Amid weak ad environment, Network18 & TV18 see revenue growth in Q1FY20

Amid a weak advertising environment, Network18 Media & Investments Limited reported an 11 per cent YoY growth in its revenues for the first quarter ended June 30, 2019 at Rs 1,245 crore from Rs 1,124 crore in the corresponding period of last fiscal. Consolidated operating EBIDTA saw a jump of 137 per cent to Rs 46 crore from Rs 19 crore in the same period of FY2019. EBITDA jumped sharply on operating leverage accentuated by cost controls. 

Network18’s revenue growth is led by election advertising and strong growth in subscription income post implementation of TRAI’s new tariff order (NTO). 

Network18’s digital revenues in Q1 FY2020 grew 34 per cent YoY to Rs 47 crore. Network18 digital saw ~166 million unique visitors, making it the #2 in digital news/ information category. 

Growing ad-spends in (especially vernacular) boosted revenues amidst a tepid environment. The rising strength of the brand and the tailwinds in vernacular consumption have helped News18 languages grow at an industry-leading pace, with 46 per cent QoQ rise in viewership. 

However, operating margin fell due to losses of FirstPost Print and marketing of CricketNext around the IPL and the Cricket World Cup (Rs 6 crore in total), revamp of, and extension of MoneyControl into subscription models. 

Adil Zainulbhai, Chairman of Network18 and TV18, remarked, “Amidst a challenging advertising environment and the implementation of a new tariff regime, we have continued to focus on creating great content for all media. Our regional portfolio continues to grow across both broadcasting and digital, and we believe that the connect our growing brands enjoy with the diverse Indian populace shall stand us in good stead.” 

Network18’s listed subsidiary TV18 owns and operates the broadest network of channels – 56 – in India spanning news and entertainment. TV18 reported a 10 per cent growth in its Q1 FY2020 revenues at Rs 1,198 crore from Rs 1,088 crore in Q1 FY2019. This was achieved amidst a weak advertising environment, led by election advertising and strong growth in subscription income post implementation of NTO. EBITDA jumped sharply by 96 per cent on operating leverage accentuated by cost controls to Rs 77 crore from Rs 39 crore in Q1 FY2019. 

The ad-environment has been tepid, led by advertisers paring spends amidst weak markets/ macro/ regulatory flux, and concentration of advertising around sports. However, news broadcasting benefitted from election-related advertising during the quarter. The network expects the environment to pivot as it heads into the festive season. 

New Tariff Order (NTO) implementation pains have smoothened as the value-chain adjusts to the new regime, and Network18’s subscription income has received a boost. Nevertheless, some flux in distribution and viewership is lingering, which is expected to taper away in the near term. As consumers make their pack/ channel choices, a strong content propositions and distinctive brands will continue to gain traction. In a release issued, Network18 stated, “Our bouquet is well-placed to benefit, through leading channels and improved distribution tie-ups.” 

Shift of Free-to-Air (FTA) Hindi general entertainment channels out of the DD Freedish platform and conversion to Pay has impacted viewership (and consequently ad-monetisation) for those channels. All top 4 broadcasters have faced a drop of 2-5 per cent viewership and consequent revenues. Similarly, viewership share for TV18’s Hindi news channel (as well as some others) which have chosen to be Pay has been impacted, versus peers which have chosen to be FTA. 

TV18’s Q1 FY2020 viewership share in news was 10.1 per cent, up from 9.3 per cent post NTO implementation. 

Election ad-spends and subscription boost drove revenue: General news revenues were buoyed by election related advertising, especially in Hindi. Business news revenue growth has continued to face genre pressures due to weak markets. 

Sharp turnaround in EBITDA: Overall, from an EBITDA loss last year, Q1FY20 has seen a major leap in profitability. This has been driven by election-advertising as well as continued reduction in Regional News gestation losses, on operating leverage as well as cost controls. 

Entertainment bouquet (Viacom18’s 32 channels + AETN18’s 4 infotainment channels) is #3 amongst national players: TV18’s entertainment Q1 viewership share was 9.1 per cent. Post NTO and shift from Freedish, aggregate entertainment viewership share of top 4 broadcasters has fallen by ~9 per cent to ~55 per cent. Major events driving Sports viewership have also contributed to this decline during Q1. 

Entertainment revenue rose 5 per cent amidst weakness in overall ad-spends and a sharp reduction in ad-revenue of channels shifted from FTA to Pay. Niche genres witnessed robust growth, underscoring the network’s strength in Kids and Youth genres, and the virtues of a full portfolio offering. 

Regional entertainment channels in Marathi, Gujarati and Kannada movies gained strength. Following up on the launch of regional movie channel Colors Kannada Cinema last quarter, Colors Gujarati Cinema was launched to further cement the portfolio leadership in these regions, and sweat the movie library better. 

Improved subscription income and cost controls raised EBITDA 40 per cent YoY: Operating loss of new initiatives (regional movie channels and VOOT expansions) was Rs 11 crore for Q1. Adjusting for these, BAU EBITDA was Rs 68 crore, up 66 per cent YoY. BAU margins for Entertainment grew to 7.5 per cent from 4.8 per cent in Q1 FY2019. 

Adil Zainulbhai added here, “Our channel brands have witnessed a strong uptake in the new tariff regime, which places the consumer even more at the center of the broadcasting business model. Class-leading value, genre-defining content and a pipe-agnostic approach are the tenets which we believe will continue to propel our portfolio forward.”


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