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The environment for advertising revenues remains challenging, but there has been a dramatic improvement in TV18 Broadcast's net distribution income, says B Sai Kumar, Group CEO, Network 18 Media and Investments.
The environment for advertising revenues remains challenging, but there has been a dramatic improvement in TV18 Broadcast 's net distribution income, says B Sai Kumar, Group CEO, Network 18 Media and Investments .
Net distribution income is the difference between a broadcasting company’s subscription revenues and what it pays as carriage fee to distributors for airing its channels.
In an interview to CNBC-TV18, Sai Kumar said that growing net distribution income was more important as it was a more resilient stream of earnings compared to advertising revenues. Also, digitization has turned out to be a major positive for the company , by way of higher subscription revenues. Broadcasting companies in general have been losing money because of cable operators under-reporting the subscriber base.
"Digitization has been has been a big plus. However the two other factors that work at the company level, at TV18 level one, is IndiaCast which is today representing 45 channels and they not only represent us in getting in distribution income but also in carriage payout. We use carriage as leverage to better run net distribution income," Sai Kumar said.
Below is the edited transcript of B Sai Kumar's interview with CNBC-TV18
Q: First take us through the TV18 performance; we are seeing a fairly big jump in operating revenues, growing from Rs 296 crore to Rs 512 crore. Does this represent an improvement in subscriber revenues, an improvement in advertising revenues? Take us through the break-up?
A: I am extremely pleased with the results. I believe that we are on very firm ground. The icing on the cake is that we have achieved these numbers in extremely bleak advertising environment. As we had guided even last quarter, we see that the advertising growth rate almost bottomed out and I see that continuing into the end of this fiscal.
Q: So they didn’t improve this quarter?
A: They have not improved. The improvement that you see is largely on the back of net distribution revenues kicking in. If you know the TV18 story you would empathise with the fact that this has been largely elusive to this group for a range of reasons that we do not want to get into at this moment.
But suffice to say that after many years we have kicked into positive territory as defined as the household income minus the carriage fee that we pay out to cable operators. I also believe that this is a much more resilient and all-weather revenue stream unlike advertising, which is equally lucrative, but it is also sometimes a fair weather friend because it has got seasonality and is susceptible to environment pressures.
Q: How is distribution doing? Now with digitization and with other advantages, is the company able to get more in terms of subscriber revenues, subscriber declarations?
A: Absolutely and I would say that there are three factors that play here. One clearly is the regulatory and environment factor. Digitization has been successfully rolled out at least in the top two cities and that has been a big plus.
However the two other factors that work at the company level, at TV18 level one, is IndiaCast which is today representing 45 channels and they not only represent us in getting in distribution income but also in carriage payout. We use carriage as leverage to better run net distribution income.
Finally with TV18’s expansion journey done we are now at this phase of our life cycle where we are fully focused on ensuring that stellar brands like CNBC TV18 or Colors or CNN-IBN get their due in the market. So that’s the management focus and that is what is borne out in the results that you are seeing.
Q: What about the big story being made about TV18 is that IndiaCast has a much better power in terms of 45 channels as a bouquet and also that carriage fees will be much lower and that has been a big problem historically for TV18. How soon do you see this story unfolding? Could we expect a sharp improvement going into FY14 itself or will it take two-three years for the story to play out?
A: I would focus on where we are going directionally. From what you see in our results we are already operating ahead of plan. We hoped to break into positive territory as far as net distribution goes, not as far as positive EBITDA and profit after tax (PAT) go. We have already achieved that in Q3.
I see this trajectory being sustainable which is extremely important because we are breaking into positive territory at the PAT level after a while. So it is important to be firm and sustainable and that is what it is here. With the digital access system (DAS) II rollout that is the second big factor. If that rolls out as smoothly as DAS I then I can see these numbers improving. Now the range is something we can debate at later stage but I see these numbers improving with DAS II rollout.
Q: Still sticking to TV18 Broadcast, we will come to Network18 in a bit. Your reporting profit as far as the news business is concerned as well as the entertainment business. What about History TV18. I think that is what you mean by news operations including infotainment?
A: The History channel is just a year old and we are extremely pleased with the improvement. You can see the improvement in topline revenues. We have cut down on our losses dramatically. I think this is a channel that is completely on target to breakeven in a year from now and it has added handsomely to the bouquet and the strength of the bouquet. It is whole new genre that we operate in.
Q: Revenues for TV18 going up from Rs 296 crore to Rs 512 crore on a year on year basis. Does some of this include ETV’s revenues, is that why it is so much better?
A: No, we have not taken in ETV numbers though we have declared ETV numbers because we expect to take over that company fairly soon.
Q: Debt was a historical problem. It’s solved now. What is the position right now and how do you see it going forward?
A: Our commitment when we went out for the rights issue was that we will use large part of the proceeds to retire debt and you can already see it trending down. We see this continuing. We will continue to repay debt at every opportune moment and so we are sticking to that commitment.
Q: Tell us about Network18’s operations as well; will you see more consolidation as well as probably some more selling off of operations in the holding company?
A: Our Head of Investments, Sarbvir Singh will be taking this question so let me just give a topline view on that. I think we will continue to focus on monetising our non-core assets. We have successfully done that by diluting certain part of bookmyshow.com, by the successful sale of NewsWire18 and we are inline for few more announcements within the next 6-12 months. So, that is going on track. Our digital businesses are punching way above their perceived strength.
Disclaimer: moneycontrol.com and TV18 are both part of Network18 Media and Investments.
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