Sun TV, Zee TV feel the heat as World Cup soaks up ad spends 

The rising prominence of Internet-based content platforms – such as Jio Cinema and Disney+ Hotstar – hurt the advertising revenue of two major Indian broadcasting groups – Zee TV and Sun TV – during the July-September quarter.

The two media groups reported muted ad-spending – particularly by the packaged consumer goods segment, hurt by the diversion of ad money to mega sports events such as the ICC Men’s Cricket World Cup on app platforms.

Sun TV and Zee TV don’t have a strong presence in sports broadcasting and lose out when there are major sports events.

The September quarter was particularly bad because these companies have already been hit by a prolonged weakness in the advertising sector this year, and were looking for a break-out.

However, the second quarter failed to give these two companies the expected boost, also because of the listless rural economy and a delayed festival season.

The major drain, however, was the ICC Men’s Cricket World Cup, despite the fact that it started only in October: Some of the advertisement spending was put off in anticipation of the World Cup.

“The industry has seen a massive change in the ad budget for sporting events,” a Sun TV official told IIFL Securities in a meeting, adding that this year’s ad revenue growth will be very nominal.

For Zee Entertainment too, ad revenues came in below Street expectations at Rs 940.9 crore during the second quarter, compared to Rs 1,012.8 crore in the year-ago quarter. Zee said it was “cautiously optimistic” on the outlook going forward.

“During the quarter, while we saw some gradual pickup in ad spends led by FMCG, the pace of recovery is still slow. Asia Cup cricket in September also took some share of FMCG ad money,” said Punit Goenka, MD and CEO of Zee Business, noting the 3.3% year-on-year decline. But he pointed out that it was up 4.1% compared to the first quarter, reflecting what he called the  “nascent pace of ad spend recovery”.

New Disruptions

Interestingly, the decline in ad revenue was not accompanied by a decline in viewership or media consumption for these two broadcasters. For example, in Sun TV’s core Tamil market, the company’s viewership share has been stable or even slightly higher in recent quarters.

Rather, the decline has been caused by a more fundamental change in the broadcasting business – particularly due to the competition faced by broadcasters from a new class of players – apps. This year, for example, saw the entry of a massive new player into the sports broadcasting business – Jio Cinema, owned by the Reliance Industries group.

The app won rights to the biggest event in India’s cricket world – IPL – and disrupted the market with its unconventional business model.

Unlike satellite channels, Jio Cinema decided to allow anyone to watch sporting events without paying a subscription.

This had a far-reaching impact on the business. Primarily, it forced its rival, Star India, to also follow suit by offering live streaming of the men’s World Cup without a subscription on its Disney+ Hotstar platform.

Because of this, these platforms faced added pressure to generate revenue through the only other means possible – advertising – and crowded out Sun TV and Zee TV.

However, on a positive note, Sun TV management said that local and regional advertisers continued to advertise on its platform, accounting for 65-70% of the company’s ad revenue during the quarter.

The management stated that ad spends has been ‘largely buoyant’ as far as these categories – local retailers, jewellery chains, real estate players, etc – were concerned.

“They have even advertised on expensive prime-time slots in the flagship channels. The company expects continued traction from these players to support the ad revenue,” said the management.