Having lost the number two spot in the Hindi general entertainment channel (GEC) genre space to Colors, Zee Entertainment needs to get its act together with some improved content. But already the high cost of programming is hurting its profitability.
In the September 2008 quarter, Zee’s operating profit margins were down nearly 700 basis points y-o-y at 26 per cent leaving net profit flat at Rs 99 crore.
Given that it still has a 20 per cent channel share and attracts a fairly high viewership during prime time, Zee continues to attract advertisers — revenues were up a smart 43 per cent at Rs 572 crore, driven by a strong 30 per cent growth in advertising revenues.
The sports channel contributed Rs 130 crore, a growth of 212 per cent, but posted an operating loss of around Rs 9 crore. Indeed, the higher programming and operating expenses on Zee Next, Zee Studios and the cost of acquiring rights for films and sports — up 57 per cent y-o-y — has meant an increase in the operating profit of just 13 per cent at Rs 149 crore.
Zee averaged television rating points (TRPs) of 217 in Q2 and also has a 25 per cent share of the top 150 programmes, similar to that of Colors. However, the fierce competition in the GEC space will only result in pushing up the cost of creating content.
While there has been no impact on Zee’s advertising rates yet, as it remains strong in prime time slots, chances are that other channels will take away some ads. That would make it all the more difficult for Zee to up its ad rates.
