ZEEL’s Q2 ad rev growth hit by slowdown, conversion of FTA channels to pay

MUMBAI: Media conglomerate ZEEL has witnessed its slowest domestic ad revenue growth due to the economic slowdown that has hurt ad spending. The company’s domestic ad revenue grew by 1.4% to Rs 1169 crore compared to Rs 1152.6 crore.

The company said that the domestic advertising revenue growth was impacted by the tough macro-economic environment which had a negative effect on demand across categories. It further stated that the impact on growth due to the conversion of two channels from FTA to pay in March continued during the quarter.

“As the quarter progressed, advertising spends witnessed a gradual improvement helped by the onset of the festive season. The full-year advertising growth will depend on the sustenance of this trend post the festive season,” the company noted.

ZEEL’s consolidated advertising revenue grew by 1.2% YoY to Rs. 1224.7 crore compared to Rs 1210.6 crore.

While ad revenue growth was tepid, the domestic subscription revenue grew by 26.8% YoY to Rs 645.9 crore while the international subscription revenue declined by 21.5% YoY to Rs 77.6 crore. ZEEL’s consolidated subscription revenue grew by 19% to Rs. 723.5 crore during the quarter.

The company stated that the acceleration in domestic subscription revenue growth is driven by sustained growth in viewership of our network.

It also stated that the viewership share has almost doubled over the past decade due to the success of the regional portfolio and genre expansion. However, this growth in viewership was not adequately monetised.

ZEEL also said that the implementation of the new tariff order has led to the alignment of channel prices with their popularity, allowing us to effectively monetise the viewership built over the years.

The company’s net profit jumped 6.9% to Rs 413.2 crore. EBITDA for the quarter grew by 2.5% to Rs. 692.9 crore and EBITDA margin stood at 32.7%. Total revenue for the quarter was up by 7.4% at Rs. 2122 crore driven by the strong performance of domestic broadcast and digital businesses.

ZEEL MD and CEO Punit Goenka commented, “I am pleased with the performance we have exhibited during the quarter. Our entertainment portfolio continues to grow from strength to strength across all formats and maintained its leading position. Our television network has emerged stronger post the implementation of tariff order on the back of a strong customer connect and brand pull of its channels. ZEE5 continued to gain traction across audience segments and markets, driven by its compelling content library and expanding list of partnerships across the digital eco-system.

“This strong operating performance allowed us to deliver industry-leading growth in both advertising and subscription despite the tough macro-economic environment. Domestic subscription growth of 27% has reaffirmed the value proposition our television network has built over the years. The impact of tariff order has now largely settled down and has brought increased transparency along with improved monetization. Our domestic advertising revenue growth, though significantly lower than the historical trend, is higher than the industry growth. We have witnessed an improvement in ad spends through the quarter and we believe that the onset of the festive season along with measures taken by the government will help revive the consumption growth.”

During the quarter, ZEEL’s International business revenue was Rs. 208.2 crore. The advertising and subscription revenues declined by 4.0% YoY and 21.5% YoY. Other sales and services revenue stood at Rs. 74.9 crore.

ZEEL’s total expenditure in Q2FY20 stood at Rs. 1429.1 crore, higher by 9.9% YoY compared to Q2FY19.

Programming cost for the quarter increased by 23.4% YoY to Rs. 896.2 crore. This increase was primarily driven by content cost for ZEE5 and higher movie amortisation costs for our Hindi and regional channel portfolio.

Advertising, Publicity, and Other expenses at Rs. 320.6 crore declined by 20.9% YoY. This fall is explained by a higher base in the corresponding quarter due to a one-off provision pertaining to certain investments and higher CSR spends. The decline in ad spends is due to lower marketing spends by ZEE5 during the quarter.

During 2QFY20, ZEEL’s television network had an all-India viewership share of 18.4%. While maintaining viewership share in the Hindi GEC segment, the network strengthened its position in the Hindi movie cluster and regional portfolio.

“Our channels have seen strong acceptance across markets under the new tariff regime, especially in the regional markets. Reach of all the pay channels had been impacted during the implementation of new tariff order. In the regional markets, there has been a strong revival of reach post the disruption in the early days of the NTO, and in almost all these markets, recovery in reach has been better than the competition,” the company stated.

ZEE5 recorded a peak DAU (Daily Active User) base of 8.9 million in September’19. ZEE5 users watched an average of 120 minutes of content on the platform in September’19. 23 original shows and movies in 5 languages launched during the quarter.

To strengthen its proposition to advertisers, ZEE5 launched 5 ad-suite products – Ampli5, Ad Vault, Infonomics, Play5, and Wish Box. These products will allow ZEE5 to offer wide-ranging and customised advertising solutions to brands. It will help ZEE5 cater to a wider advertiser base and create deeper partnerships.

You may be interested