How ZEEL beat the odds and reported 25.8% Y-o-Y increase in domestic ad revenue..

In Q3 FY18, ZEEL reported 25.8% Y-o-Y increase in its domestic advertising revenue; having a clutch of top ranking regional channels further helped it to achieve these numbers

e4m by Sonam Saini
Updated: Jan 25, 2018 9:00 AM

Subhash Chandra led Zee Entertainment Enterprises Ltd (ZEEL) had unprecedented growth going by its Q3 FY18 results. ZEEL stole the show by reporting a robust  growth of 25.8% Y-o-Y increase in its domestic advertising revenue- an especially remarkable feat for the company in times when the TV industry is struggling to even achieve 10 per cent growth. So what exactly worked right for ZEEL?
Speaking to exchange4media, Punit Goenka, MD & CEO, ZEE Entertainment Enterprises Ltd, said, “The last quarter was indeed a productive one for us. Our domestic advertisement revenue growth of 26% is a testimony to the fact that television continues to remain the most effective medium for brand building. ZEE continued to maintain its number 1 position as an entertainment network, with a network share of 18.3%. Our other business verticals, Movies, Music and Live Entertainment are witnessing steady growth, while the Digital business is gearing up for its next big announcement – Zee5 which will be launched in the month of February 2018. It was an overall great quarter and we will continue to put in our best efforts to achieve higher results in the last quarter of this fiscal year.”

As per the analysis done by DART (Dolat Analysis and Research Theme), Zee TV was a leader in the Hindi GEC segment for Q3FY18 primarily due to out performance in GEC (Rural) segment. Coming to the numbers...

Domestic Business

ZEEL moved to top slot in non-sports entertainment television network with 18.3% viewership share and launched two HD channels (Zee Telugu HD and Zee Cinemalu HD) taking the total count to 13 HD channels.

It must be mentioned here that the last quarter has been quite an eventful one for the broadcaster and not just financially. ZEEL completed 25 years in the television industry which led to mega celebrations and brand overhaul across its properties.  
ZEEL not only changed the look and feel of its bouquet but also increased the number of hours in original programming (the channel increased their programming hours from 4 to 5 hours from August 2017) and launched some of the iconic shows like SaReGaMaPa Little Champs, which they launched in Q4 in FY17 and they again launched a fresh audition in the mid season which worked very well for the channel. “The finale was rated 3.3 which was the highest across channels,” said Zee TV deputy business head Deepak Rajadhyaksha in an interview. 
In events, Zee Rishtey awards was rated 1.9 in which the channel unveiled the brand philosophy’ Aaj Likhenge Kal’. In the terms of fiction Kundali Bhagya was launched in the same quarter and recorded highest ratings and has been number one show along with Kumkum Bhagya.

Meanwhile in regional space, Zee Marathi maintained its no.1 position in the Marathi market. Zee Bangla continued to be the second most watched channel in West Bengal. In the Telugu market, Zee Telugu improved its market share significantly to become the no. 1 channel in the Urban market. Zee Kannada maintained its position as the second ranked channel in Karnataka. Zee Tamil improved its market share as the third ranked channel in the Tamil market. Zee Sarthak continues to maintain its strong leadership position in the Odiya market. Big Ganga, the Bhojpuri channel, too maintained its strong viewership.

ZEEL's &privé HD, a premium destination for English movies, gained leadership position in the first quarter of its launch.

International Business

During the quarter, ZEEL’s International business revenue was Rs. 1,87.8 cr. On a comparable basis, the advertising and subscription revenues were lower by 0.8% and 3.4%, respectively as against last year. The adverse impact of currency appreciation and region-specific issues have contributed to the decline in revenues.

For the quarter ended December 31, 2017, international business revenue break-down is:

• Advertisement Revenue of Rs. 64.7 cr • Subscription Revenue of Rs. 98.1 cr • Other Sales and Services of Rs. 25 cr • Total Revenue of Rs. 1,87.8 cr.

Other Businesses

Zee Studios, the movie production division, released three movies during the quarter – Secret Superstar (Hindi), Qarib Qarib Singlle (Hindi) and Faster Fene (Marathi). Secret Superstar performed well at the box office and the other two movies received rave reviews too.

Zee Music Company, the music label, continued with its library expansion with acquisition of rights of both Bollywood as well as regional music. In Q3, the music label registered 3 billion views on YouTube.

OZEE saw a sharp improvement in performance metrics with an average of 145 mn+ video views per month during the quarter. DittoTV continued to see improved traction leveraging its partnerships with telecom operators. The strong performance of the two platforms provides a sound launch-pad for the new digital platform Zee5.

“One of the reasons of ZEEL's growth being so high is due to low base of Nov/Dec 2016 on account of demonetisation. Most large entertainment TV companies have grown in 20% range in Q3 on the back of increased FMCG spends,” said an industry expert on condition of anonymity.

Karan Taurani, Senior Analyst at Dolat Capital, said “ZEEL's Q3FY18 revenues fared well. The investments were high this quarter because of a few reasons including the Zee Cine awards and some kind of increase in other expenses. We expect margins to remain under pressure due to the launch of its new digital platform (Zee5) in Feb’18 and higher investment to increase programming hours; yet, ZEEL management maintains its margin guidance (above 30%).”

EBITDA margin improved 80bps YoY to 32.3% (DCMe: 31.5%) owing to the higher gross margins abetted by lower programming cost on account of absence of sports segment. PAT improved 28.3% YoY at ` 3.21bn (DCMe: ` 3.27bn) due to lower fair value loss on financial instrument as compared to corresponding quarter last year.

“ZEEL's Ad revenue growth of 25.8% YoY was a positive surprise during the quarter, however, our revenue estimates for FY18 remain unchanged, as positive impact of Ad. growth has fairly balanced the negative impact of subscription revenue. We have estimated an ad growth of 14% for Q4 FY18, albeit, this may shrink going ahead (FY19 & FY20) in the medium-term due to threat from online content consumption,” mentioned Taurani.

However, concerns remain on the regional front as players like Sun TV, Sony and Colors spread their wings aggressively in regional languages by introducing newer channels. Further, the shift of regional content online on the VoD/digital platforms may also have a negative impact on the regional segment for the TV industry.

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