the conversion of two free to air (FTA) channels to pay and the implementation of the Telecom Regulatory Authority of India’s (TRAI) new tariff order (NTO).

The company converted Zee Anmol and Zee Anmol Cinema to pay and along with other private broadcasters pulled out these channels from free direct to home (DTH) platform DD Free Dish, which has an estimated 30 million customers.

In its Q1 report, the company said that the domestic advertising revenue growth was slower than the previous quarters primarily due to the impact of two leading channels getting converted from FTA to pay, and therefore moving out of DD Free Dish.

It further stated that the implementation of the tariff order was underway during the quarter, the reach and viewership of all entertainment networks got affected. “Due to this uncertainty, some of the brands moved a part of their advertising spends temporarily to sports channels airing cricket events which promised a higher reach. As the impact of tariff order normalises and the festive season begins, the advertising growth is expected to return to its normal trajectory,” the company stated.

During the first quarter, ZEEL’s consolidated advertising revenue grew by 3.6% YoY to Rs. 1186.7 crore from Rs 1146 crore in Q1 FY19. International ad revenue declined by 7.6% to Rs. 54.5 crore.

Even as the ad revenue saw a dent, the company’s domestic subscription revenue grew by 46.7% YoY to Rs. 624 crore. The company said that the implementation of the new tariff order has led to better monetisation of viewership which explains the steep jump in domestic subscription revenue growth.

ZEEL further stated that its broadcast business, over the years, has built leadership positions across markets which has resulted in strong uptake of its channels and bouquets under the new tariff order. It also said that the order has allowed it to price channels in line with their popularity, leading to a sharp improvement in subscription revenues, especially in the Southern markets.

The company’s consolidated subscription revenue grew by 36.7% to Rs. 708.8 crore during the quarter from Rs 518.6 crore. International subscription revenue declined by 9.2% to Rs 84.8 crore.

During Q1 FY20, ZEEL maintained its position as the number 1 network in the non-sports entertainment segment with an all-India viewership share of 18.7%.

ZEEL MD and CEO Punit Goenka commented, “We delivered another quarter of strong performance despite the operational challenges faced by the industry due to the implementation of TRAI tariff order. We have witnessed a strong uptake of our channels across markets which is reflected in the 47% growth of our domestic subscription revenues. It validates our standing as the #1 entertainment network of the country, built on the foundation of a strong position in each of the markets we operate in. We are confident that the new tariff regime is going to be beneficial for all the stakeholders and will greatly improve the consumer experience.

“Domestic advertising growth of 4.2% YoY is considerably lower than the growth in past quarters. This is primarily on account of the decision to convert our two leading FTA channels to pay, which significantly impacted the ad growth for the quarter. Additionally, the implementation of the new tariff order in the previous quarter negatively impacted the reach and viewership of most entertainment channels, leading to a temporary shift in some of the ad spends from entertainment to sports. We believe that the underlying demand for advertising still remains strong and we are confident that spends would come back as the tariff order settles down and the festive season kicks in.”

The company’s consolidated net profit grew 62.6% to Rs 530.6 crore as against Rs 326.4 crore in the same quarter of the previous fiscal. EBITDA jumped 16.6% to Rs 659.8 crore from Rs 565.7 crore. Operating revenue increased 13.3% to Rs 2008.1 crore from Rs 1772 crore.

Expenditure expanded by 11.8% to Rs 1348.4 crore from Rs 1206.4 crore. Programming cost for the quarter increased by 16.7% YoY to Rs. 780 crore. This increase was primarily driven by content cost for ZEE5 and higher movie amortisation costs for ZEEL’s Hindi and regional channel portfolio.

Advertising, Publicity, and Other expenses at Rs. 368 crore were flat on a YoY basis. Higher marketing and promotion costs for ZEE5, both in India and in International markets, led to higher A&P expenses during the quarter.

In June, ZEE5 had 76.4 mn monthly active users (MAU) globally. The platform had a global daily active user (DAU) base of 6.6 million. The company said that ZEE5 users spent an average of 33 minutes per day on the platform.

Talking about ZEE5’s performance, Goenka added, “ZEE5 continues its strong run and is working towards achieving its aim of becoming India’s #1 digital entertainment platform. In the international markets, it has seen an encouraging response in the initial phase. I am confident that with its strong content line-up and partnerships with leading players in the digital eco-system, value proposition of the platform and engagement with the consumers will continue to improve.”

During the quarter, ZEE5 launched 18 Original shows and movies, of which 7 were in regional languages. The platform is building its content library on the 3 Rs – Real, Relevant, and Resonant, and continues to experiment with new genres and concepts.

In its endeavor to reach a wider consumer base, ZEE5 is entering into partnerships with players across the digital eco-system. ZEE5 is already integrated with all the major telecom networks and connected devices, driving higher reach and engagement. During the quarter, ZEE5 entered into a partnership with Hathway and ACT Fibernet to offer bundled package to consumers. To expand its footprint, ZEE5 has tied up with players in the online eco-system like Myntra, Qwikcilver, Netmeds, and Gaana.com.

To improve the consumer experience, ZEE5 is collaborating with some of the leading OTT technology companies. ZEE5 announced a strategic partnership with Optimove to bolster the performance of the platform based on a suite of services backed by insight, engagement & optimisation. It also announced a collaboration with Applicaster, one of the leading global cloud platforms for media app development and management in the media space.

Following the launch in priority APAC markets, ZEE5 commenced marketing activities in the neighbouring countries to leverage its language and content affinity. After #sharethelove and #dilsedesi campaigns saw great traction, ZEE5’s ‘Extreme Emotion’ campaign introduced ZEE5 to mainstream audiences who love Indian content.

ZEE5 is entering into partnerships across the region with several distribution platforms. To tap into the existing demand for Indian content in several markets, it also soft-launched dubbed content in 5 international languages. The roll-out in APAC will be followed by MENA, Europe, Canada, and Caribbean markets.

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