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Driven by robust growth in subscription, Zee Entertainment Enterprises (Zee) surprised markets with an expansion in revenues, albeit modest, in the June quarter, even though advertising revenues did not grow significantly.
During the quarter, revenues grew by 3.1 per cent over the same period last year to Rs 698.3 crore, while net profits dipped 13.3 per cent to Rs 130.2 crore.
A combination of low advertising volumes, a 25.1 per cent increase in employee expenses and a 12.2 per cent higher programming costs led to a decline in profits.
Accounts for 43%
What is significant during the quarter is that subscription revenues, which accounts for over 43 per cent of the overall pie, rose 16.7 per cent year-on-year.
This has been possible largely due to a 55.9 per cent increase in revenues from the DTH platform to Rs 110.7 crore. Revenues from domestic cable subscriptions too were up 8.4 per cent.
Although not a substitute to advertising, a reasonably sound subscription model becomes important in being resilient when there is a slow down in the macro environment when volumes tend to be thin as pricing pressures mount.
For Zee, and indeed most of the television channel operators, the festival season spread over the next couple of quarters holds the key in terms of rise in advertising volumes.
Viewership, a must
For the company to deliver a double-digit annual growth in advertising from hereon, would require it to milk its leading position in terms of viewership in several regional and national channels to the hilt. These include Zee Cinema, Zee TV, Zee Marathi and Zee Bangla, all of which are in the top-three in terms of garnering television rating points in their respective genres, especially during lucrative time slots of the day.
That the DTH platform is gaining greater acceptance and deeper inroads into consumer homes is evident from the over million subscriptions getting added each month. While this will drive growth, the tie-up of Zee Turner with Star Den to distribute channels jointly too would aid subscription.
Of course, with the Europe and the US showing weaker macro data points, driving international subscription revenues may not be easy.
The markets cheered the results, with the Zee stock closing over six per cent higher at Rs 132.2 on Thursday.
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