Q3 to see price hike on new Trai norms: Zee Entertainment

Zee Entertainment posted stellar numbers and beat Street expectation on every parameter in the second quarter. But price hikes are in the offing in the third quarter on the back of Trai cap on inventory because of which all major channels have to reduce inventory to 12 minutes from about 14 minutes, says Atul Das of Zee Entertainment. Though he hopes to pass on the hike to advertisers.

Also Read: Zee Ent Q2 net up 26% to Rs 236 cr, ad rev rises 10.5%
Das says in the second quarter too, there has been price hike but for a totally different reason – prices went up because of natural demand for the quality of content.
As far as subscription growth goes, the company has seen 16 percent overall rise to Rs 450 crore, of which 19 percent has been from domestic subscription and 7-8 percent from international subscription, he says.
Apart from that, the company delivered a margin of 28.2 percent for the second quarter,  against last year’s 22.8 percent, he says. However, Das says margins may see some impact going forward on the back of significant sports events in the third quarter and also because of continued focus on investing in new programming and channel launches. Below is the verbatim transcript of Atul Das's interview on CNBC-TV18 Q: Any price hikes have been undertaken or are in the offing?
A: In Q2 we did see a positive impact because of prices going up. I won't really call it a price hike but we have seen lot of big properties coming on to almost all the channels including ours and that has resulted in positive price hikes going into Q2.
Third quarter, the reason for price hike is totally different, it is related to the Telecom Regulatory Authority of India (Trai) cap on inventory because of which all of the major channels have to reduce their inventory to 12 minutes and to compensate for that reduction in inventory we are taking a price hike. So that is a different reason for the price hike. Whereas in Q2 we have seen prices going up because of natural demand for the quality of content that we have been showcasing. Q: For this quarter October 1 because of the Trai guidelines how much broadly if you could just give us some figure that we can expect these are the prices that you are contemplating also and what sort of an impact we can expect in this quarter because of those guidelines?
A: It would be difficult for me to give a forward looking statement on that but generally speaking we are reducing our inventory from about 14 minutes to 12 minutes so that is the kind of adjustment that we have to do because of the TRAI restrictions and we are hoping that we could pass on the same increase to the advertisers so we will see at the end of Q3 where we finally land up. Q: How has been the subscription growth this quarter, also if you could give us a breakup of international and domestic growth also?
A: Subscription revenue growth has been very strong even in Q2 which has been a continuing phenomenon for the last several quarters. So if you look at our Q2 numbers our subscription revenues have grown 16 percent overall to Rs 4.58 billion. Within that the growth from domestic subscription has been about 19 percent plus. So the subscription revenue growth has again been led by domestic subscription and we have seen about 7-8 percent growth from international as well. Q: Any guidance on margins?
A: For Q2 the company has delivered a margin of 28.2 percent which is a significant increase over last year for the same period where we had 22.8 percent EBITDA margins. We are continuing to invest a lot into new programming, we have launched a couple of new channels even in the domestic market. Zee Anmol has been launched just on October 1, & Pictures – a movie channel was launched last quarter and we are also launching couple of new products in the international market. So given all of that we do expect some impact on the margins going forward and we will also have significant sports events coming into Q3 which is the India-South Africa Series which will impact the margins because big properties do end up making losses for us. Q: How has the sports business panned out this quarter, also if you could tell us the guidance for the losses also for the coming year, what can we expect?
A: I would not get into the forward looking statements for losses but for this quarter we have made a loss of Rs 19.1 crore on the sports business which is well within the limits and for the full year we have already told the market that the losses will be higher than what we had in the last year so that continues.