Strong penetration in regional languages and revival of advertisement spends from companies post-GST, has aided the performance of one of the leading media network companies, Zee Entertainment, in the latest June quarter. The company has met market expectations and reported a robust revenue and profit growth of 15 per cent and 31 per cent y-o-y, respectively, in the first quarter of FY19.

Domestic advertisement revenue grew 22 per cent y-o-y to Rs 1,087 crore in the June quarter. Increased ad spends from consumer goods companies has helped. Further, the company’s strong penetration in regional languages through channels such as Zee Cinema, Zee TV and Zee Marathi, along with other GECs (General Entertainment Channels) has also aided ad revenue growth. Nearly 60 per cent of the company’s revenue is generated from advertisements and the popularity of the weekly shows add spunk to the company’s advertisement revenues.

On the domestic subscription front, revenue for the June quarter increased 12 per cent y-o-y to Rs 425 crore. Also, Zee’s content in channels such as Zee Marathi, Zee Bangla, Zee Telugu and Zee Sarthak witnessed good viewership during the quarter, thanks to improved content quality. The audience for Zee Café is increasing, according to the management. The Zee Studio (renamed as &flix) movie channel, too, has increased viewership and has over 400 movies in its library.

Though TRAI’s tariff order (broadcasters are required to offer their channels on an a la carte basis, where Maximum Retail Price, excluding tax, for each pay channel should be disclosed) is a cause for concern, the management is confident of growth from subscriptions going ahead. This new tariff structure is likely to come into effect from January 2019.

Similarly, another lucrative segment – movies and music – continues to make good progress. It has released three movies during the quarter, which was well received in the box-office and one of them was recognised in international film festivals. Zee Music has expanded its music collection and registered about 4.1 billion views on YouTube in the first quarter.

Zee’s programming cost increased to Rs 1,206 crore in the June quarter from Rs 1,056 crore during the same period last year. This is mainly driven by an increase in operating cost (14 per cent y-o-y) and advertisement and publicity expenses (21 per cent y-o-y). An increase in original programming hours in regional channels and an increase in content cost for Zee5 (a mobile application) have driven an increase in expenditure for the company. However, margins have improved 33 per cent y-o-y from 29 per cent last year.

Outlook

Going ahead, the company is planning to launch a new GEC television channel in Malayalam by December 2018 and is awaiting regulatory approval for the same.

The newly launched Zee5, the company’s digital OTT offering (a mobile application) has increased its viewership base. Though the company has not signed any deals with telecom players, the management is confident of subscriber growth with the launch of original content and exclusive movie premiers. In addition, the company has halved the subscription rate till August 15 as part of its promotional strategy. The company plans to launch the app globally by the end of fiscal 2019.

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