Ad revenue growth remains positive: Zee Entertainment

Zee Entertainment Enterprises reported a higher than expected consolidated net profit of 18.8% year-on-year to Rs 187.69 crore in the quarter ended September 2012. The company’s consolidated net sales too increased at a better than expected rate of 13% to Rs 953.5 crore from Rs 843 crore during the same period.

Atul Das, Chief Strategy Officer of Zee Entertainment said the company's advertisement revenue grew by 33.7% and its subscription revenue was up 36% year-on-year. He further added that the advertisement revenue growth continues to be positive. Here is the edited transcript of the interview on CNBC-TV18. Q: Can you take us through the results?
A: If you look at our consolidated operating revenue, it has gone up by 33.8% to 9.53 billion. Within that we have two streams of revenues which have equally contributed to very reasonable growth. If you look at our advertising revenues, they have grown by 33.7% to USD Rs 5.28 billion and our subscription revenues have gone up by 35.7% to Rs 3.95 billion.
Overall, performance has been very robust both on the subscription as well as advertising revenues. If you were to split the subscription revenues further, a major driver of the subscription revenues have been obviously the domestic subscription revenues which have gone up by 43.9% to Rs 2.808 billion. International revenues have also chipped in with a growth of 19% to Rs 1.14 billion. That is on the revenue side and on the operating performance level we have seen our EBITDA growing by 7.8% to Rs 2.17 billion.Our profit after tax which is the net profit has also grown by 17.2% to Rs 1.87 billion. Q: Advertisement and subscription revenue has seen a massive boost. How sustainable is this? Will you be able to maintain this going forward?
A: In the advertising revenues, one has to account for the fact that there has been a substantial increase in advertising revenues this quarter on account of sports. We had the India-Sri Lanka cricket series during the quarter which has obviously added a lot to advertising growth.
But, what we have seen is that because of our growth, our overall market share even in non-sports business including the Hindi language channels as well as our regional language channels have recorded higher growth than what the market growth in advertising has been.
Our view is that while the market could have grown by about 8-9 percent on advertising revenue spends on television, we had done far better than that as we had predicted because our market share growth has been substantial. Q: As of June 2012 the cash on your books were around Rs 1200 crore, how exactly do you intend to utilize the funds?
A: We have a very healthy cash on books and we are also generating positive cash flows. Our need for cash in the business is for investing in content and we are doing so. If you have seen the launch of our channels, we have launched Zee Bangla Cinema in the regional segment, we have also launched Zee Alwan as an Arabic GEC channel in the Middle East region and we have launched a certain number of new media properties in the last 7-8 months. These are our organic ventures.
We are also looking at opportunities for inorganic growth and if need be, we can utilize these cash reserves and if we are not able to find the right places to utilize the cash, it is for the board to decide. Q: Give us a quick word on digitization.
A: Digitization is round the corner. I think we will have to wait for another 20 days and we will see what happens on the November 1. I think stakeholders have been pushing hard to ensure that everyone is ready for digitization to rollout.
The first four metros will definitely be on the digital path from November 1 and of course there will be some amount of hiccups that happen when such a big move in an industry takes place. But we are very hopeful that digitization will rollout positively and it will be very beneficial for the entire industry and specifically, for broadcasters like Zee.