News channels' ad revenue growth lags that of entertainment networks

This week, a Pitch Madison report revealed the bulk of television (TV) advertising spending had increased 21 per cent in the first half of this year, the most in the past five years. However, while entertainment channels have seen a jump in advertising revenue, news networks such as NDTV and TV Today recorded moderate-to-low growth.

In the June quarter, both NDTV and TV Today reported lower revenue compared to a year earlier. For the March quarter, however, these companies posted growth in advertising revenue, which led to an overall increase for the first half of the year.

The slowdown recorded by news channels is also because of a higher base. Last year, these channels had cashed in on a surge in advertising revenue during the general elections. "The corresponding quarter last year had clocked exceptionally higher TV advertising revenue due to the general elections. If we exclude the revenue specific to elections, there is no decline in revenue," NDTV stated after the announcements of its results for the June quarter.

The Pitch Madison report said the main categories that fuelled the overall growth in ad spends were e-commerce (70 per cent), automobiles (55 per cent) and fast-moving consumer goods (13 per cent). Household durables and banking and financial services increased their advertisement expenditure about 45 per cent.

At Rs 4,200 crore, FMCG was the largest contributor in absolute terms, accounting for 51 per cent of the overall TV advertisement spending. E-commerce commerce increased their spending 70 per cent; now, they account for six per cent of the market.

The spurt in spending is primarily due to an increase in the inventory of Zee Entertainment Enterprises (ZEE) and Sun TV, as well as events such as the ICC Cricket World Cup, the Indian Premier League (IPL) and the Delhi Assembly elections.

The growth in ad spends, however, hasn't necessarily translated into a corresponding rise in revenue or profits for all companies in this segment. In the first half of this year, ZEE posted 41.5 per cent growth in advertising revenue at Rs 1,449.6 crore, compared with Rs 1,024.5 crore in the corresponding period last year. However, the company's net profit for the period has grown only 10.3 per cent, due to expenses incurred during the launch of general entertainment channel &TV in the March quarter.