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Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
Zee Entertainment posted subdued December 2019 quarter results yesterday. Weak advertisement revenue due to macro-economic challenges continues to weigh on the third quarter performance. The operating margins too took a hit due to increase in selling and programming costs.
In the December quarter, Zee’s revenue declined 5.5 per cent y-o-y to Rs Rs 2,049 crore. Though the domestic subscription registered a strong double digit growth of 22 per cent y-o-y, it was partly offset by muted advertisement revenue, which declined 16 per cent y-o-y. Zee derives over 60 per cent of its revenue from advertisement, about 35 per cent from subscription and the remaining 5 per cent from other segments such as movies and music.
The operating profit margins contracted to 26 per cent in the December quarter 2019 from 37 per cent in the same quarter last year. Apart from pressure due to lower advertisement revenues, the company’s programming cost increased 6.2 per cent y-o-y, predominantly driven by content cost for Zee5 platform. The operating profit was also impacted by a one-time credit loss charge of Rs 38 crore on delay in payments from two distributors. The company’s profit fell to Rs 349 crore in the recent quarter, a decline of 38 per cent y-o-y.
Robust viewership, particularly in the regional channels such as Zee Bangla, Zee Marathi, Zee Keralam and Zee Kannada, helped Zee deliver strong subscription revenue growth. Sustainable content and launch of original content have increased viewership thereby aiding the company’s revenue. Additionally expansion to new markets too helped increase its viewership base. The company has launched three new regional channels - Zee Punjabi (in Punjab, Haryana, Himachal Pradesh, and Delhi), Zee Thirai (Tamil Nadu) and Zee Biskope (in Bihar) to enhance its regional portfolio. With the launch of Zee Punjabi, it has taken its regional portfolio to nine languages. It also has plans to launch new channels in regional markets and increase its viewership base.
However, the revised new tariff order (NTO) announced by the regulator may hinder the subscription growth going forward. While the revised NTO is consumer friendly for bringing down the cost, coupled with consumption slowdown in the economy, it could further erode the revenues of the broadcasters like Zee. The proposed changes by TRAI, telecom regulator, are being challenged in the court, awaiting final verdict.
On the digital business front, monetisation of video content from Zee5 has also contributed to the domestic subscription growth to an extent. During quarter Zee has launched 26 original shows and six movies and has commitment to produce over 70 original contents by the end of FY20. The partnerships with telecos are also working well for the Zee5 to build traction and strengthen its position in the competitive OTT space. Additionally, it has partnered with Tata Sky Binge (application) and IRCTC to accelerate its subscription growth.
The domestic advertisement revenue declined 16 per cent y-o-y due to continued slowdown in key consumer sectors. Despite conversion of two free-to-air channels to pay channels in March, ad revenue didn’t pick up for Zee as advertisers preferred to give ads in other free channels. Zee5’s portfolio expansion and increase in viewership based would likely to aid advertisement growth going ahead.
Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
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