Mumbai: When life gets tough, we often turn to movies, music, or binge-watching our favourite shows for comfort. Behind the scenes, it’s a robust balance sheet that keeps the entertainment industry going. For Zee Entertainment Enterprises Limited (Zeel), a pioneer in India’s satellite television space, the latest financial results for Q2 FY25, announced on 18 October 2024, reflect the company’s determined efforts to navigate a challenging economic landscape while driving growth and profitability.
The company reported a profit after tax of Rs 2,095 million, a 61 per cent increase from the same period last year, underscoring its successful cost-reduction strategies. Improved operational efficiencies helped Zee achieve an EBITDA margin of 16 per cent, up from 13.6 per cent in Q2 FY24, even as the broader macroeconomic conditions remained difficult.
Zee's Q2 FY25 revenue stood at Rs 20,007 million, a decline of 18 per cent YoY, primarily due to a decrease in advertising revenue. The advertising segment experienced a 9 per cent drop YoY, affected by a muted spending environment. This softness in the market reflected the broader industry's struggle to regain momentum. In contrast, subscription revenue showed resilience, increasing by 8 per cent YoY as the company capitalised on digital content demand and favourable regulatory changes following the NTO 3.0 implementation.
Zee's network viewership share increased by 100 basis points over the previous quarter, reaching 17.4 per cent, driven by content enhancements across popular channels like Zee TV, Zee Marathi, and Zee Tamil. "We have strengthened our competitive position with a 60 bps network viewership share gain over the past two quarters and are well-positioned to capitalise on the ad spend recovery," said MD & CEO, Punit Goenka,.
The company’s digital arm, Zee5, continued its positive trajectory, posting a 6 per cent QoQ revenue increase to Rs 2,363 million. Efforts to streamline the cost structure resulted in a reduction of EBITDA losses by Rs 189 million QoQ. Zee's focus on balancing growth with long-term financial sustainability appears to be bearing fruit, especially in the face of a challenging macroeconomic environment.
Zee's financial position remained robust, with cash and cash equivalents rising to Rs 17.8 billion as of September 2024, aided by proceeds from the first tranche of foreign currency convertible bonds (FCCBs). Additionally, the company continued its disciplined approach to managing content inventory, which declined by Rs 4.1 billion during H1 FY25 due to strategic content acquisitions and movie releases.
The reduction in operating costs, primarily in programming and technology, contributed significantly to improving the bottom line. As Goenka highlighted, "Our prudent cost discipline and focused execution enabled us to clock a 630 bps improvement in EBITDA margins despite a challenging macro environment."
Despite Zee's strong performance on the profitability front, the ongoing struggle with ad revenue remains a concern. The company acknowledges the need for a sustained recovery in advertising spending, especially with the festive season approaching. While ad revenue showed some signs of improvement towards the end of the quarter, broader market recovery will be crucial for sustaining growth.
