Increased investments in distrubution and marketing resulted in higher viewership, not ad revenues: TV18

New Delhi: Announcing the results for the second quarter ending September 30, 2022, TV18 Broadcast Ltd on Tuesday cited higher investments in distribution, content and marketing as reasons behind a 95.55% decline in its consolidated net profit.

The company reported a net profit of Rs 10.28 crore for the second quarter ending September 30, 2022, as compared to Rs 231.40 crore for the corresponding quarter of the previous fiscal.

According to Elara Capital’s media analyst Karan Taurani, “Consolidated ad revenues during the quarter declined 0.5% YoY, (up 14% QoQ and up 34% vs Q1FY20 – pre-pandemic levels), to Rs 827 crore, impacted by weak economic sentiments with high inflation posing a challenge for companies, especially the FMCG sector.

“Near-term weakness in ad revenue is very much in line, as expected with peers in this segment. We expect some revival in ad spends for H2FY23 backed by festive. We believe TV ad spends will at best breach towards pre-covid levels in FY23, as against a 95% ad revenue recovery in FY22,” said Taurani.

On a standalone basis, the revenue from news stood at Rs 298 crore in the quarter ending September 30, down 1% from Rs 301 crore in the corresponding quarter of the previous year.

Taurani said that the TV News segment, which has a 20% revenue contribution to the overall revenue of TV18, witnessed a 1% drop YoY (up 12% QoQ and up 14% vs pre-COVID levels – Q2FY20) primarily due to a decline in advertising revenue.

TV18 in its regulatory filing said that the events-led monetisation partially offset the loss of display advertising.

The drop in advertising revenue of the network was higher than the industry level because its key channels dropped inventories.

It is for the first time that the company’s standalone net and EBITDA margins are in red for two consecutive quarters.

The company reported a loss of Rs 12 crore in Q2FY23 for its news businesses against Rs 31 crore profit a year ago. In the previous quarter, i.e. Q1, the company had recorded a loss of Rs 5 crore.

The expenses were up 22% on account of investment in distribution, content and marketing, the company said in the regulatory filing.

In Q2FY23, the company’s operational expenses stood at Rs 302 crore versus Rs 247 crore a year ago.

"EBITDA margins (for TV18 news standalone) was -2% vs 18% in Q2FY22 and remained flat sequentially impacted by investment content and distribution initiatives," said Taurani.

For H1 also, the EBITDA margins was -2% vs 16.4% in the first half of the previous year.

Compared with the normalised results, the aggressive push on distribution and marketing additionally cost the company Rs 55 crore in the quarter and Rs 97 crore in the half-year ending September 30, 2022, compared with corresponding periods of the fiscal year.

If the company’s investment and inventory optimisation continue for the next two quarters, the standalone EBITDA and net for the entire year may remain either in red or flat depending on the uptick in ad revenues in the festive and election seasons.

The company in its regulatory filing said that the increased investments have resulted in higher viewership but that did not translate into ad revenues because of a subdued advertising environment.

“Operating costs for the quarter increased by 22%, primarily driven by content cost and distribution initiatives. Our investments have started showing positive results with a visible improvement in viewership metrics of our key channels over the last 2 quarters,” the company said.

“However, because of a subdued advertising environment, the increase in viewership did not translate into commensurate revenue. We believe that this investment is critical to build a strong foundation for growth which will help our portfolio fortify competitive positions across markets and drive strong revenue traction going forward,” it added.