Zee Entertainment Shares Fall As Analysts Raise Concerns Over FMCG Ad Spend


Shares of Zee Entertainment Enterprises Ltd. fell after Credit Suisse raised concerns about fast-moving consumer goods companies’ spending on advertising.

A gradual recovery in TV advertisement spending by consumer goods firms marks a tepid third quarter for media companies, including Zee Entertainment Enterprises, Credit Suisse said.

“While incremental raw material pressure has eased, the cautious commentary from FMCG (fast moving consumer goods) companies on demand suggests that the return of ad spends may be a bit more gradual,” the research house said in its investor note.

FMCG ad spending was impacted because companies needed to protect their profitability from rising input costs, which have dragged down gross margins, according to the research firm.

The ad spend as a percentage of sales for FMCG companies was similar to the lows observed during the first wave of the Covid-19 outbreak, it said.

The revenues that media companies get from these advertisements may take a bit longer to pick up, the research house said.

Adding to this, the viewership of Zee Entertainment was also hampered after Zee Anmol, which catered to free-air viewers, was taken off, Credit Suisse said. “Content fatigue” across Hindi, Tamil, and Marathi languages too contributed to the decline in viewership, which is now being corrected, it said.

The subscription revenue has been growing at a tepid rate despite rising Zee5 and Zee Music subscriptions, as the court has stayed price increases on linear TV subscriptions pending the NTO 2.0 order, the note said.

The implementation of the deadline for this new tariff order, which was extended to February 2023 by the telecom regulator, seems to have broad industry buy-in, Credit Suisse said, adding that it should revive near-term growth in this category.

While linear TV subscription will remain a moderate growth category beyond years when price increases are taken into account, the drag on subscription vertical growth should reduce as Zee5 and Zee Music ramp up, the research firm said

As the media company attempts to regain its viewership from the free to air channels, its subscription growth will continue to be lacklustre in the quarter ending December, Credit Suisse said.


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