Source: TAM Media Research

“Against the first year’s cash requirement of Rs 110 crore, and expected ad revenue of Rs 40 crore, the channel has been able to garner barely Rs 15 crore in advertising,” says a senior insider, adding, “the target of a break-even by the third year is clearly not possible with ET Now also entering the fray next month”.

UTV Software Communications, in which The Walt Disney Company holds a 60 per cent stake, will thus bail out the business channel and take a 49 per cent stake in the new special purpose vehicle that will now own UTVi. This is expected to bring in Rs 80 crore-100 crore considering that the valuation of the business channel is unlikely to exceed Rs 200 crore.

With most media companies dependent on ad revenues, the slowdown has had a debilitating effect. The total advertising pie is estimated at Rs 20,000 crore annually of which television takes away Rs 8,500 crore and newspapers account for Rs 10,000 crore.

On television, the advertising volume in November last year fell sharply to 45.31 million seconds compared to the previous month’s 55.37 million seconds — a fall of 18 per cent in a single month. The print industry’s pain was worse. From a high of 20.99 million column centimetres of advertising in October last, ads fell 45 per cent to just 11.59 centimetres in November. Radio advertising, too, declined by 30 per cent from 9,176 seconds in October to 6,515 seconds in November.

The actual fall in ad revenue would be far larger considering that advertising rates have crashed between 15 and 30 per cent across all mediums. From November onwards, too, television advertising has continued to decline marginally. On the other hand, both print and radio ad volumes have been inching up. The April-May Lok Sabha elections are, however, expected to arrest the downward trend. “We expect an infusion of Rs 800 crore – Rs 500 crore in national media and Rs 300 crore on regional platforms,” TAM Media’s CEO L.V. Krishnan said.

News channels have been hit harder by the advertising downturn since most of them are free to air and are largely dependent on advertisement revenues. NDTV suffered a Q3 loss of Rs 125 crore compared to Rs 32 crore in the previous quarter. TV18 was in the red with a Rs 30-crore loss compared to a net profit of Rs 8.4 crore in FY2008. Deccan Chronicle Holdings’ net profit for the quarter ended 31 December 2008 fell sharply by 75 per cent to just Rs 25.7 crore compared to the Rs 103 crore in the previous quarter.

Notably, Hindi entertainment channels have been increasing their subscription revenues to 35-40 per cent of their total earnings. As Rajesh Jain, head of KPMG’s entertainment and media practice puts it: “These are expected to be robust even during the meltdown.” For instance, Zee Entertainment’s third quarter results ending 31 December 2008 showed ad revenue growing just 2 per cent to Rs 264 crore as compared to the previous comparable quarter. On the other hand, subscription revenue grew 17 per cent to Rs 227 crore in the same period. This also means subscription revenue now accounts for 42 per cent of the company’s earnings — up from 38 per cent in the previous comparable quarter.

What is the forecast for calendar 2009? Estimates vary. The Pitch-Madison survey expects a flat scenario. After a heady 17 per cent growth to Rs 20,717 crore, total ad revenues are expected to inch up just 2 per cent in 2009. WPP’s media arm Group M on the other hand is more optimistic forecasting a 8.9 per cent growth to Rs 24,900 crore by the end of 2009. In this, television is expected to grow faster at 11.4 per cent to Rs 9,353 crore as compared to the print medium that is expected to log a 7.4 per cent growth rate to inch up to Rs 10,770 crore.

(Businessworld Issue Dated 06-13 April 2009)