TV18 Broadcast Reports Strong EBITDA, Revenue Growth In Q1

TV18 Broadcast Ltd’s earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 96 percent to Rs 77 crore in the quarter ended June 30 on operating leverage accentuated by cost controls, said the company.

The company’s consolidated revenue rose 10 percent to Rs 1,198 crore in the June 2019 quarter led by election advertising and strong growth in subscription income after the implementation of a new tariff order.

“News, both broadcast and digital, benefitted from election-related advertising during the quarter. We expect the environment to pivot as we head into the festive season,” the company said.

The company reported a profit of Rs 23 crore compared with a net loss of Rs 7 crore in the year-ago quarter.

“Overall, from an EBITDA loss last year, Q1FY20 has seen a major leap in profitability. This has been driven by election-advertising as well as the continued reduction in Regional News gestation losses, on operating leverage as well as cost controls,” the company said.

On NTO, Network18 said implementation pains have smoothened with subscription income receiving a boost. “As consumers make their pack/channel choices, we believe that strong content propositions and distinctive brands will continue to gain traction. Our bouquet is well-placed to benefit, through leading channels and improved distribution tie-ups,” it said.

TV18’s viewership share in news was 10.1 percent in the first quarter as against 9.3 percent post NTO implementation.

Adil Zainulbhai, chairman, Network18, said amidst a challenging advertising environment and the implementation of a new tariff regime, the company has continued to focus on creating great content for all media. “Our regional portfolio continues to grow across both broadcasting and digital, and we believe that the connect our growing brands enjoy with the diverse Indian populace shall stand us in good stead.”

TV18 Broadcast’s parent Network18 Media and Investments said its consolidated net loss for the first quarter ended June 30 widened to Rs 128 crore from Rs 112 crore a year ago due to exceptional items. The media and entertainment company’s revenue from operations rose nearly 11 percent to Rs 1, 245 crore in the June 2019 quarter from Rs 1,124 crore a year earlier.

The company said, “Exceptional items for the quarter ended 30″ June, 2019 represents impairment of investments in Homeshop and provision for trade receivables from Homeshop and its wholly-owned subsidiary Shop CJ Network Private Limited.”

The company’s EBITDA rose 137 percent to Rs 46 crore in the Q1FY20 from Rs 19 crore in the same quarter previous year.

CEO of Broadcast News at TV18 Avinash Kaul and MD of Viacom18 Sudhanshu Vats spoke with CNBC-TV18’s Latha Venkatesh about the financial performance of the company.

Edited excerpts from the interview:

This is a great performance in the news business. News business standalone revenues growing by 29 percent and of course EBITDA growing substantially, give us more colour, is it largely elections?

Kaul: In large measure, it is of course because of the elections. It has been a bright spot for us, no doubt about that, and primarily for the general news segment part of it. We haven’t seen much action happening in the business news segment because elections primarily are a general news stable.

On the other hand, we have also been very effectively looking at costs and the management of that and the operational synergies that we have drawn by integrating the regional and the national news networks, which have resulted in substantial cost controls as well.

When you look at both these items put together, that is what has helped us go from literally losses into substantial profits when you look from quarter-to quarter basis (QoQ).

In that case, since you are saying that elections were such an outsized contributor, what is the view for the year considering that there has also been a new tariff order (NTO)? So two questions, has the new tariff order impact stabilised and what is your view of the news space for full FY20?

Kaul: At the start of the quarter, I think the new tariff order did create a lot of teething issues for us, for the general industry at large. But, I think those pains have gone away. It is still just about stabilising, it is kind of still around its motion but I think it will probably stabilise. But it has resulted in a good boost for us from a subscription-base perspective, right? But the reach and other things while people have become, consumers have become used to choosing which packs they want to get on to and all those kinds of teething issues related to that, I think overall it has been good for the business. That is what has held us in good stead in this quarter as well.

Are you seeing a good jump in subscribers?

Kaul: We are seeing a good jump in subscription numbers. It has been fairly substantial and moving forward for the general year, I think since the year does include the elections, June particularly was a bit dampened because a lot of action is happening in the sports area. So a lot of advertiser money was going towards sports. Then we have the festive seasons coming up and then the budget coming up again at the end of the year. So we should be in a good spot by the end of this financial year.

It is a 48 percent rise in subscription.

Kaul: That is right.

How will the year-end look like full FY20?

Kaul: It is an evolving situation. It is very difficult to say right now.

This is not affected by low base or one-offs. Can we say that we will be able to grow substantially for the full year? Any numbers you want to give on subscription?

Kaul: Very tough at this point of time to be honest because the consumers are still getting used to it. A lot of people are still figuring out from dual TV sets to single TV sets. Different people have different thinking. Also, what happens is sports drove a lot of subscriptions in this quarter. Now with the sports ending now, the cricket largely, it might lead to a different kind of a shuffle as far as the subscription is concerned.

So all of these factors are still playing out. It is very difficult to give an annual number at this point of time.

The performance at the revenue level for entertainment was not very good, 11 percent. Can you give us more colour, were you disrupted by the new tariff order or was the general overall tepid consumption the issue?

Vats: There are a few things which have played out for entertainment. First of all, there is no impact of election on entertainment. So what has happened is we have had very robust subscription growth, about 48 percent. That is very good news from a subscription growth point of view and that is indeed very good news for entertainment as we go forward because that is one of the catch-ups we needed to do with our peers. So that is excellent news.

The second thing is that on advertising, what has happened in this quarter is there are three factors. Avinash Kaul just spoke about sports. That is a factor because it was a very heavy calendar, Indian Premier League (IPL) and Cricket World Cup (CWC) together. So that took away a lot of that stuff.

Second is beginning of the quarter, there was some level of uncertainty around NTO and therefore what will be the eventual reach and so on and so forth, so advertisers were a bit more cautious as they entered the quarter — previous quarter and the beginning of this quarter. So that had played a role on ad sales growth, although subscription growth has been very good.

Lastly, I think general economy also slowed down on certain fronts, which you know very well. Automobiles have slowed down considerably, fast moving consumer goods (FMCG) segment is a little worried now especially on rural growth, so that is an issue.

I was told anecdotally that during the World Cup, there was no growth in colour televisions, which is absolutely unprecedented. So some of those are clear headwinds for us as we go forward. So a bit of economy, sports will correct because that is behind us, NTO some amount of churn will continue as you were asking Avinash Kaul. I think it is largely settled down, but my sense is because this is a new regime, about now like in telecom companies, we have to expect even in broadcast subscriptions about 8-10 percent churn every quarter, some form. But the good news is it is largely settled down and another very good news is that people of India have actually chosen. So if you look at the packs which have been chosen, about 60-70 percent are distributor packs, which is the way it used to happen earlier, but more importantly about 30-35 percent of the packs have been chosen by individuals – there is stickiness.

If you can give us some idea of what were the pressures on the margins and how are you seeing it pan out?

Vats: The good news on margins per se, on profitability is, we continue to remain very focused on cost. So, if you look at it, EBITDA has again grown close to about 40 percent plus but more importantly business as usual, we have done two new things even in this quarter which is the Guajarati Cinema channel and investments in Voot Kids beta, which have gone in now fully, the payment beta. So our business as usual EBITDA growths are upwards of 70 percent. Our expansion in margin on business as usual is 300 basis points (bps) in this quarter, close to 300 bps in this quarter. So on margin front, we continue to improve and with subscription the good news is that as we go forward, margin will continue to improve as well.

Give us some colour on whether digital products are making money. Is it still in investment mode, some numbers on the capex and returns?

Kaul: Overall if you look at the digital proposition, we have established in this quarter that we are the number two digital player in India. We had around 166 million users on digital in this front.

Could you monetise it?

Kaul: The growth has been 34 percent on the digital business and the only dampener again has been the business segment within that which is primarily Moneycontrol and That section is generally seeing headwinds due to whatever all the pressures that Sudhanshu talked about in the economy at large. Those are the ones which are playing out there.

But otherwise, since elections again was the propelling force, I think the 34 percent growth on that base was a good number. We do continue to invest, there has been significant investments in manpower in that particular side of the business and that is something that will continue as we keep seeing the audiences moving on to the digital front and as content creators it is really agnostic to which platform they come into but that is what we are seeing and that is what we are continuing to invest in.

Overall what is the subscription ad revenue split?

Kaul: For television business, this is just a first quarter, it will still evolve because this is first quarter that you are saying 48 percent jump in subscription. When things settle down, there is also pressure because of the NTO on some of the English language channels particularly business news so the ratio probably will settle down by the end of this year, probably will have a better number which might be a most stable number as opposed to what has happened historically in the past.

What I am asking is will subscription be sticky enough because both of you said that subscription has been sticky?

Kaul: Subscription will continue to be sticky.

Will it be able to compensate the headwinds in ad revenue because of the state of the economy?

Kaul: In large measure. If there is let us say 29 percent growth overall, it has also contributed to a large measure by subscriptions, and the softness that you saw in business news is countered by some of the subscription numbers that come through in this particular thing. That is something that we will continue to see as the year goes by and eventually a new normal sets in for some of the channels, which are earlier more used to advertising and now will look at a better homogenous mix between subscription and advertising sales moving forward.―CNBC TV18

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