ZEEL Q3 FY2929 revenues see 5.5% decline; ad revenue down by 15.8%

Zee Entertainment Enterprises Limited has reported consolidated revenue of Rs 20,487 million for the quarter ended December 31, 2019, a decline of 5.5 per cent YoY. For the third quarter of FY2020, ZEEL’s Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for the quarter declined by 25.0 per cent to Rs 5,658 million and EBITDA margin stood at 27.6 per cent. Profit After Tax (PAT) for the quarter was Rs 3,494 million. 

Q3 FY2020 Highlights 

During the third quarter, ZEEL’s consolidated advertising revenue declined by 15.8 per cent YoY to Rs 12,308 million. Domestic advertising revenues declined by 15.7 per cent YoY to Rs 11,570 million. International advertising revenue for the quarter was Rs 738 million. 

Domestic advertising revenue was impacted by the continued slowdown in key consumer sectors. As the volume growth for most consumer companies did not see any uptick during the quarter, they cut advertising spends to protect their margins. While the festive month of October saw a pick-up in advertising spends, the growth slumped post that. The growth was also impacted due to a higher base and the effect of conversion of two channels from FTA to pay in March. 

On the other hand, ZEEL’s consolidated subscription revenue grew by 15.4 per cent to Rs 7,137 million during the quarter. Domestic subscription revenue grew by 21.7 per cent YoY to Rs 6,317 million, while the International subscription revenue declined by 17.4 per cent YoY Rs 820 million. 

The domestic subscription revenue growth rate saw a sequential decline due to the impact of a higher base and reduction in a-la-carte prices of some of the group’s channels during the festive period. During the quarter, TRAI announced changes to the Tariff Order, which are proposed to be implemented from March 1. All the major broadcasters, under the aegis of IBF, have challenged the proposed regulation in the Bombay High Court and the case is sub-judice. 

Meanwhile, ZEEL’s total expenditure in Q3 FY2020 stood at Rs 14,829 million, higher by 5.0 per cent YoY, compared to Q3 FY2019. Considering the weak revenue scenario, the company took measures to control cost during the quarter, which resulted in only 5.0 per cent YoY increase in total cost, despite 6.2 per cent increase in programming cost. The programming cost increase was led by content cost for ZEE5 and higher movie amortization costs for ZEEL’s movie channel portfolio. Other expenses have a one-time expected credit loss charge of Rs 376 million due to the expected delay in receiving payments from some of the distributors. 

Commenting on the group’s performance, Punit Goenka, Managing Director and CEO, ZEEL, said, “Third quarter is normally a strong growth period for us, however, the tough macro-economic environment led to a decline in our ad revenues. Most of our advertisers are going through a slow-growth period and that has led to a cut in advertising spends. I believe that the worst phase is behind us and we will start seeing an improvement from the next quarter. The proposed changes to the tariff order by TRAI are being challenged in the court and we are awaiting the final verdict. However, I am confident that our strong portfolio of channels across markets will enable us to navigate any regulatory changes in the most efficient manner.” 

Goenka further said, “Despite the slowdown, we continue to make investments in businesses where we see potential for growth. Working with our strategy to entrench ourselves deeper into the regional markets, we have launched 3 regional channels that will make our content more accessible to audience across the country. India’s first Punjabi GEC will surely help further strengthen our viewership share and brand in the north Indian markets. With the addition of two new regional movie channels, we now have the biggest movie channel portfolio in the country. We are preparing for the launch of two more channels over the next few months. We also continue to invest in original content for ZEE5, to create a rich content library that will make it a really compelling offering for consumers. These investments will help us grow ahead of the industry once this transient slowdown phase has passed.”

Digital Business 

ZEE5 recorded a peak DAU (Daily Active User) base of 11.4 million in December 2019. ZEE5 users watched an average of 140 minutes of content every month on the platform during the quarter. During the quarter, 26 Original shows were released, of which 14 were in regional languages, along with movies in 6 languages. With a strong content line-up across genres and languages, ZEE5 is on track to release 70+ originals in FY2020. 

A refreshed ZEE5 Progressive Web App (PWA) was released in December to enable a seamless user experience on mobile web. ZEE5 was launched on Tata Sky Binge, further widening the distribution reach of the platform. ZEE5 is the only OTT platform integrated with IRCTC. To leverage the rapidly growing penetration of smart TVs in India, ZEE5 has inked deals with leading smart TV brands for placement of hotkey on their remotes. 

ZEE5’s international expansion is seeing initial signs of success in the APAC and MENA regions, which have a close affinity to Indian content. A mix of high-decibel marketing campaigns along with partnerships with local telecom operators in key target markets like Bangladesh, Sri Lanka, UAE, among others, is helping increase the platform’s reach.