TV18 Broadcast reported a 15 percent jump in its consolidated net profit for the second quarter ended September 30, 2019, at Rs 46 crore. Net profit in the same quarter of last year stood at Rs 40 crore and at Rs 23 crore in the first quarter of the current financial year.
The company said its total income for the given quarter stood at Rs 1,151 crore as against Rs 1,201 crore for the same period of last year and Rs 1,231 crore in the first quarter of current fiscal. Total expenses dropped to Rs 1,104 crore versus Rs 1,146 crore in the corresponding period of last year.
The company’s pure earnings, or EBITDA margins, improved to 9.3 percent as against 9 percent last year. While subscriptions in the second quarter rose by 43 percent, advertising environment continues to remain soft.
Managing Director of TV18 and Network18 Rahul Joshi and Viacom18 Managing Director Sudhanshu Vats speak about the financial performance of the company and the future outlook.
Subscription doing very well, do you think we can sustain this 43, last quarter it was 48, it is a fairly handsome pace, can it be sustained? Joshi: I think the fact that subscription revenues have gone up shows that the new tariff order has been beneficial to the broadcasters. Looking after the news business, I feel very happy that we are not free to air. Our customers, our viewers are paying for the news that we dish out, which is very good news for us. So it is a good development for us from news and from an entertainment point of view. I just want to know if we can sustain it, but more importantly the weakness is ads; it is not a surprise at all – every company that comes on the channel has spoken about a slowdown in consumption but how bad is it and are you seeing any green shoots in October itself with the festival season starting? Joshi: We definitely see green shoots in October. This month has been much better than the last two months. We have really seen some tough economic conditions in the second quarter. This month, while it has been good, I might add a caveat. I think it is not as good as the October of last year. So there is definitely the impact of slowdown that is being felt.
I think the consumption story – I do see some challenging months ahead as well. So I think advertising, display advertising, will remain under some kind of pressure though October as a festive month has really picked up for us.
It doesn’t work this way that people are now hard-pressed to gain market share or maintain market share and therefore advertise – it doesn’t work negatively and positively for us? Joshi: I don’t really think so. In a slowdown, advertising is the first thing that goes out. Also, it is very often the last thing that comes back. So we have to be careful but at an overall level, the subscription revenues are sustainable. This new tariff order and its implementation has helped the broadcasters -- that is definitely a good news. You all have certainly controlled costs – I should say we because there has been a control on costs, employee costs and resources costs? Joshi: Absolutely. There has really been a good check on the costs in the last quarter. We have been doing this over the course of the last year and the benefits are now beginning to show. I think these will also show in the subsequent quarters; because of that we have been able to maintain our profitability, our regional news is well on its way to profitability and breakeven. That is the good news. I think we have also grown in regional and Hindi news. It is the English, the business piece, which has not interrupted. The old cash cow which is not growing. Joshi: That is right. I just want to ask you this is also election season, in the sense there are a couple of state elections and then of course there will be Q4 which will be budget. So what is your view of the second half? Joshi: I think the Q3 will continue to remain tough given the conditions. I think the Q4 is usually good for news because we have a budget in that quarter, we have a lot of branded content properties that all stack up into the Q4. So it’s typically the second half. Hopefully the sentiment will also pick up. I think the government is taking some measures, they are seized of the problem and they acted in the past. So the next two quarters, I look forward to them with hope and optimism but I would definitely like to say that the conditions are tough; we have seen a very, very tough quarter and things while they may be easing up, I would say that we should also be careful in the coming two quarters. Coming to the entertainment part, particularly because Q3 is good for you. So first tell us how has the Q2 been for Voot, how have been the download and what are you looking forward to in this festival season? Vats: As far as we are concerned, just building on what Rahul was saying, I think Q2 has been, from a revenue point of view, a mix story; advertising has been under pressure and we talked about that but subscription has been really good and that’s a good thing. Therefore, overall if you look at the end of first half, we are sort of, on revenue, holding on but importantly because of cost control one thing which is very heartening and this is the process we spoke about just now as well. In entertainment we are beginning to now make solid movements as far as profitability is concerned. So because of all the cost controls which we have brought in place. So the fallout of a tough year has been that as we exit FY20 we are likely to nearly double the profitability of our entertainment business. Which are the streams? Vats: Across the board, the point is that we have tightened everywhere on different lines. The second interesting thing which is the fallout of this tough year is that we are making rapid strides in digital, to very specifically your question on Voot. I think Voot now is beginning to deliver over 30-34 million daily active users which is a very good thing and with Bigg Boss now come in, we are now looking at between our own numbers and our partnerships and a monthly active user base in October which we are projecting of upwards of 80 million. And if you remember, I had talked about this number earlier. So it’s a rapid improvement about 50-60 percent. So these two are very important. Our strategic shift towards building a strong digital portfolio and considerable substantial improvement in profitability are two really good news in this overall slightly dark cloud of the previous quarter. You have two phrases that caught my eye. Original content behind the paywall and kids edutainment product. Now out there in the world Netflix is making money, BYJU is making money, should we believe these two can become income generators -- original content behind the paywall and edutainment? Vats: You are absolutely right. This is where we are going to further build our digital portfolio. So, Voot Kids has now gone live, behind paywall. Our payment systems are currently working more on iOS, we do not have those many functionalities on Android, but our first set of this thing is extremely good.
We are going commercial launch with Voot Kids which is our kids’ platform in this quarter. So, you will see that hopefully a month down the line. We are doing our beta launch of our paywall service for adults. So, basically our Voot paywall service where originals will come, where you will have to come behind paywall and there will be three functionalities there, there will be originals, there will be good international content, and there will be linear channels and ad-free video-on-demand (VOD) which is available. So, I think that proposition is also looking good.
So you are hoping that that can be a money spinner? Vats: In future I think. So we are building a strong foundation on digital with advertising-led products, subscription-led product and kids’ product. All three are coming into play. How is the digital business doing, I mean Moneycontrol, Forbes and Firstpost? Joshi: We have invested in digital over the last couple of years thinking that it will pay off in the long run and I am happy to report that we have indeed done well in this year where there has been a problem with advertising.
I think Moneycontrol has launched a very successful subscription product called Moneycontrol Pro. It is doing exceptionally well for us. As these subscription products go, people are not even getting subscribers in tens or thousands, we have 85,000 subscribers and counting; that is just in five months. So, I think that is a big story.
We have launched News18.com in 11 languages in the last one year. On mobile, in languages we are number one. In most of the regional languages in News18.com we are in the top three.
Our overall television share (of TV18 Broadcast's viewership) has also grown from 10.1 percent to 10.9 percent after the new tariff order. I think that is also good news. So, overall the health of the business is good. I think we are waiting for better times ahead to be able to monetise some of these assets.
I was just going to ask you, how much of this is monetisable and therefore will Network18 be in the black very soon? Joshi: We all hope that it will happen because I think we are opening new revenue streams like subscription revenues even in digital like MC Pro, Voot as Sudhanshu was saying is going to go live next month. So, I think there are new revenue streams coming up and we are hopeful that if the health of the business is there, if our ratings are good, if our numbers hold, if our traffic grows, I think we will sooner or later monetise these products.
Disclaimer: Reliance Industries owns TV18 Broadcast and Network 18 which publishes CNBCTV18.com