Media Cos report muted performance; average sales growth @8% YoY

Media companies reported a muted performance in second quarter (July-September) of financial year 2011-12 owing to soft revenue growth due to slow down in ad-spends across media.

by Dipali Banka
Published - Nov 18, 2011 9:02 AM Updated: Nov 18, 2011 9:02 AM
Media Cos report muted performance; average sales growth @8% YoY

Media companies reported a muted performance in second quarter (July-September) of financial year 2011-12 owing to soft revenue growth due to slow down in ad-spends across media. In the broadcast space while the GECs were on the receiving end of tough competition and slow ad revenue; news companies fared better with the ‘Anna Hazare’ factor coming in. Print companies had a dampener on their margins because of expansion in new regions, forex losses and inflationary climate while radio companies reported moderate results. The average Sales revenue growth for all media companies in the quarter ended September 2011 compared to the corresponding quarter last year comes to around 8 per cent.

Analysts believe that considering the current economic condition, such lack lustre performance will continue for the coming two quarters. “Advertising revenue has been down somewhat and results have been impacted because of that. We expect the softness to continue for another couple of quarters. But at the same time, at least in broadcast, there are some companies where subscription revenue is steady, for example Zee TV. In that sense and if digitisation does happen on the time table that the government has laid out, you should see some improvement on the subscription numbers,” said Jehil Thakkar, Head- Media and Entertainment Practice, KPMG.

Total operating revenues of Zee Entertainment Enterprise Ltd grew by only 1 per cent YoY to Rs 7.18 billion while consolidated advertising revenue declined by 4 per cent from Rs 4.12 billion to Rs 3.94 billion YoY because of no India-specific cricket series. Sun TV reported a muted 6.2 per cent growth in toplines and 2 per cent advertising growth YoY. Compared to this, news broadcast companies like Zee News, Network18, NDTV and TV Today reported double digit growth from news operations. Analysts said higher advertising revenue on news channels was due to “Anna Hazare” and other such news items during the quarter. “News channels’ numbers were even good because news advertising spots are cheaper as compared to Hindi GECs. Advertisers saved money and got the desired eye balls on news television because of compelling content. So they migrated to news platforms rather than GECs,” said a media analyst who did not want to be quoted. These may only short term bursts given that news category is a little more challenging than the entertainment category for the advertisers.

Inflationary pressure was apparent in the results reported by the print companies as even though they delivered a moderate growth in net sales; margins were impacted because of high newsprint cost, forex fluctuation losses and higher interest cost. DB Corp’s operating profit fell by 18.9 per cent while that of Jagran Prakashan reduced by 13 per cent. HT Media’s operating margins during the quarter contracted by 125 basis points YoY due to higher other expenses, but Hindustan Media Venture’s yield improvement and volume growth helped in delivering 24 per cent to Rs 1,133 million and operating margin growth of 73 per cent YoY at Rs 314 million.

News print costs may taper off going forward but high input costs will continue to be a problem especially if some of the wage-board recommendations are implemented; operational cost may go up significantly, said Thakkar of KPMG. In October this year, the Union Cabinet approved the recommendations of the Justice G.R. Majithia Wage Boards for the journalists and other employees of the newspapers/news agencies. However, the implementation of the notification is subject to the final order of the Supreme Court. If implemented, the recommendations could increase the salaries of journalists and, in turn, raise the wage bills of newspaper companies by 60-100 per cent. Although, Prasoon Pandey, Head- Investor Relations, DB Corp Limited told exchange4media, “this will affect the unorganised sector in the print media because those wage board recommendations are already being implemented in the organised sector. We are already paying wages on the scales of those recommendations.” He also added that given the current downward trend in revenues we may see reduction in paginations of newspapers and staff increment costs may come down.

During the July-September quarter new ventures of companies bogged down their margins. UTV Software reported a consolidated net loss Rs 288.5 million for the quarter ended September 30, 2011 at the behest of launching of new channels. DB Corp which had launched four new editions in Maharasthra in the previous quarters announced in the analyst conference call that it will not be launching any new editions for the next six months. Given the current scenario, it will now be seen whether other media companies go ahead with their expansion plans or not.


For more updates, be socially connected with us on
WhatsApp, Instagram, LinkedIn, Twitter, Facebook & Youtube

Stay updated with the latest news in the Marketing & Advertising sector with our daily newsletter

By clicking Sign Up, I agree to the Terms of Use and Privacy Policy.