Zee Entertainment chief executive officer (CEO) Punit Goenka is hopeful of a recovery in the advertising spending, as he expects the upcoming Union Budget 2025 to improve consumption, which has been sputtering.
“We are hopeful that the upcoming Union Budget will encompass pertinent steps by the finance minister to revise the consumption cycle in order to spur growth. On the back of these factors, we remain optimistic about a gradual recovery in the new fiscal that will enable us to capitalise on the increased spending by advertisers,” he said during a Q3 earnings call.
Despite the festival season, Zee’s advertising revenue declined by 8.4 percent year-on-year (YoY) on continued strain in demand from a constrained FMCG ad budget.
“The green shoots we witnessed during the beginning of the quarter did not pick up the required pace to drive a positive growth momentum. This, coupled with the muted spending by FMCG brands in a festive quarter, further slowed the pace of growth for the industry at large. Although there was a marginal pickup in the rural recovery, the lacklustre sentiment in the urban market led to weaker demand and impaired significant income,” Goenka said.
The company’s ad revenue declined to Rs 940 crore. Domestic ad revenue stood at Rs 880 crore, down 10.8 percent YoY as softness in the overall ad environment continued in Q3. International ad revenue grew 50 percent YoY and 46.7 percent QoQ to Rs 60 crore on a low base.
“While the domestic ad sales have been slower, you look at our nine-month FY25 international ad sales, YoY is up. We are trying to look at types of revenue from retail and other sectors. Also, if there are markets outside with partnerships with device makers, in European markets,” Zee’s acting chief financial officer Mukund Galgali said.
The company is exploring segments beyond FMCG to improve ad revenue.
In the first half of 2024, FMCG ad volumes on TV declined 6 percent from the year-ago period, according to the TAM AdEx report. TAM Media Research monitors television advertising expenditure.
“Q3 FY25 was a soft quarter for advertising growth, wherein broad consumption cooled down and outweighed festive season pick-up. While we did see some pick-up in October closer to Diwali, the momentum quickly cooled down in November-December,” Galgali said.
The impact of the weak consumption on FMCG ad spend has been more pronounced in the Hindi heartland, while the south, and other language markets are holding better, he added. “We are continuing to look at ways to maximize ad revenues in this environment and will remain cautious in the near term,” he said.
While ad revenue fell, Zee’s subscription revenue grew 6.6 percent YoY to Rs 980 crore, up 1.3 percent quarter-on-quarter (QoQ). The segmental performance was driven by robust linear subscription revenues and streaming platform ZEE5’s performance.
Domestic subscription revenue was at Rs 890 crore, up 8.4 percent YoY and 3.5 percent QoQ, and international subscription revenue stood at Rs 860 crore.
Zee5’s revenue grew 8.1 percent YoY and 2.1 percent QoQ to Rs 230 crore. The vertical released 14 shows and movies in the December quarter, including seven originals versus 16 in Q2 and 19 in Q3 FY24. While the number of subscribers has grown YoY, ZEE5’s revenue was lower than expected due to some delays in business to business (B2B) deals, the management said.
The company also said the pain due to the losses under exceptional items may abate going ahead.
In its financial statement for the quarter, Zee said as pain of the restructuring, the employee termination and other restructuring related expenses aggregating to Rs 11.1 crore for the quarter ended September 30, 2024, Rs 39.7 crore for the nine months ended December 31, 2024 and Rs 22 crore for year ended March 31, 2024 have been recorded and presented under exceptional item.