Network18 Q2 consolidated revenue up 12% amidst AdEx challenges

Network18’s consolidated revenue grew 12% YoY to Rs 1,549 crore for the quarter ending 30th September as against Rs 1,387 crore in the same quarter of the previous fiscal. Network18, which is the parent company of TV18 and Viacom18, said that the revenue grew despite a challenging ad environment.

The company's consolidated operating profit declined 87% to Rs 32 crore from Rs 253 crore due to continued investment in content, marketing, and distribution initiatives. It added that investments are needed to create a strong foundation for long-term growth. Network18 slipped in the red with a net loss of Rs 29 crore against a net profit of Rs 199 crore.

Expenses rose 34% to Rs 1,592 for the quarter under review against Rs 1,189 crore in the corresponding quarter of the previous fiscal. Marketing, Distribution, and Promotional Expense jumped 43.3% to Rs 354 crore from Rs 247 crore.

In its quarterly earnings release, the company said that the economic sentiment remained weak during the quarter with high inflation posing a challenge for companies, especially the FMCG sector. It added that brands held back advertising spends on new product launches and sustenance campaigns due to these headwinds. It also noted that advertising spends by start-ups and e-com players also declined due to the difficult fund-raising environment.

The network pointed out that the total TV ad inventory declined by 3% on a YoY basis with the news category seeing a drop of nearly 10%. It also stated that the ad revenue of the entertainment segment was flat YoY while news ad revenue saw a decline. The entertainment business was also affected by the drop in Colors Rishtey's revenue.

Network18 Chairman Adil Zainulbhai said, "The first half of the fiscal has been challenging for most sectors. However, we believe that this phase should only be a minor bump in the long runway for growth. Our presence across the full spectrum of content segments and platforms places us in a unique position to leverage the combined strengths of our assets. We have set clear objectives for our different business segments and are working on executing our plans in that direction. Despite the macro environment being less than ideal for growth currently, we continue to make investments which will help us create a strong foundation for the long-term and will hold us in good stead as growth returns."

The entertainment portfolio comprising Viacom18’s 38 channels, and Voot+ AETN18’s 2 infotainment channels reported 17% growth in operating revenue at Rs 1,176 crore compared to Rs 1,007 crore.

The company stated that the revenue growth was primarily driven by the movie segment, as ad revenue was flat due to the subdued advertising environment. Adjusting for the impact of the withdrawal of Colors Rishtey from DD FreeDish, ad revenue grew in high single digits on a YoY basis, despite the challenging environment, it added.

Expenses for the entertainment segment rose 38% to Rs 1,131 crore from Rs 819 crore as operating costs increased by 15% (excluding movie production) due to higher content and marketing spends. The content cost was driven by a higher number of hours (TV and Digital), higher episodic costs, and increased spending in regional markets.

Operating profit for the segment shrank 76% to Rs 45 crore compared to Rs 189 crore as the advertising revenue lagged expectations despite content investments helping the network to strengthen ratings in certain markets. In addition, increased investments in Digital and a drop in Colors Rishtey ad revenue also impacted EBITDA, the company stated.

TV18's entertainment portfolio had a viewership share of 9.9% in the entertainment genre in Q2FY23. TV18-owned News18 Network had an 11.5% market share in the news segment.

With 20 channels, TV18's news network recorded a 3% decline in operating revenue at Rs 281 crore in Q2 FY23 compared to Rs 292 crore in Q2 FY22 due to a de-growth in advertising revenue. News ad inventory declined by 10% at the industry level and the drop was even higher for the News18 network as it continued to optimise inventory on key channels. However, the impact on revenue was much lower as the scale-up of events-led monetisation partially offset the loss of display advertising, the company stated.

Operating expenses jumped 20% to Rs 291 crore from Rs 242 crore primarily driven by content cost and distribution initiatives. The company stated that its investments have started showing positive results with a visible improvement in viewership metrics of key channels over the last two quarters.

"However, because of a subdued advertising environment, the increase in viewership did not translate into commensurate revenue. We believe that this investment is critical to building a strong foundation for growth which will help our portfolio fortify competitive positions across markets and drive strong revenue traction going forward," Network18 stated.

The news segment reported an operating loss of Rs 9 crore compared to an operating profit of Rs 49 crore.

The digital news business saw a meagre 5% growth in operating revenue at Rs 87 crore from Rs 83 crore. Expenses jumped 39% to Rs 93 crore from Rs 67 crore. The segment recorded an operating loss of Rs 6 crore against an operating profit of Rs 16 crore.

The company stated that the digital segment, which had so far been largely unaffected by the macro environment, was also impacted by the slowdown. After having delivered growth for 8 consecutive quarters, the ad revenue of the digital news business was flat on a YoY basis.