Zee News, which operates six regional news channels and a business channel, has experienced a good start to the new fiscal with net profit rising sequentially 33.8% to Rs. 119.40 million and consolidated sales of Rs. 1.37 billion, down marginally from the previous quarter.
Salary cuts and staff rationalization reduced personnel costs by 3.9% to Rs. 196.3 million compared to Q4-09. This resulted in a reduction in expenditure by 4.3% to Rs. 1156.82 million, despite a rise in selling, distribution and administrative costs. “Our endeavor to de-leverage the balance sheet has led to a 13% reduction in interest costs sequentially” Laxmi Narain Goel, Managing Director, Zee News said.
Consolidated EBITDA is up 43.5% to Rs.248 million year on year. New businesses reduced EBITDA levels to 18.5% from 41.9% during the quarter but it is still higher than the 16% margins recorded in Q1, FY-09. Expenditure on new businesses excluding 24 Ghanta, totalled Rs. 50.94 million, almost 75% higher year on year.
The total contribution of advertising has risen to 79.4%, compared to 77.3% last quarter. Sales through advertising has turned around showing a 1.9% quarterly and 22.7% year on year increase in revenues from advertising to Rs.109.08 million. Political advertisements signed on last quarter, which were removed once the code of conduct was sounded, have come into effect this quarter, as Zee News Chairman Subash Chandra said in the conference call last quarter. The company projected that the second quarter of the fiscal would be the most challenging for broadcasters and that in the third quarter, the market is expected to turn around.
Chandra said, “A fast digitizing country has led to an upside on the subscription revenues and going forward we foresee exponential growth from this revenue stream as well.” Subscriptions to the Zee news bouquet grew 25.2% to Rs. 265.4 million year on year. It now contributes to 19.3% of total revenues, up from 18% in Q4-09.
There are 13 million DTH subscribers in the country and IPTV is also rolling out in metros. They are the digital networks that the broadcaster is referring to when it expects further growth. Last quarter, DTH subscriptions contributed 37% to the subscription revenues.
Zee News has the benefit of choice though, unlike its sister company Zee Entertainment which is shifting to a subscription-led model due to plummeting advertising sales. Zee News recently launched regional channels, which are good media for regional advertisers seeking to reach target audiences.
Regional Channels & Viewership
Zee News recently added a new COO post and put Zee Telugu chief executive officer Sanjay Reddy in charge of all the South Indian operations. Bengali news channel 24 Ghanta owner Zee Akaash News, a subsidiary in which Zee News holds 60% stake has made an operating loss of Rs. 0.4 lakhs for the quarter. This adds to the total loss incurred due to new channels of Rs. 57 crores.
Viewership share of its channels grew to 4.65% in Q1 FY10 as compared to 4.48 % in the corresponding period last fiscal. The company claims Zee Business’s market share has increased to 26% as compared to 14% in the first quarter of last fiscal.
Zee Telugu, launched three years ago, experienced an 8% GRP growth during the quarter. The newly launched Zee Tamil, Zee 24 Gantalu and Zee News U.P. are still being ramped up. Distribution issues caused Zee Tamil’s progress to slow down and the channel’s programming and marketing costs were cut back so the company expects the recovery period to also be longer.
Zee Kannada is currently at the third position and holds about 11%-12% of the market share. Did the channel break even this quarter? We will update this post later, so check back.
Zee spent 45% of its unutilised funds on acquiring movie rights in FY-09.
The company is also planning to launch a Malayalam channel and a second Telugu channel called Zee Cinemalu this year.