Higher ad spend to spur broadcasters revenue growth by 39%

Written by Shaheen Mansuri | Mumbai | Updated: Jul 16 2010, 08:27am hrs
Buoyancy in advertisement spends will lead to a revenue growth of around 39% for the broadcasting segment of the media sector for the June quarter, say analysts. Sectors like telecom, FMCG and auto were the key advertisers in this segment. Also, increasing digitisation and direct-to-home penetration will continue to boost subscription revenues for all broadcasters.

A report from IDFC Securities says Zee Entertainment Enterprises Ltd (ZEEL) is expected to garner a 33% growth in revenues for the June quarter to Rs 631.5 crore compared with Rs 475.9 crore in the corresponding quarter of the previous year on the back of a low base effect, strong revival in ad spends and additions of general entertainment channels (GECs). Its net profit will also surge 28% at Rs 130.8 crore as against Rs 101.9 crore. Zee has recently de-merged its six regional channels from Zee News to ZEEL.

UTV will also see a jump of 132% in its sales at Rs 201 crore as against Rs 86.50 crore. Net profit is estimated to be Rs 34 crore. UTV posted a loss of Rs 31.80 crore loss in the corresponding quarter of the previous financial year.

Sun TV Network is expected to post a 27% growth in revenues at Rs 365.30 crore for the June quarter compared with Rs 287.70 crore in the corresponding quarter of the previous financial year. Its net profit would be around Rs 143.30 crore as against Rs 119.80 crore, up 20%.

Regional channels are also consolidating revenues as their viewership is growing. According to a recent Ficci-KPMG report, advertisers are realising potential of regional channels as they look to penetrate deep. The report says that lower operating costs as well as the opportunity to earn attractive revenues from international markets mean that regional GECs can break even more quickly compared to their Hindi counterparts.

Says Divya Radhakrishnan, president TME, a media buying agency, Due to events like the Indian Premier League and the Fifa World Cup, an upswing in ad spends was witnessed during the June quarter.

Television advertising is expected to touch Rs 11,897 crore in 2010-11, up from Rs 9,914 crore in 2009-10.

Abneesh Roy and Sameer Bahirat from Edelweiss in their latest report say that they are bullish on companies in the GEC space mainly because broadcasting companies are expected to benefit from the increased share of subscription revenues with increasing digitisation and rapid rise in DTH ( direct-to-home) subscriber numbers. Currently, 22 million households have DTH connections. Of the 500 million homes with TV, only 30% are digitised with an anticipated growth of over 10% on a quarter-on-quarter basis.

According to the Ficci-KPMG report, Even though the media and entertainment industry faced a tough year in 2009 due to global recessionary pressures and the resultant reduction in advertising budgets, television as a medium showed mixed results. In the midst of a sluggish growth in advertising revenues, especially in the first half of the year, the industry had reason to cheer on an increased viewership on account of newer content and formats.