Network18’s Q2 subscription revenue up 43%; to launch Voot freemium version

Network18 Media & Investments has reported a 43 per cent YoY growth in its subscription revenue for the second quarter ended September 30, 2019. Cost optimisations boosted Q2 FY2020 Entertainment EBITDA margins to 11.4 per cent vis-a-vis 9.9 per cent last year. 

Broadcast subscription tailwinds continue to benefit: Network18’s subscription income grew by 43 per cent YoY in Q2 FY2020, continuing the 48 per cent growth YoY witnessed in Q1 FY2020. The implementation of the new tariff order (NTO) has created a transparent and non-discriminatory B2C regime. Flux around the NTO has largely settled, though the cable segment continues to face some billing and reporting issues. Domestic yields have improved, led by the strength of our bouquet as demonstrated by consumer choice for the network’s channels and packs. Improved distribution tie-ups have increased the reach of the channel portfolio across TV and Digital. 

Green-shoots in late Q2 amidst general ad-weakness: The advertising environment continued to remain tepid during much of the past quarter. Weak macro-economic trends dragged down consumer spends and depressed broader corporate appetite for above-the-line marketing activity. However, certain categories of new-economy advertisers were bright spots, and tailwinds in regional and digital consumption continued to attract attention. Ad-spends began to rise led by the advent of the festive season late in the quarter, and big-ticket programmes and events planned around the same. Network18 is hopeful that Government policies aimed at stimulating demand shall aid the recovery as the industry heads into H2. 

News bouquet (20 channels) maintained its #1 position. TV18’s Q2 viewership share in news increased further to 10.9 per cent, up from 10.1 per cent in Q1 consolidating its leadership. 

As election tailwinds witnessed in Q1 tapered off, Q2 operating revenue for News declined 2 per cent YoY. Weakness in financial markets, lack of government ad-spending and limited international advertising compared with last year dragged growth. 

Tight rein on costs kept Opex near-flat YoY. The News business remains firmly above breakeven, as regional news bouquet continues to ramp-up and move towards profitability. 

Entertainment bouquet (Viacom18’s 32 channels + AETN18’s 4 infotainment channels) is #3 amongst national players: TV18’s Q2 entertainment viewership share was 9.2 per cent as against 9.1 per cent last quarter. 

GECs impacted portfolio revenue growth; Digital picking up steam: Macro-weakness and shift of channels from DD Freedish to Pay ecosystem continues to drag ad-revenues of GECs for the entire industry. Pushing of some high-end content versus last year for better monetisation (that is, planned delay in the launch of ‘Bigg Boss’, shifting of IIFA awards to Q3, etc.) makes the base not fully comparable. 

Improved subscription income and cost controls raised EBITDA 7 per cent YoY: Sharp pullback in broadcast costs through optimisations raised EBITDA margins to 11.4 per cent vs 9.9 per cent in Q2FY19. This is despite investments to the tune of Rs 13 crore in regional movie channels (Kannada and Gujarati Cinema) and paid-offerings (Voot Kids & International). Excluding these, BAU margins improved to 12.9 per cent. BAU margins include the impact of initiatives launched more than a year ago but are still in gestation, including Voot and Colors Tamil. 

Digital-only subscription a nascent, high-growth area of impetus: A robust uptake was witnessed for the subscription product MoneyControl Pro launched in Q1. The product underscores the impact of a strong brand and superior features at a class-leading price-point. Voot, the primary OTT VOD platform for the group, shall soon be launching its freemium version with offerings like digital exclusive and digital-first broadcast content as well as original content behind a pay-wall. Kids edutainment product, Voot Kids, was soft-launched in Q1 with a niche and highly differentiated offering, and shall be progressing to commercial operations behind a pay-wall in this fiscal. 

Network18 digital is #2 in digital news/ information category, has ~180 million unique visitors. Network18’s digital revenues grew 10 per cent YoY to Rs 46 crore. Sharp display advertising growth in News18.com (especially vernacular) boosted revenues even amidst a tepid environment. Operating margin fell due to operating losses of recently launched app CricketNext (Rs 4 crore) and investments into the subscription model of MoneyControl, MC Pro. 

Commenting on the results, Adil Zainulbhai, Chairman, Network18, said, “Network18 successfully encapsulates News and Entertainment content, across National and Regional platforms, in both TV and Digital mediums. We are fully geared for a Digital world, with differentiated content available on integrated platforms on a pipe-agnostic basis. Impetus on seeding new business models and germinating fresh ideas are the hallmarks of our Digital business, which is backed by a TV content backbone that we continue to invest in.”