Ad revenue may slump post festive season: Zee News

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Ad revenue may slump post festive season: Zee News

What is most interesting about the Q2 results of Zee News is that the company has managed to clock advertising revenue growth of 19.5% despite a weak environment. Speaking to CNBC-TV18, Barun Das, chief executive officer, ZEE news says that the ad growth is not encouraging except for the festive season.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Zee News See previous management interviews See what other Experts & Brokerages are saying about Zee News Zee News BSE | NSE 30/05/12 Are Mutual Funds betting on Zee News?

Media major Zee News came out with its quarterly figures yesterday that have boosted the stock nearly 3.8%. Net profit is up at Rs 3.5 crore against Rs 22 lakh prevous quarter. What is most interesting is that the company has managed to clock advertising revenue growth of 19.5% despite a weak environment. Speaking to CNBC-TV18, Barun Das, chief executive officer, Zee News says that the ad growth is not encouraging except for the festive season. "There could be a slump in the ad pick-up post Diwali," he cautions.

On the digitization program of the government, Das says that though the process is taking shape, the sunset date set by the ministry, of December 2014, is far too optimistic.

Below is the edited transcript of the interview. Also watch the accompanying video

Q: First if you could tell us what the ad growth looked like this quarter and how do you see the subsequent quarters pan out?

A: This quarter, ad growth is about 19% for our company over last year. Going forward, it's anybody's guess... beyond October, I am not very certain how is it going to shape up. But as a company, our endeavor would always be to outperform the market growth rate by 5-10%, that's the self-guidance that we work on. I don't think anybody can put a finger on how the market is going to look like beyond November.

Q: Are you getting a sense that things are really getting bad and the first cuts will therefore happen in advertising?

A: To what extent it's looking bad, I am not too sure, but I do see there is a dampening in terms of action and activity out there in the advertising market. This festival month has been extraordinary for us, but beyond that, the sense that we get is not very encouraging. Therefore we have gone back to drawing board, doing two things simultaneously- planning out innovations and different kind of solutions so that we could wait through this recession, if that hits us, and also as always relooking at the cost and sort of planning for tightening our belts. But irrespective of how the market would shape up, we would try to maintain our growth in coming quarters as well.

Q: What about subscriber revenue? How do you see it panning out now that there is digitization and perhaps less under-recovery from the LCO or do you think it's still distant, it's not going to be so easy to rein in the LCO?

A: There are two-three things that's happening in the subscription front, some in the industry as well and some with our company. Media Pro has come into action which is the new joint venture. They work on a principle-to-principle arrangement and therefore the subscription revenue which is reported is netted off commission expenses. But there are realignments, regrouping of subscription revenue that's happening at the company level as well. So overall, I think we would be able to come back to growth trajectory also in subscription revenue.

The other part which you mentioned in the digitization, that's just taking shape. It hasn't yet come into full flow. I personally feel that the sunset date that has been decided by TRAI and government are very optimistic.

Having said that, I am also certain that it's going to happen; when is the question, not whether. So when that happens, the entire television industry would certainly get a fillip. And I think we should come to the next level of evolution for television industry, both in terms of erasing out the capacity constraint and therefore lowering the carriage fees, as well as higher subscription revenue because of the last mile feasibility.

Q: Because the operating environment has been so tough this year, do you think you can hold onto that 15.5% margins that you saw last year or do you think that's a thing of the past now?

A: We should be close to that, that's what we gun for. If you see this quarter's Ebitda margins, which is on the lower side because there is a contra-entry where the inventory transfer that has happened for the Zee Tamil to the tune of Rs 12.4 crore has added to the top-line as well as to the expenses. So while it didn't have any effect on the Ebitda per se, obviously it lowered the margin. So even the second quarter, which is not one of the best quarters in terms of advertising seasonality, we could report effectively aboard a 13% Ebitda margin. So I am hopeful that by the end of the year, we should be able to climb up close to that 15% level. In fact, if you look at our existing channel's Ebitda margin even in not-so-encouraging environment, it's still about 24%.

Q: Your revenues this quarter include the sale of film rights from Zee Tamil, right?

A: yes, that's right. Whatever this Rs 79 crore, you have to net that up Rs 12.4 crore. So the revenue would be less than Rs 12.4.

Q: So should we assume pro-rata something like Rs 65 will be your quarterly performance?

A: No, as I said, traditionally, the second quarter is not one of the best quarters. It's like a less than average quarter. So I think we should be able to post higher revenue going forward for the next two quarters.