Bull market fails to shore up TV18’s revenues; costs go out of whack  

January 27, 2010

There is a widespread belief that if the stock market does well over a prolonged period, TV18’s revenues would rise sharply. The assumption is that CNBC TV18’s extensive market coverage is bound to attract audiences to the channel and its various other properties, thereby boosting advertisements. TV18’s managers encourage this belief and analysts propagate this avidly too. However, this has turned out to be a false belief, as per its December quarter results. The Sensex has rallied by more than 100% from March 2009 to January 2010. However, even after this strong rally, TV18’s revenue for the December quarter was down from Rs130 crore to Rs129 crore. Revenue from the core broadcasting operations was up by only 10%. Meanwhile, TV18 is still reeling from large losses. On a nine-month basis, coinciding with a massive bull market, the net loss has jumped 139% to Rs148 crore from Rs62 crore for the corresponding period of the previous fiscal.

In fact, losses have become so deep set that TV18 has had to slash costs in all four business segments it operates in. It slashed its distribution, advertising and business promotion costs by 50% in the December 2009 quarter, but clearly it still does not have its costs aligned to its weak business model. Its other expenditure has rocketed for the December 2009 quarter. TV18’s marketing and distribution costs are down by 50% to Rs13 crore for the December 2009 quarter from Rs26 crore in the corresponding year-ago period. Staff costs for the quarter are down by 31% to Rs39crore (from Rs57 crore).
 
However, other expenditure has shot up to Rs71 crore from Rs48 crore, a rise of 41%. Saving on staff cost and distribution expenses on one hand and increase in other expenditure on the other hand leaves the company in no better position.

TV18’s flagship news channels, CNBC TV18 and CNBC Awaaz have registered a net loss of Rs21 crore in the December 2009 quarter from a net profit of Rs4.6 crore in the corresponding quarter of the previous year, which was boosted by Rs27 crore of other income. On a consolidated basis, TV18 has registered a net loss of Rs42 crore, up from Rs30 crore. TV18 has under its umbrella business brands like CNBC TV18 and CNBC Awaaz, Web18, Newswire 18, Infomedia 18 and IBN18, most of which are in the red since inception, irrespective of market conditions.

Last year, Infomedia launched the Forbes magazine in India. The magazine was priced at Rs50 in an inaugural offer, which is now sold at Rs100. Subsequently, it launched Entrepreneur, a magazine for the small-business segment priced at Rs75. These ventures have been a big drag on revenues. — Moneylife Digital Team