Zee Entertainment Enterprises Ltd. pushed back by a year the target for its over-the-top platform to break even as new original shows and movies to compete with larger rivals in the lucrative streaming battleground increased costs.
“The assumptions that we had made two-three years ago will have to be reviewed. We are expected to reach breakeven for Zee5 by end of FY24,” Rohit Gupta, chief financial officer at India's second-largest TV entertainment network, told BloombergQuint in an interview. The company had earlier envisaged a breakeven for Zee5 by the end of five years of its launch in 2018.
Zee5 launched seven original shows and 17 original movies during the quarter ended September. It also terminated its deal with one of the telecom operators in August, leading to a decline in subscription revenue. The platform now is also pushing for direct downloads by customers.
Zee Entertainment's subscription revenue rose 2.3% year-on-year in the second quarter, led by Zee5. The OTT platform posted revenue worth Rs 98.9 crore during the period, but suffered an operating loss of Rs 189.4 crore.
A fall in advertising revenue by 26.3% over a year earlier led to an 18.8% drop in Zee Entertainment's consolidated revenue at Rs 1,722.7 crore. Also, high advertising and marketing spends due to comeback campaigns hurt operating margin. Content costs for TV, however, were lower as production resumes in a staggered manner after lockdown curbs were eased.
Sequentially, Zee Entertainment's advertising revenue has more than doubled. Subscription and overall revenue, too, have risen over the preceding three months.
“There's a strong rebound in the quarter. Advertising revenue has come back sharply and overall revenue has been growing as well. My expectation is that by Q3 we will reach last year's revenue and by second half (October 2020-March 2021), we should see growth as well,” Gupta said.
Provisioning
Zee Entertainment has provisioned for Rs 81.2 crore as past dues outstanding against Siti Networks Ltd. It has moved Siti to cash-and-carry for the current outstandings.
“We are now very stringent on any receivable,” said Gupta. “We received a payment plan from Siti. We received the payments for April to September. There were some payment plans for past outstanding. Unfortunately, we were told by Siti that because of Covid-19 and pressure from lenders they are not able to pay for the old outstanding and, therefore, we on a very prudent basis decided to take provision on outstanding of Rs 81.2 crore.”
The company also reported an exceptional item of Rs 97.1 crore as loan guarantee to Siti.
The broadcaster, Gupta said, is monitoring outstanding against Dish TV as well. The company has reduced outstanding from Rs 584 crore in March 2020 to Rs 498 crore. “We are also collecting current outstanding. Net of provisions, the outstanding is around Rs 460 crore. This outstanding is expected to decline by the end of the year,” he said.
Watch the full interview here:
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