The rising prominence of Internet-based content platforms – such as Jio Cinema and Disney+ Hotstar – hurt the advertising revenue of two major Indian broadcasting groups – Zee TV and Sun TV – during the July-September quarter.
The two media groups reported muted ad-spending – particularly by the packaged consumer goods segment, hurt by the diversion of ad money to mega sports events such as the ICC Men's Cricket World Cup on app platforms.
Sun TV and Zee TV don’t have a strong presence in sports broadcasting and lose out when there are major sports events.
The September quarter was particularly bad because these companies have already been hit by a prolonged weakness in the advertising sector this year, and were looking for a break-out.
However, the second quarter failed to give these two companies the expected boost, also because of the listless rural economy and a delayed festival season.
The major drain, however, was the ICC Men's Cricket World Cup, despite the fact that it started only in October: Some of the advertisement spending was put off in anticipation of the World Cup.
“The industry has seen a massive change in the ad budget for sporting events,” a Sun TV official told IIFL Securities in a meeting, adding that this year’s ad revenue growth will be very nominal.
For Zee Entertainment too, ad revenues came in below Street expectations at Rs 940.9 crore during the second quarter, compared to Rs 1,012.8 crore in the year-ago quarter. Zee said it was “cautiously optimistic” on the outlook going forward.
“During the quarter, while we saw some gradual pickup in ad spends led by FMCG, the pace of recovery is still slow. Asia Cup cricket in September also took some share of FMCG ad money,” said Punit Goenka, MD and CEO of Zee Business, noting the 3.3% year-on-year decline. But he pointed out that it was up 4.1% compared to the first quarter, reflecting what he called the “nascent pace of ad spend recovery”.
New Disruptions
Interestingly, the decline in ad revenue was not accompanied by a decline in viewership or media consumption for these two broadcasters. For example, in Sun TV’s core Tamil market, the company’s viewership share has been stable or even slightly higher in recent quarters.
Rather, the decline has been caused by a more fundamental change in the broadcasting business – particularly due to the competition faced by broadcasters from a new class of players – apps. This year, for example, saw the entry of a massive new player into the sports broadcasting business – Jio Cinema, owned by the Reliance Industries group.
The app won rights to the biggest event in India’s cricket world – IPL – and disrupted the market with its unconventional business model.
Unlike satellite channels, Jio Cinema decided to allow anyone to watch sporting events without paying a subscription.
This had a far-reaching impact on the business. Primarily, it forced its rival, Star India, to also follow suit by offering live streaming of the men’s World Cup without a subscription on its Disney+ Hotstar platform.
Because of this, these platforms faced added pressure to generate revenue through the only other means possible – advertising – and crowded out Sun TV and Zee TV.
However, on a positive note, Sun TV management said that local and regional advertisers continued to advertise on its platform, accounting for 65-70% of the company’s ad revenue during the quarter.
The management stated that ad spends has been ‘largely buoyant’ as far as these categories – local retailers, jewellery chains, real estate players, etc – were concerned.
“They have even advertised on expensive prime-time slots in the flagship channels. The company expects continued traction from these players to support the ad revenue,” said the management.
Outlook
Besides local players, Sun TV is betting on higher ad spends by political parties and government agencies ahead of the elections in November through May.
“A number of ministries such as Road, Agriculture, Railways, etc., have started advertising in the run-up to the 2024 elections,” it said.
However, IIFL Securities added a note of caution, noting that the third quarter too could turn out to be “sluggish” for Sun TV as a significant portion of the ad budget has been allocated towards the 2023 Cricket World Cup.
Zee TV too remained optimistic about the upcoming quarters and said that it was noticing some changes in the advertising expenditure and was hopeful of a gradual recovery.
“The recovery mode [in the advertising segment] has just begun, and we are yet to witness rural sentiment improve entirely, thereby keeping us cautious on the overall growth,” said CEO Punit Goenka recently.
“The festive season is expected to spur growth in the third quarter, and we remain optimistic of delivering higher growth albeit with some caution towards the overall macro-economic environment,” he added.
On the other side, the TV18 Network – the parent of Jio Cinema – said that one of its media divisions saw a sharp growth in advertising revenue in the second quarter in sports and digital segments.
The sports revenue was driven by the two cricket series – West Indies vs India and India vs Australia – while the digital revenue was led by original shows like Bigg Boss OTT, Taali, Kaalkoot and TV network shows like Khatron Ke Khiladi, said the media channel.
However, it said that the advertising demand in the entertainment broadcast segment continues to be soft as spending by consumer goods companies and new-age clients remains weak.
The companies also benefited from strong performances by their movie production businesses.
Zee Studios’ Gadar 2 and Sun Pictures’ Jailer helped cushion the impact of soft ad spends in the traditional broadcasting business.
Gadar 2, which was released in theatres on August 11, has recorded worldwide collections of over Rs 690 crore.
Jailer collected more than Rs 650 crore worldwide, becoming only the second Tamil film after '2.0' to achieve this feat. SunTV is also reported to have earned Rs 100 crore by selling the movie’s OTT rights to Netflix.