ZEEL expects pricing to drive ad revenue growth going forward
During the Q3 FY21 earnings conference call, ZEEL MD & CEO Punit Goenka said that the ad revenue situation is nearing normalcy
Broadcaster ZEEL expects ad revenue growth to be driven by pricing going forward, for the company as well as the industry. The company also hopes that ad pricing will see further improvement in the coming quarters. In Q3 FY21, ZEEL had delivered a 7.5% growth YoY as pricing and inventory utilisation had seen an improvement.
"Compared to 1Q and 2Q, we have seen significant improvement at both the places, in pricing as well as inventory utilisation. And it was a festive quarter so pricing was good, but that said, we continue to see a possibility of improving pricing further," ZEEL Head, Corporate Strategy, FPA, and Investor Relations, Bijal Shah told analysts during the Q3 FY21 earnings conference call.
She further stated that 80% to 85% of growth in any particular year comes primarily from pricing because inventory is largely fixed. "So save for the impact of COVID, we typically run at 90% to 95% in all the key channels during prime-time. So largely our growth is always driven by pricing, and in the coming year, we are saying that the industry and us will most likely have a very strong growth that would be largely driven by pricing again."
Queried about the difference in ad pricing compared to the previous fiscal, Shah said that pricing also depends on the performance of a channel and differs from one channel to another. "Depending upon channel to channel but yes pretty much close to that or in some of the channels it would be higher than that. Some of the channels lower than that also, as viewership has a role to play in what exact price you get, but it is in that ballpark."
ZEEL MD & CEO Punit Goenka said that the ad revenue situation is nearing normalcy. He expects FY22 to be a growth year for the industry. "As I said, we are near normalcy, we are not back to the normal situation. So Q4 should be better and definitely, in FY22, we will see growth for the industry overall. But whether it will be back to the normal 10-11% number or not is still very hard to say. We are yet to see this quarter before we can guide for the next financial year fully."
On the impact of the Indian Premier League (IPL) taking place in Q3, Goenka said that the tournament is a double-edged sword as it impacts and at the same time helps rival TV networks. "Part of it would have impacted us but it also helps us in a way because the way IPL sells advertising, it is category exclusivity, so all the competitors of the people who buy IPL actually for a share of voice go to the competition. So, it also helps us in one way and therefore while there has been some impact but it is also of some help to us."
Asked about the impact of BARC controversy on TV advertising, Goenka said that there was no impact on entertainment channels. "I will answer this in my current position, not as the other position. I think the BARC ratings impact largely the news genre and not so much the genre that we operate in, which is entertainment. As you can see the ratings for the entertainment channels have been coming out as usual and there has been no change whatsoever to that. Therefore, I see no reason for any doubt in the mind of advertisers for BARC rating system for the entertainment channels and the total impacted viewership that we are talking about is 7% of the viewership of this country, which is the entire news genre put together."
Answering a question on scaling up the film business, Goenka said ZEEL will play the holistic film business game. "We are targeting time and the entertainment share of the consumers and movies do form a significant part of the share for the consumers in our country. And therefore, we will play the holistic game of box office as well as it being a feeder of content into our own ecosystem for all three segments of digital, broadcast, as well as the music business."
Goenka is confident that the film business will deliver profitability in the long-run albeit with a low-margin. "Obviously it will be a low margin business compared to our traditional core business of television. But we do believe that the portfolio and the approach towards selection of the films we can make it sustainably profitable for us in the long term, and including FY22 itself."
Responding to a question on ZEE5, Goenka said that the platform lost some base due to the non-availability of original content during the lockdown and stand-off with distribution platforms. A lot of ZEE5's monthly active users (MAUs) are driven by television content and the pandemic had impacted the production of TV shows.
He further stated that ZEE5 will not invest capital behind MAU to DAU conversion. "Our expectations on the investments will be largely on the original content and movie content that we will build for the subscriber acquisition. Our conversion rate from MAU to DAU, we would be targeting in the mid-term around 15% to 18%, let's say by end of the next fiscal. That will be an industry benchmark that we should be looking at."
"So that has shrunk the funnel for us in a big way in the initial period of Q1 itself. We have been building the base back from that period onwards. Obviously, it's far more stable now, as you saw the numbers of the last two quarters and hopefully, from this quarter onwards the monetization will also start improving," Goenka noted.
"On the subscriber side, we have had again stand-offs with multiple operators given the fact that a key property came only in the 3rd quarter of this fiscal and therefore we had to get off some platforms for commercial reasons. So that's a battle that continues to go on Sanjesh and it's something that we will continue to fight going forward as well."
Goenka said that the TV subscription revenue will see low to mid-teens growth if the regulatory environment stabilises. "If the regulation stabilises and things become normal in a stable situation, low-teens to mid-teens kind of expectation is fair, which is both on account of pricing, as well as the discovery of subscribers that may not be paying currently."
The ZEEL head honcho also said that the content cost for television has not seen any change because the cost per hour basis things are pretty much stable due to the availability of ample content supply on television side. "On the movie side, the cost had gone up even before pre-COVID with the advent of digital but on the other side for television, the content cost has come down on films right now. It’s kind of even evening out itself but collectively still the costs are higher on the film side in the short-term especially in the Hindi market. The impact is not as extreme in the regional market as you would see in Hindi."
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