Post NTO Effect: Tepid Advertisement Growth With Strong Subscription Revenue

Post NTO Effect: Tepid Advertisement Growth With Strong Subscription Revenue

Tepid advertisement growth coupled with strong subscription revenue, after TRAI New Tariff Order (NTO).

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TV18 Q3FY20 Results 

Revenue decline of 3% YoY to Rs 14.75 bn; on a 9M basis revenue was flat YoY.

EBITDA margin grew 1600bps YoY to 20%; on a 9M basis it grew 500bps YoY to 12%. EBITDA margin in the news genre declined 300bps YoY to 13% whereas EBITDA margin in the entertainment genre grew 1600bps YoY backed by better subscription revenue growth.

Subscription revenue grew 40% YoY backed by positive impact of New Tariff Order, Advertisement revenue declined 16% YoY for the quarter. On a 9M basis, subscription revenue grew 43% YoY whereas the ad revenue declined 15%YoY. Decline in ad revenue was due to shift of channels from FTA to pay channels which negatively impacted viewership in GEC post NTO.

Revenue for news genre was flat YoY; viewership share was down 70bp QoQ to 10.2%

Entertainment viewership rose 90bps QoQ to 10.1%; subs revenue growth and content partnerships had a positive impact on EBITDA. Profitability improved despite investments in the regional movie channels (Rs 130mn in Kannada and Gujarati).

Z Channels & SUNTV’s Results

Advertisement Growth for Z channels and SunTV is estimated to post a decline in double digit for the quarter despite festive season and is largely in line; hence no surprises on the same. Subscription growth for TV18 is much higher than that of Z channels and SUNTV as the former’s share of subs revenue was mere 25% last year as compared to peers like Z channels or SUNTV who derived 29%/36% from subs revenue in the same period. We have estimated subs revenue growth in the range of 15%-20% YoY for Z/SUNTV with a slightly better performance by Z channels.

We maintain our underweight stance on the broadcasting segment in India until further clarity emerges on NTO 2.0; we believe there will be a big change on monetisation models for broadcasters given NTO and OTT threat and the ad.growth market too remains subdued currently showing no hopes of revival in the near term atleast. Maintain our Accumulate/Reduce rating on Zee Ent/Sun TV with a TP of Rs 310/Rs 520.

Karan Taurani @ Elara Capital

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