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Last Updated : Dec 22, 2016 03:30 PM IST | Source: CNBC-TV18

Ad revenue takes a hit post demonetisation: UFO Joint MD

The digital distribution space was impacted in the aftermath of demonetisation and the worst hit was UFO Moviez. Speaking to CNBC-TV18, Kapil Agarwal, Joint Managing Director of the company said that amongst the the three revenue streams i.e., films, exhibitors and advertising, cash ban took a toll on the advertising stream.

The digital distribution space was impacted in the aftermath of demonetisation and the worst hit was UFO Moviez. 

Speaking to CNBC-TV18, Kapil Agarwal, Joint Managing Director of the company said that amongst the three revenue streams i.e., films, exhibitors and advertising, cash ban took a toll on the advertising stream. 

The corporate sector saw withdrawal of contracts and the company expects flat or marginal growth in the third quarter. 

He also said that government ads have also been lower than expected. 

Agarwal further said that negative growth in ad revenue will not be seen in the third quarter despite withdrawal of some contracts.

He also doesn't see a reduction in advertising rates. 

Below is the verbatim transcript of Kapil Agarwal\\'s interview to Mangalam Maloo and Sumaira Abidi on CNBC-TV18.

Sumaira: Just wanted to get a firsthand account of how things have shaped up since the demonetisation move was announced and what’s the impact you are feeling. Any sort of a hit as far as your advertising revenues are concerned?

A: As you know that we have we have 3 revenue streams; one comes from the film, one comes from the exhibitors and one is the advertising. Yes, on advertising revenue we are definitely feeling that some advertising contracts have been withdrawn – so while we have seen some growth as compared to the third quarter of last year in the government advertising this year, but even the government advertisement has been lower than the expected revenue and in the corporate sector we have seen withdrawal of contracts in advertising post demonetisation. Overall, we are not seeing a negative growth in the ad revenue as compare to Q3 last year.

Mangalam: Negative revenue growth is not a concern, but if you look at it the last time you spoke to us you said you are expecting 30 percent ad revenue growth in this fiscal, so after demonetisation what exactly happens to that guidance that you gave, will you still maintain it or is there a downward risk?

A: Definitely, there will be a downward trend – so as you know that in the H1 we grew by 29.4 percent, which was close to the guided revenue and Q3 is always high on growth, because of the festive season. We are expecting a flat revenue in Q3, flat or maybe very little marginal growth – so to that extent the overall growth guidance is going to get affected. I am unable to talk about the Q4 right now, although we are seeing that the advertisers have started reengaging, because now the line up of movies is very good like Dangal is releasing tomorrow and then you have Raees, you have multiple movies, you have Jolly LLB II in the next quarter – so multiple movies are coming, line up of movies are good. People have started talking back – the initial pinch that we felt, which is started coming from November 15 till December 15 has slightly started weaning off, but it is still early to talk about the next quarter, but overall the 30 percent growth will definitely not be achieved.

Sumaira: This is interesting because there were some analyst reports recently, analysts who had met with some cinema exhibitors and they said that they believe there were slower number of releases in the single theatre space, but what you are saying is actually contrary to that – is it that you speak for the entire industry?

A: It has been very widely reported that the single screens are not getting the movie. In fact, those analysts have not then done their homework well, because what has happened is that there are like 6 major movies have come post-demonetisation, so there are two movies which was like Force 2 and Wajah Tum Ho, which has released last week – these two movies were like single screen and multiplex screen mixed movie, but then when you talk on movies like Rock On 2 – you talked about Dear Zindagi, Befikre, Kahaani 2 these were really multiplex movies.

These four movies saw limited release because Rock On 2 was not a single screen movie anyway, but when movies like Force 2 and Wajah Tum Ho came last week – Force 2 came a week after the demonetisation and Wajah Tum Ho came last week 5 weeks after demonetisation both movies went to the expected number of screens, so they have very wide release, but yes Befikre and all were brief release.

Mangalam: Now your ad revenue is a function of 4 things as we understand the number of screens, the number of clients you have, the number of minutes per screen and the ad yield, which is ad rate per minute. Let address each of them individually one what is the kind of number of minutes per screen you would expect in the next two quarters, what have you done in the first half last quarter was around 5 minutes and what is the ad rate the yield per minute has that affected because of demonetisation, because we speak to a lot of companies and they say that ad inventories available for much cheaper?

A: Last year we close the year with like 4.15 minutes and H1 was 4.5 minutes. This quarter definitely the utilisation will be less difficult for me to say what will be the utilisation and as I said the overall growth in this expected to be flat – so far as the rates are concerned you know government rates are fixed and we are not really seeing any reduction in the rates from the corporate sector – so while the contracts have been withdrawn, because all the entire corporate sector which are going to be consumer they felt that consumers don’t have money to pay, so why to advertise now. Across the board the ad contracts have been withdrawn, but we have not really seen impact on the rates as well as I said like tomorrow when the major movie is releasing we are seeing a lot of contracts coming in for Dangal.

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First Published on Dec 22, 2016 02:04 pm
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