In an interview to CNBC Awaaz, Network18 Group CEO B Sai Kumar explains how net distribution income and subscription revenue helped the company in posting a fantastic set of numbers.
Below is the interview of B Sai Kumar, Group CEO, Network18 with Hemant Ghai and Ishleen Kaur on CNBC-Awaaz.
Hemant: Can you explain how did your margins grew this quarter?
A: Almost all the margins are coming from that one revenue stream that we been talking about and building for the last one-and-a-half year, which is our distribution income. We look at a matrix called net distribution income, which is the payment that we get from households minus the carriage that we pay the cable operators - that has grown about 140-150 percent and that’s really been the constant theme in TV18’s results. So all the household has started paying us and this money has started reaching us. So that is a good news. The second line that is working very well is our international business for Colors, MTV and in the last two quarters even News18, which is launched in couple of markets. So the ad sales and subscription there is seeing a very good spike, viewers are loving these channels. The third set, which is advertising continues to be a bit soft, but I must also say that when we started off last year, we had given a guidance saying it is going to be bleak, there is going to be a degrowth. We are now seeing some greenshoots, you will see some improvement in Q4 but I think you will see a bounce back next fiscal for sure.
Ishleen: Subscription revenues have gone up substantially, how big a trigger is digitisation for Network18?
A: It’s a big trigger because our margins – our attempt is to ensure that going forward our advertising revenues take care of costs and distribution revenues that is net distribution income (NDI) goes directly into profits. That is the way we want to be building the broadcast business. In the past we didn’t have distribution income to talk about, but if you look at this quarter then most of our distribution revenues have gone into our margins. So, as advertising revenues improve and we see that improving a bit as costs are getting managed – you know that early last year we took a fairly large cost management exercise. Now with all of this I see distribution income going only into our profit, so it is going to be a simple annuity income improving our margins year on year.
Hemant: I want to know the outlook for upcoming quarters; you said that because of general election coming quarters will be good for media companies due to increase in ad spends. Will it be beneficial for Network18 in fourth quarter?
A: There is a change in sentiment, in the past we heard advertisers being a bit reticent. I think that is opening up. Everybody is extremely positive about elections and life after election. So, that too is a risk because it is life after election, we do not know these – there are too many variables. But that said let me tell you that Q3 is typically the strongest quarter for broadcast. The quarter four is very strong for your channel because of the Union Budget but there is no Union Budget this year, there is a Vote on Account, which is good but it is not as big as the Budget. So that said I will repeat what I said earlier, I see improvement into Q4 and next fiscal for channels like yours and by next fiscal you will have four CNBC channels CNBC-Awaaz, TV18, Gujarati and our HD channel. Next year we will have two Union Budgets; one hopefully in July-August and the other back to the cycle in February, so that should see even better growth for channels like you.
Ishleen: Are you confident about operating cost of TV18 as you are talking about new channels in some time?
A: In the past the market have punished us for expanding too rapidly, therefore, we went into a period of sanyas where we said that we will focus only on profitability. But we are at the crossroads where our profits have started coming in. But these are also huge amount of opportunities in broadcast space, so we are now looking at only those expansion projects where there will not be investment losses or investment losses will be minimal. This time we continue with our profit guidance and we believe that our operating performances will more than make up for any investment losses in new projects.
Hemant: What kind of growth you are expecting in entertainment segment?
A: If you look at entertainment and this will interest you because I am sure you guys watch a lot of movies and watch Colors and MTV and so on, all our broadcast channels have done extremely well. I must say here that our performance in entertainment could have been even better if our motion picture business had done so. Unfortunately few of our movies didn’t do as well. Motion pictures is not as core business for us as broadcast. So I see fundamentally that broadcast is improving even after getting motion pictures. Viacom18 has managed to come out with an excellent profit number. So, next year hopefully our motion picture losses will be further reduced. We are taking some management steps there and all the good performance of broadcast will be visible to investors.
Hemant: ETV has also show good results and good growth. Will this growth continue in coming quarters and what do you have to say about integration in the company?
A: The change happening in the media market in India is that national media hogged the limelight for a long time. Now a lot of the growth is seen by regional media. If you look at ETV Entertainment, we now own 50 percent of ETV Entertainment, we had invested in marketing and programming to up our ratings in those. Our losses have reduced from upwards of Rs 30 crore to about Rs 3 crore-4 crore currently. And in ETV News, our profits are about Rs 20 crore. So, I think ETV - you will see growth and much-much higher growth than you see in our national channels and profitability is the constant theme across.
Disclaimer: Moneycontrol.com and CNBC-TV18 are both part of the Network 18 Group.
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