Entertainment broadcasters recover from pandemic shock to post strong growth in Q3
The first two quarters of the fiscal were catastrophic for the media sector as consumer demand had slumped leading to a cut back in ad spending by corporates
Broadcasters ZEEL, Sun TV Network, and TV18 have seen a strong recovery in the third quarter of the current fiscal as the advertising market rebounded thanks to the festive season and a slow but steady revival in economic growth. The first two quarters of the fiscal were catastrophic for the media sector as consumer demand had slumped leading to a cut back in ad spending by corporates.
According to Voices Report on the media sector by Motilal Oswal Institutional Equities, revival in the economy and festive season in 3QFY21 led to an increase in advertisement spends by corporates – resulting in a recovery in ad revenues for broadcasters. Broadcaster, however, have maintained that while a volume uptick has been observed, ad rates are still below pre-Covid levels.
In its recent sectoral report, ICICI Securities noted that the media sector, as a whole, saw more positives compared to H1FY21 during the festive quarter. It added that broadcasters are in a relatively better position compared to peers and are expected to maintain subscription growth while ad volumes are also in a recovery mode. However, ad realisations continue to be a concern.
The brokerage firm said that the original programming of GECs coupled with a festive boost led to a recovery in ad volumes sequentially. However, ad realisations were under pressure given macroeconomic scenario has not yet fully normalised. Consequently, revenues are likely to remain muted during the quarter.
"We expect Zee to witness ad growth given the recovery in GEC market share and festivities. Sun TV ad revenue is estimated to de-grow on account of lower viewership and slower pickup in ad volume. Again, the saving grace for broadcasters will be continued growth in subscription revenue, led by digital platforms," ICICI Securities said in its report.
Elara Capital VP - Research Analyst (Media & Consumer Discretionary) Karan Taurani said that the third quarter turned out to be a saviour of sorts for the TV broadcasters due to the presence of festive season after the disappointment of the first two quarters of FY21. While the Q4 is traditionally not a great quarter for media companies, Taurani expects broadcasters to post healthy growth numbers due to the base effect as Covid-related lockdown had impacted Q4 FY20.
Media conglomerate ZEEL's ad revenue grew 5.78% to Rs 1302 crore in Q3 FY21 compared to Rs 1230.8 crore in the same quarter of the previous fiscal. The company's subscription revenue rose 17.96% at Rs 841.9 crore compared to Rs 713.7 crore a year ago. The company's net profit jumped 14.4% to Rs 399.9 crore as against Rs 349.4 crore in the previous fiscal. EBITDA was up 26.5% at Rs 715.7 crore from Rs 565.8 crore.
ZEEL had an all-India viewership share of 18.2% in Q3.
"After the disruption faced due to the unprecedented economic slowdown in the first half, our business returned to near normalcy in the third quarter led by a strong resurgence in consumer demand across categories. Advertising witnessed a sharp rebound as the sale of products across all categories saw a strong recovery. With the lockdown easing across the country, people began to spend more time out of their homes leading to the normalisation of TV viewership to pre-Covid levels. While the movie genre had gained massively during the first half, the category suffered some fatigue due to lack of new content and saw a drop in the viewership share which benefitted the GEC genre," ZEEL MD and CEO Punit Goenka said during the Q3 earnings conference call.
TV18's entertainment bouquet comprising Viacom18’s 34 channels + AETN18’s 2 infotainment channel had reported an 8% jump in EBITDA at Rs 263 crore compared to Rs 245 crore in Q3 FY20. Ad-recovery and cost-efficiency drove entertainment EBITDA margin to 25%, its highest ever. Revenue from the bouquet declined 7% to Rs 1,055 crore compared to Rs 1,137 crore.
In its Q3 earnings presentation, TV18 had said that its Hindi GECs performed strongly on both platforms (Pay and FTA), driving up monetisation amidst stiff competition for eyeballs and advertiser wallets in the festive season. It further stated that regional GECs continue to recover with a lag, in line with demand from regional advertisers. Niche genres like Kids, Youth, and Music have also bounced back, as ad-demand has unlocked.
"Entertainment fully recovered from Covid impact, led by programming returning to normalcy and high-impact content driving ad-yields up during the festive season. Viewership remained strong despite sports (IPL) and peer non-fiction shows competing for eyeballs," the company said in its Q3 earnings report.
The company noted that the EBITDA includes the impact from initiatives launched more than a year ago but are in gestation, mainly Colors Tamil and Voot. The advertising-led platform has scaled up and become profitable, while investments into digital content creation and acquisition for Voot Select continue to be made.
“The group has fully recovered from the effects of the pandemic, even as safety measures and innovative solutions to logistical challenges continue to be deployed. We have treated this period as an opportunity to rethink our businesses, and are emerging stronger and ready for the post-Covid world," Network18 chairman Adil Zainulbhai had said a statement.
TV18's entertainment bouquet had maintained its market share at 10.7%, up sharply from a low of 9.1% in Q1.
Sun TV Network's revenue for the quarter ended 31st December 2020 jumped 19% to Rs 972.34 crore compared to Rs 814.97 crore in Q3 FY20. The standalone revenue was at Rs 972.3 crore, up 19.3% YoY boosted by IPL revenue. Ex-IPL, the revenue was at Rs 763.3 crore, down 6.3% YoY.
Subscription revenues were up 3% at Rs 424.05 crore as against Rs. 411.85 crore. However, the company's ad revenue was down by 9.4% at Rs 309 crore due to a cut back in ad spends by retail advertisers. The share of retail advertising on the network fell from 30% to 10% in Q3. On a sequential basis, the ad revenues increased to Rs 309 crore during the quarter under review as compared to Rs 245 crore in Q2 FY21.
According to ICICI Direct, Sun TV’s Q3 FY21 numbers were mixed as ad recovery was slower and subscription growth was lower than expected but lower amortisation aided net profit. The company's net profit jumped 18% to Rs 441.82 crore from Rs 373.45 crore while EBITDA registered an increase of 4% at Rs 600.68 crore as against Rs 580.36 crore.
Explaining the drop in ad revenue, Sun TV Network MD R Mahesh Kumar had said that the retail segment has not fully come on-board. Also, the number of movie premieres saw a significant dip in Q3 FY21 vs Q3 FY20. A lot of special events that happened last year did not happen this year.
With theatres remaining shut, the movie producers and theatres who were big advertisers on the network did not advertise as actively. "Broadly, these 4-5 big-ticket items have contributed to the marginal de-growth in ad revenue," Kumar said. That said, Kumar noted that the months of January and February are looking positive as far as advertising is concerned. Sun TV Network's management expects its ad revenue to reach FY20 levels in FY2.
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