COVID-19 & NTO 2.0 impacts weigh down ZEEL’s Q1 FY22 margins

Domestic ad revenues of Zee Entertainment Enterprises Ltd (ZEEL) for both Q1 FY22 and Q1 FY21 were impacted by lockdowns. However, the impact this year was much lower, reflected in the 127.9% YoY growth. Compared to Q1 FY20, domestic ad revenues were lower by 22.7%.

On the subscription front, the embargo on pricing change due to NTO 2.0 litigation continued to hurt domestic television pay revenue growth. The 2% growth over Q1 FY21 is driven primarily by digital business.

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ZEEL’s EBITDA margin for the quarter stood at 19.4%, with EBITDA of Rs 3,440 million. Lower ad revenues on the one hand and increase in costs due to lockdown (Rs 271 million) on the other hand affected EBITDA for the quarter.

The drop in revenue is on account of a large movie syndication deal in the previous year.

At the same time, increase in marketing cost on a YoY basis is on account of release of the movie ‘Radhe’ and continued investments in ZEE5. Marketing costs in Q1 FY21 was lower on account of much lower original content production.

Programming cost increased YoY as original content production largely continued across the states during the lockdown at alternate locations.

ZEEL’s Q1 FY22 international revenue break up includes:

  • Advertising revenue – Rs 514 million
  • Subscription revenue – Rs 956 million
  • Other Sales & Services – Rs 109 million

On the other hand, ZEEL’s OTT venture, ZEE5, continued to gain momentum, backed by an expansive content catalogue. ZEE5 reported 80.2 million global MAUs in Q1 FY22, with 7.1 million global DAUs in June 2021. The average watch time of ZEE5 viewer per month stood at 190 minutes. The platform reported Q1 FY22 revenue of Rs 1,117 million, while EBITDA stood at Rs 2,033 million. The EBITDA loss excludes costs incurred by the business on ZEEL network.

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