Zee Entertainment's merger with Sony Pictures Networks India (SPNI), announced in 2021, continues to face legal challenges. However, Punit Goenka, CEO of Zee, stated that matters remotely connected to the company have been addressed.
Regarding the IDBI Bank plea, which was dismissed by the National Company Law Tribunal (NCLT), Goenka mentioned that the team is taking all necessary steps within the boundaries of the law to ensure there are no further hindrances in the merger approval. He expressed hope for positive developments on the merger front.
In terms of financial performance, Zee Entertainment reported a 70 percent drop in operating revenue YoY, amounting to Rs 151.7 crore. This decline can be attributed to reduced revenue and increased strategic investments across the business. Advertising revenue also fell by 8 percent to Rs 4,057.9 crore in FY23 from Rs 4,396.2 crore in FY22.
Rohit Gupta, Chief Financial Officer of Zee Entertainment, described FY23 as a challenging year for the media and entertainment industry as a whole. Weak ad spending, delayed implementation of the New Tariff Order (NTO), and underwhelming movie content affected Zee's performance throughout the year.
Gupta expressed expectations for a gradual recovery in ad spends, but cautioned that it was too early to make accurate predictions. In Q4 FY23, ad spending by FMCG brands remained muted.
Subscription revenue for Zee Entertainment saw a 1 percent YoY decline. The implementation of NTO 3.0 on February 1, 2023, led to a situation where some distribution platform operators (DPOs) challenged the order in court and did not sign interconnection deals with broadcasters as required.
As a result, Zee had to switch off channels, adversely impacting advertising and subscription revenue. The standoff eventually ended with DPOs signing new agreements.
Goenka emphasized that the industry may not experience significant growth in subscription revenue in the medium to long term during FY24, expecting only inflationary growth.
ZEE5, the streaming platform of Zee Entertainment, witnessed revenue growth, reaching Rs 220 crore in Q4 FY23, compared to Rs 161.4 crore in FY22 for the same period.
Goenka mentioned reports projecting 20-25 percent CAGR for the digital ecosystem over the next eight years. He highlighted Zee's doubled quarterly revenue run rate in the past eight quarters.
Goenka expressed cautious optimism regarding inflationary headwinds and the benefits of NTO 3.0.
Zee Entertainment also announced plans to discontinue its present business and operations, including Margo Networks, which offers internet connectivity under the brand name 'Sugarbox.' This decision is part of portfolio rationalization and aligns with the impending merger conditions, according to Gupta.