Financial Daily from THE HINDU group of publications
Wednesday, Nov 23, 2005
Financial Daily from THE HINDU group of publications Wednesday, Nov 23, 2005 |
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Marketing
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Advertising Industry & Economy - Radio/TV Crowding broadcast space to lower margins
Latha Venkatraman
Mumbai , Nov. 22 THE crowding of broadcast space, as many more television channels gear up to join the battle, may not augur well for this segment of the media and entertainment industry. While the overall buoyancy in the economy would help sustain growth in advertisement revenue, competition in the form of many channels from similar genres and a relatively slow growth in subscription revenue would keep margins under pressure, analysts and industry representatives said. "A challenge facing the broadcast industry is the oversupply of channels, many of them news channels and within that many business channels. I don't think the advertisement pie is growing at a commensurate rate," Mr Nitin A. Khandkar, Vice-President - Research, Keynote Capital, said. The subscription revenue scenario too has not undergone any change from the earlier period. Commenting on Zee Telefilms Ltd's (ZTL) second quarter results, Enam Securities said that rising intensity of competition both in the local and international markets would continue to weigh upon financials over the medium term. ZTL recorded higher advertisement and subscription revenue during the second quarter. But the growth of subscription revenue was lower than the year-ago period. Ad revenue for the second quarter stood at Rs 147.7 crore (Rs 131.7 crore) and subscription revenue stood at Rs 174.5 crore (Rs 167.5 crore). Subscription revenue's contribution to total revenue slipped to 51.9 per cent (54.2 per cent), while ad revenue contribution to total revenue edged up to 44 per cent from 42.6 per cent. Broadcasters, especially news channels, are also incurring higher employee costs. "Employee costs have risen quite alarmingly," said Mr Khandkar. NDTV's personnel costs in its consolidated operations rose to Rs 36.31 crore in the first six months of the current fiscal as compared to Rs 24.66 crore in the year-ago, higher by 47 per cent. This, according to industry sources, does put pressure on profit margins. However, TV Today reported a drop in overall expenditure during the second quarter to Rs 25.8 crore (Rs 27 crore). Television Eighteen (TV 18), on the other hand, faced much less competition as it is sitting in a much less crowded space. In an analysis of TV18's second quarter performance, SSKI Research has said that the company retains its "dominance in the business news space and continues to capitalise upon a buoyant economy and active capital market". Even as other broadcasters faced margin pressure, TV 18's margins improved because of low competition in the space it operates in. But this scenario is changing with the entry of other business channels. In the case of ZTL, the company is the process of investment as it has launched many channels, expanded its DTH network and is into film production. "The dynamics of the Indian cable industry require the broadcasters to create a `channel bouquet' to increase their negotiating powers with the local cable operators. Simultaneously Zee is forced to increase its programming and marketing spend on its marquee channel to improve its market share and grow its franchise," Mr Chirag Negandhi, Analyst at Enam Securities, said in his report. "The losses from the new channels and the expenses of the football rights from the third quarter of 2005-06 will impact profits. Though the existing business will grow by 10-12 per cent at the PAT level, the new businesses will depress overall profits," he said.
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