News channels report poor showing

CHANNELS VISION PART II

At the NDTV's annual general meeting on September 19 this year, one of the 200 assembled shareholders told Chairman Prannoy Roy: "You are becoming the Infosys of media, recording profits quarter after quarter."

The next month, the NDTV declared a net loss of Rs 6.59 crore for the second quarter of this financial year, its first major loss since being listed in May 2004.

For the same quarter last year, it had declared a profit of Rs 2.81 crore. Even as seven new news channels are slated to go on air in the coming months, most news broadcasters reported dismal numbers for the last quarter (July-September 2005).

Zee TV, which has Zee News and Zee Business among a host of general channels, reported a drop of 38.5 per cent in its profit after taxation, Rs 42.5 crore.

TV Today, which has Aaj Tak, Headlines Today and Tez, reported a marginal profit of Rs 2.37 crore for the quarter, against a net loss of Rs 1.12 crore for the same period last year. This, in spite of full utilisation of the advertisement inventory.

TV18 provided the lone silver lining, reporting a 42 per cent rise in net profit to Rs 10.01 crore and a 55 per cent rise in revenues to Rs 30.8 crore. Its Internet business "" Moneycontrol.com and Commoditiescontrol.com "" posted a strong topline with high-profit margins.

Anticipating competition from new players, the existing ones ventured into new genres and incurred costs. Two, with many new channels going on air in recent months, the supply of ad airtime has shot up, driving down rates. And three, with poaching becoming rampant, salary costs have shot up as channels strive to retain personnel.

The wage bill, which constitutes about 40 per cent of a news channel's operational costs, has gone up by at least 30 per cent in the last six months. Much of NDTV's loss can be attributed to a Rs 7.45 crore payment towards stock options comprising 40.57 lakh shares which are to be amortised over four years.

One general news channel is believed to have increased the salaries of senior journalists and executives by 100 per cent. "The cost benefit that you get as a result of launching a news channel is not very high. You will incur certain expenses which will have an impact on the balance sheet," says Haresh Chawla, chief executive, CNBC TV 18.

With the launch of new news channels, the demand for infrastructure has also gone up, pushing the costs up by about 20 per cent. Other costs too "" carriage fee and durable cost "" have been on the rise.

Advertisement revenue, on the other hand, is getting fragmented. As a case in point, Zee's advertisement revenue in the quarter increased by 12.1 per cent to Rs 147.7 crore and subscription revenue by 4.2 per cent to Rs 174.5 crore.

At the same time, its cost of goods and operations went up by 39.5 per cent. Other costs, particularly marketing costs, increased by 26.6 per cent.

It hasn't helped that new news channels are willing to sell airtime for throwaway prices. "The demand supply equilibrium is tilting towards increasing supply and hence could result in ad-rates increasing at a slower pace than past," says brokerage house Batlivala & Karani.

Companies acknowledge this. "The revenue flow for new channels will be slow. Channels should look at ensuring a smooth revenue flow and then look at booking profits," said an executive with a leading Indian news broadcaster.

Companies hope the lean patch will end soon. Soon after its second quarter results, the NDTV had said in a statement that the worst phase in expense increases was over and the rise in salary and other costs would slow down. It projected a 30-35 per cent increase in its revenue in the second half of the current financial year.