Zee Entertainment expects advertising growth to bounce back in Q3

Topics zee | Zee Entertainment

While the company is hopeful of a rebound in advertising, the near term could see some impact given the IPL scheduled in September
Pegged back by a sharp fall in advertising revenues, Zee Entertainment reported a disappointing June quarter performance.

Though viewership went up during the quarter, weak spending by corporates due to Covid-19 led to a 66 per cent fall in advertising revenue. The share of the segment to overall revenues came down to 32 per cent in the quarter as compared to nearly 60 per cent a year ago. 

However, the company highlighted that advertising revenues are on an uptrend over the last few months with advertisers gradually coming back led by the FMCG sector. The company expects growth to come back by the December quarter. 

This could be led by improvement in share of general entertainment channels and bounce back in company’s viewership share from 15.8 per cent  in the June quarter to 19.2 per over the last four weeks. The company highlighted that gradual resumption of original content and launch of two channels on the free to air platform led to the gain in market share.

Domestic subscription revenues grew 6 per cent y-o-y on a higher base led by subscription sales from its over the top (OTT) application, Zee5. The company disclosed the revenues of Zee5 for the first time and it stood at Rs 95 crore while loss at the operating level came in at Rs 145 crore. 

The monthly average users (MAUs) came in at just under 40 million users while the daily average users (DAUs) was at 4 million. This fell sequentially from 63 million MAUs and 6 million DAUs in the March quarter given the lack of original content due to the lockdown. In addition to advertising revenue, the digital assets get subscription revenues from tie-ups with telecom companies and direct subscriptions. 

While the company will continue to invest in its digital assets, it will be an uphill climb to breakeven at the operating level and  gain scale. Zee5 accounts for 7 per cent of its operating revenue currently. 

Though operating costs came down as there was limited new content in the first two months of the quarter, flattish employee expenses, purchase of licensed content and home-based content creation offset the drop in programming costs. The result was a sharp 67 per cent slide in operating profit y-o-y in the quarter. Going ahead, the company’s plan of lower inventory acquisition as compared to earlier periods, moderation of capex and lower receivables for FY21 are positive.   

While the company is hopeful of a rebound in advertising, the near term could see some impact given the IPL scheduled in September, weakness in advertising and gradual availability of new content. 

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