Double digit advertising growth difficult in FY12: Zee

Zee Entertainment announced its second quarter results for FY12. The company's Q2 consolidated net profit was up 23% at Rs 160 crore versus Rs 130 crore. Its consolidated net sales were up 2.86% at Rs 718 crore versus Rs 698 crore.

Zee's advertising revenue was down 4% to Rs 395 crore (YoY) and up 2% (QoQ), and the subscription revenue was up 6% to Rs 291 crore versus Rs 274 crore and down 4.6% (QoQ). Atul Das, president of corporate strategy and business development doesn't see any signs of normalcy in the advertising trends in the third quarter of FY12. Moreover, he feels that it would be difficult to achieve double digit advertising in FY12. According to Das, there could be some impact on margins going forward. He also indicated that the cable digitisation will prove to be positive for the company. In addition, Das maintains a guidance of Rs 100-crore loss in sports business in FY12. Here is the edited transcript of his interview. Also watch the accompanying videos. Q: Concerns are rising in the long-term strategy of the company with respect to the advertising revenue, which is tepid for the past two quarters. What is your outlook for the advertising space and the expectations for this fiscal? A: It is too early to talk about FY12 because the ad environment has not become stable. As we started FY12, we saw a slowdown or softness in ad spends. In the first quarter, we recorded almost negligible growth. In the second quarter, we recorded fairly decent single digit growth on a non-sports basis, but they are nowhere near normal. As we enter into the third quarter, we are not seeing any signs of normalcy. They are still growing, but they are nowhere near normalcy. If the third quarter goes well, we should see the entire fiscal 2012 ending up on a single digit growth. In the last few years, we have not seen a continued weakness in ad spends scenario for two years at a stretch. As we go into FY13, we should be able to see some kind of growth. Q: What do you expect to do by way of advertising revenues? How would it pan out for the industry? Will you be outperforming the industry trend? A: Double digit looks very difficult at this stage for fiscal 2012. As far as our market share is concerned, we have done well so far. We would not gain market share this year, but it all depends on how the third quarter goes. We should be either at par on the market or maybe at a very marginal loss because we have seen some changes and shifts in the market share. Q: There has been some concern that your market share is slipping. What was it standing at in Q2? What are your plans to pull it up? A: In the Hindi GEC segment, in the top segment of channels, we had almost 20% market share. We have lost a bit there and we are working towards correcting the situation. At the beginning of the third quarter, we have launched a couple of new shows