By Karan Taurani@Elara Caps

Drag in ad spends leads to muted growth in a festive quarter in the TV segment of media and entertainment industry.

TV was the first traditional medium to report higher advertising revenue vs pre COVID levels last year (grew 7 percent-8 percent vs pre COVID levels).

However, Q3 FY23 has been relatively muted with revenues declining 5-6 percent YoY vs pre COVID levels, despite positive impact of festive, primarily due to 1) lower spends by new age/e- commerce companies (cut ad budgets by 30-40 percent YoY) and 2) muted growth in FMCG vertical due to RM inflationary pressures YoY.

Expect ad revenue growth of 8.5percent/ 9%percent/12.4 percent for Zee/Sun/TV QoQ respectively led by festive season but a decline of 12.8 percent/1 percent/8 percent YoY due to higher base (TV medium surpassed pre COVID levels last year).

Expect subscription revenue to remain flat for Zee and a growth of 6 percent QoQ for Sun; this is primarily on the back of uncertainty of NTO implementation. We expect subscription revenue to grow 8-10 percent over the near term helped by price hikes, as NTO 3.0 will be implemented by Feb ’23.

For SUN TV, absence of IPL and other operating revenue (movie segment revenue – no major releases this quarter) will lead to total revenue of INR 8,563mn – decline of 17.1 percent YoY and up 5.1 percent vs pre Covid levels of FY20.

Zee is expected to report flat revenue growth YoY, but up 4percent/3 percent, QoQ/ pre covid, whereas TVT’s revenue is expected to decline of 4 pwrcent YoY, due to high base in Q3FY22, although up 17 percent/11.5 percent, QoQ/pre covid respectively, driven by festive quarter.

Expect EBITDA margin to grow 80bps/down 90bps/ up 350bps QoQ, helped by higher ad spends; however, margins are estimated to decline 722bps/487bps/1720 bps YoY for Z/SUNTV/TVT respectively, due to 1) pressure on content costs (TV and digital) and 2) lower ad spends.