Expect Zee, Sun and TV Today ad revenue to grow by 8.5%, 9% and 12.4% QoQ, respectively: Elara Capital

TV was the first traditional medium to report higher advertising revenue versus pre-Covid-19 levels last year, however, Q3FY23 has been relatively muted with revenues declining 5%-6% year-on-year (YoY) versus pre-COVID-19 levels, despite the positive festive impact, as per the latest report by Elara Capital. 

As per Elara Capital’s report, the revenue decline in TV has been primarily due to - lower spends by new age/e-commerce companies (which cut advertising budgets by 30%-40% YoY), and muted growth in FMCG vertical due to a rise in inflationary pressures.

According to the report, the ad revenue of Zee, Sun and TV Today is expected to grow by 8.5%, 9% and 12.4% QoQ, respectively. This growth is led by the festive season. On the other hand, a decline of 12.8%, 1% and 8% YoY is expected for Zee, Sun and TV Today due to a higher base (TV medium surpassed pre-Covid levels last year). 

Elara Capital expects subscription revenue to remain flat for Zee and a growth of 6% QoQ for Sun; this is primarily on the back of uncertainty of NTO implementation. Elara expects subscription revenue to grow 8%-10% over the near term, helped by price hikes, as NTO 3.0 will be implemented by February 2023. 

For Sun TV, the absence of IPL and other operating revenue (movie segment revenue - no major releases this quarter) will lead to total revenue of Rs 8,563 million – a decline of 17.1% YoY and up 5.1% vs pre-Covid levels of FY20. 

Zee is expected to report flat revenue growth YoY, but up 3-4% QoQ/pre-Covid. 

Whereas, TVT’s revenue is expected to decline by 4% YoY, due to a high base in Q3FY22, although up 17%/11.5%, QoQ/pre covid respectively, driven by festive quarter. 

“Expect EBITDA margin to grow 80bps/down 90bps/ up 350bps QoQ, helped by higher ad spends; however, margins are estimated to decline 722bps/487bps/1720 bps YoY for Zee/SUN TV/TV Today respectively, due to 1) pressure on content costs (TV and digital) and 2) lower ad spends. Expect PAT to decline 53%/ 8%/ 51% YoY and grow 25%/5%/ 54% sequentially (decline 59%/up 13%/down 19% vs pre-Covid levels) for Zee/SUNTV/TVT respectively,” read the report. 

Radio medium is still struggling to reach the pre-pandemic levels, as per the report.

Radio as a medium has been growing slowly as compared to other forms of media while there has been a substantial shift of consumers towards digital, the report stated. 

As per the report, Elara Capital expects Entertainment Network/Music Broadcast to report revenue growth/decline of 14%/7% YoY (down of 40%/20.4% vs Q3FY20 – pre-pandemic levels) respectively. 

For ENIL, Elara expects the non-radio segment to recover at around 83% (vs pre-pandemic levels), helped by the normalisation of events/activations/concerts. The research firm believes that ENIL’s non-radio business will continue to report traction over the near term. It is expected that ENIL/MBL will report an EBITDA margin of 20.6%/12% in Q3FY23. 

Exhibitors are expected to perform better sequentially led by the strong performance of movies like Avatar-The way of water, Drishyam 2, Kantara and Vikram Vedha, while other big budget movies like Cirkus, Ram Setu, Thank God, Bhediya have performed much below expectations. 

As per the report, the festive season led to a healthy performance in Q3FY23 sequentially, however, growth was subdued when compared to Q1FY23. Box Office revenue is expected to post an 85% recovery to the pre-Covid-19 level in Q3FY23. Expect PVR and INOX box office revenues to grow 18% sequentially but decline 15% each vs pre-Covid-19 levels.

Ad revenue recovery is to be delayed in line with expectations and may only come back to pre-Covid-19 levels in FY24. The report further read, expect ad revenue to recover towards 60% vs pre-pandemic in Q3, despite the festive season primarily due to muted performance of Hindi content which drives a large portion of ad spending and challenged macro environment, wherein ad spends across verticals are under pressure. 

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