Zee Entertainment Enterprises Ltd
NSE:ZEEL
Earnings Call Analysis
Q2-2024 Analysis
Zee Entertainment Enterprises Ltd
The company experienced a positive second quarter in the 2023 financial year, as the movie segment delivered strong box office outcomes, with notable successes across Hindi, Telugu, and other languages. The enthusiasm from cinema-goers contributed to the company's healthy quarter. The synergy and strategic importance of the movie segment were emphasized, not just for immediate revenue, but for its supportive role in augmenting the company’s linear and digital businesses. On the corporate front, the company has received legal approval for a merger proposal with Sony, signifying commitment to unlocking value for all shareholders.
From an operational perspective, the company is witnessing a gradual recovery in advertising spending, particularly in the entertainment sector, which indicates potential growth as rural market sentiment improves. The festive season is anticipated to boost performance in the upcoming third quarter, although the company exercises caution due to the broader economic context. There is optimism in the subscription space as stability returns following the implementation of new media tariffs. The company also celebrates the peak TV viewership growth over recent quarters and the progress of ZEE5, which has depicted robust user metrics and reduced EBITDA losses.
Financially, operating costs rose year-on-year largely due to content investments and the ongoing development of ZEE5. Despite this increase, efficient cost management and revenue growth have led to an improved EBITDA margin of 13.6%, marking a significant improvement from the previous quarter. The net profit was partially offset by exceptional items relating to merger costs. Content inventory decreased, reflective of movie releases and syndication. The company maintains a strong cash position with anticipation for a sustained recovery in consumption sentiment throughout the financial year, and a strategy poised to leverage this optimism for better profitability moving forward.
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Ladies and gentlemen, good day, and welcome to the Q2 FY '24 earnings conference call of Zee Entertainment Enterprises Limited.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Pratap Singh, the Head of Investor Relations for Zee Entertainment Enterprises Limited. Thank you, and over to you, sir.
Thanks, Sanjay. Hello, everyone. Welcome to our Q2 FY '24 earnings question. We hope you've had an opportunity to glance through our earnings. Today, we are joined by our Managing Director and CEO, Mr. Punit Goenka, along with the senior management team. We will start the call with opening remarks from Mr. Goenka, followed by commentary on operating and financial performance by Mr. Rohit Gupta, our Chief Financial Officer. We will subsequently open the floor for questions-and-answer session.
Before we get started, let me remind everyone that some of the statements made or discussed on today's conference call will be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face. The company does not undertake to update any of these forward-looking statements publicly.
With that, I'll now hand the call over to Mr. Goenka for his opening remarks. Over to you.
Thank you, Mahesh. Good evening, everyone. I hope all of you are doing well and are gearing up for the long Diwali celebration weekend. Actually, for taking the time to join us this evening. I'm pleased to connect with all of you as we discuss our company's performance in the second quarter of the financial year 2023, 2024. Let me give you a macro level overview on the industry and our performance during the quarter [indiscernible]; post which, our CFO; Mr. Rohit Gupta, will take you through the financial and the operating metrics.
Before we begin, let me share a quick update on the proposed merger with Sony. As you all must have noted, during the quarter, we received the approval from the Mumbai bench of the honorable National Company Law Tribunal for the composite scheme of arrangement. From our perspective, we are committed towards ensuring that all points in the composite scheme agent are duly addressed. We recognize the value that the more holes and and our focus remains on unlocking the opportunity for all the shareholders.
Coming back to the company's performance. Let's begin with the movie segment. The second quarter brought in a lot of excitement for the industry at large, with audiences returning to theaters and movie delivering a blockbuster performance of the box office. We witnessed a good quarter on the back of an extremely encouraging response received for our films. These included other 2 in Hindi, Bro in Telegu and and King of [indiscernible] in [indiscernible], which boosted our overall performance.
The tool is a strategic piece of our portfolio, and it plays a very synergistic and complementary role in the success of our linear and digital businesses. Our investment focus continues to remain sharp on fuels across all languages, enabling these 2 [indiscernible] to emerge as a truly an [indiscernible] studio. The industry is going through a rapid evolution and several changes can be expected at a structural level in the years to come. It is an exciting time for the media and entertainment ecosystem and the increasing investment in competition will only lead to higher opportunities for growth.
Amidst this scenario our company remains well positioned to capitalize on any shifts as a result of opportunity with a very diversified portfolio. What we have built at is truly unique, had a valuable asset that harbors capabilities to continue delivering returns to its shareholders unless such changes as we industrial contends with advertising revenue and prescription revenue recovery, our performance in other key business segments helped offset the slow growth rate displaying the fundamental strength of our business.
The quarter 1 buy has certainly approved higher value than the previous quarter, and we remain cautiously optimistic on the outlook going forward. We are seeing a gradual recovery in the advertising settlement, which led to gains during the quarter. But the recovery mode has just begun, and we are yet to witness rural sentiments improve entirely, thereby keeping us cautious on the overall growth.
The festive season is expected to spur growth in the third quarter and we remain optimistic of delivering higher growth, albeit with some caution towards the overall macroeconomic environment. On the subscription side as well, with MTO 3.0 implementation having stabilized, we find ourselves on a better footing and remain hopeful of sustaining positive growth levels in the coming quarters. We continue to make significant efforts along with the industry to drive growth of ATV ecosystem.
We are enthused by the results of those efforts whereas TV viewership continues to grow, the share of ATV is at its peak of the past 7 quarters are increased by nearly 300 basis points in the last 1 year.
Coming to our digital performance. All the usage metrics for ZEE5 continue to remain healthy on the back of key originals and direct to digital films, driving higher subscriber acquisition and retention. Our revenues are suitable reflection of the platform's growth quarter-on-quarter and are in line with the external industry reporting standards.
We also witnessed a healthy reduction in ZEE5's EBITDA losses, in line with our indication of the platform already being close to its peak investment level. Overall, the second quarter has displayed positive signs of growth compared to the start of this fiscal, and we remain hopeful of the sentiment further improving as we move forward. I would now like to hand over the session to Rohit to take you through the financial and operating metrics of the company's performance in detail. I would also like to take this opportunity to wish all of you and your loved ones a very happy and a prosperous Diwali. I look forward to interacting with you during the Q&A session later. Over to you, Rohit.
Thank you, Punit. Good evening, everyone, and great to connect with all of you. We've had a good all around operating and financial performance in quarter 2, and I will briefly touch upon some of the key highlights. As Punit alluded, the industry landscape is transforming, and we are very excited about longer-term growth prospects for our broad content portfolio and diversified offering. We are continuing to shape our business with focused investments for the future while navigating some of the near-term headwinds around the soft ad environment.
During the quarter, while we saw some gradual pickup in ad spending led by FMCG, pace of recovery is still slow. Asia Cup in September, took some share of FMCG ad money. Our ad revenues were 3.3% lower year-on-year and grew at a moderate pace of 4.1% quarter-on-quarter, reflecting less pace of ad spend recovery.
Looking forward, we are optimistic of gradual recovery to continue in quarter 3 on back of festive season. However, Cricket World Cup will take some share away. With NTO 3.0, having paved way for TV subscription revenue growth and step up in refi subscriptions, our subscription revenues were up 8% year-on-year.
On a quarter-on-quarter basis, there is a slight moderation of 2.2% decline, given we had a lumpy base in quarter 1 for TV subscription revenue, which was the first full quarter post NTO 3.0 implementation. TV industry landscape remains healthy and post NTO's implementation, we remain optimistic of modest growth in our TV subscription revenues. Quarter 2 was another strong story for our TV leadership share performance, wherein we have gained 90 bps share quarter-on-quarter to take our network share to 17.9%. It's happening to note that this gain is a fairly broad based across several key markets, including TV, Marathi platform, Hindi movie channel and certain channels like Zee [indiscernible] and Kerala. We remain market leaders in Hindi and Marathi movies, [indiscernible], Bangla and Punjabi.
From a competitive landscape perspective, our 90 bps share gain is higher common all major TV networks in India. Overall, we are extremely pleased with teams concentrated efforts to bring back share and hope to keep the momentum in coming quarters.
Specific to Q3, please keep in mind that [indiscernible] share in December quarter will be adversely impacted by Cricket World Cup. On digital side, 5 had a strong quarter with 59% year-on-year and 37% quarter-on-quarter digital revenue growth. We have seen growth in resi subscription and a digital syndication deal has further aided the revenue growth. Our original content continues to resonate well with [indiscernible] and we released 22 shows and movies, including 4 originals during the quarter. Driven by operating leverage and prudent cost management, we find EBITDA loss has narrowed by $882 million quarter-on-quarter.
Coming to the movies business, quarter 2 FY '24 was a blockbuster part of our Zee studios, which created new course in terms of footfall and box office collections. Zee Studios remain 6 moves, 2 Hindi and 4 regionals during the quarter with [indiscernible] grow, King of [indiscernible] in some of the headline names. [indiscernible] 2 went on to become the highest ever grossing movie on box office for Zee studios. As a result of strong performance of capital releases and syndication, other sold and services revenues are up 201% year-on-year and 322% quarter-on-quarter.
Our music business, Zee Music company is seeing consistent growth in video views and subscribers, highlighting strength of Zee music company, new age music catalogs with rich library. Regency is now #2 music channel with over 142 million subscribers of view group and over 45 billion total video views during the quarter 2.
Moving to cost and profitability. In quarter 2 FY '24, overall, operating costs have increased by 23.2% year-on-year and 15.1% quarter-on-quarter due to higher content cost, movie releases and investment in ZEE5. Given strong revenue growth and led operating leverage and effective cost management, EBITDA margin have improved to 13.6% higher by 580 bps quarter-on-quarter. Start from continued operations for the quarter came in at INR 1,299 million. Net profit for the quarter and the year was impacted by merger expenses related exceptional items, which for quarter 2 stood at INR 118 million. This quarter, merger-related expenses also include a net provision for some duty with respect to the post-merger fee.
On balance sheet side, content inventory has declined in quarter 2, driven by movie release and syndication. September '23 content inventory advances and deposits are lower by INR 2.9 billion at INR 76.7 billion. The cash and treasury investments of the company as of September '23, stood at INR 5,655 million, which include cash balance of INR 3,649 million and INR 6 deposits of INR 2,006 million. Also quickly touching upon receivables from DISH outstanding balance is at INR 691 million as of September 2023.
Moving to the rest of FY '24. We are expecting gradual recovery in consumption sentiment and are optimistic based on FMCG commentary with respect to as funding. While quarter 3, we'll see some effective pickup, we are still cautious and would monitor how the pace of recovery settles post Diwali as quarter 2 has shown. We have a high degree of operating leverage in our business and are confident that as revenue picks up, we will also have more tailwinds on profitability as the year progresses. Back to you, Mahesh.
Thanks, Rohit. And we now open the call for questions-and-answer session.
[Operator Instructions]
The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.
My first question is on ZEE5. So the sharp reduction in losses quarter-on-quarter, so what is new here? Is it because of the impending merger, you would like to have a more nuanced look at the merged entity difference overall strategy? Or is it because the competitive intensity from the global OTT is reducing? Or is it because the overall OTT revenue potential itself seems to be slowing down much earlier than initial expectation?
Abneesh, this position is not as grim as the 3 options that we are giving. We are still operating this entity as if we have a stand-alone entity. And the gearing merger is not any impact on what may have transpired. But the increase in revenue, and as we have said that our investments have peaked in these ZEE5 already, as I said in my opening remarks as well. Our investment levels are not going up at that level. And therefore, this trend will continue, and you will see only better operating metrics coming at ZEE5.
So one follow-up on that was, and that's also on your movie production business. So Q2, we saw the entire movie industry do really well, multiplexed industry at all time their numbers. And your results did well across 3 different languages and very good numbers. So are there any learnings from what you did, which can be seen as a playbook for your Zee movies because the same movie industry in October has again seen very tough times. So your comment on that. And second one was what we have picked up OTTs now are bidding for movies once they are actually released. So then they'll get a sense of how the movie is and the rights also bidding rights also are much more sensible. So how does that impact you both as a buyer of content and as a seller of content.
I think first and foremost, Abneesh, as I've always maintained, content is king. So if you make the right content, then this connects the hearts of people, it will do well. And then, of course, marketing is the second key mantra behind films. So I think we've had key learnings from our last 3, 4 films that we have released in terms of the marketing strategy, et cetera, and how that has paid off. So it's not rocket science, whether it's something we have tried differently, et cetera, and that has paid off for us. So we will continue to work on that going forward in some of other learning, but we'll continue to work on that. I think you're absolutely right. OT market, et cetera, is also settling down now. The pricing awards will end very soon, and things will find -- the water level will find its best place for the right content on the right price.
Okay. Last question on the news article which came today and articulate also. So I understand you got the [indiscernible] from SAP. So if you could comment on, is there any disconnect between now and on a product rational level. Is there a which can happen to the merger because of this? And what are the prices you're looking at. Almost all have come. Do you see the listing and the list of the [indiscernible]?
I'll just take the first part, Abneesh and others can [indiscernible]. We don't, as you know, comment on speculation that happen in press. So I would not like to comment on that. We are in active engagement with Sony on various parts for the entire scheme to be finally implemented after getting all the approvals that we've got on the listing part, he sure it can take.
So on your other questions, Abneesh. Right now, we are focusing on intimating the scheme as a approved by the NCLT by the shareholders and other regulatory bodies. So we are focusing on that and trying to take that at the audience. We're not putting in condition precedence and closing conditions, which will have to complete on which we are working right now. So in terms of the time lines, probably we may take a few next weeks in order to complete this.
The next question is from the line of Vivekanand Subbaraman from AMBIT Private Limited.
Punit, I wanted your comments on the competitive landscape that is currently prevalent. Reliance is infusing more capital, but then Disney globally has been on the back foot as far as the linear TV and perhaps also their ability to tolerate longer gestation in India is concerned, how should one think about the TV industry given the competitive dynamics?
So Vivekanand, as I said in my opening remarks, I mean in the last 7 quarters, we have seen the TV viewership peaking by almost 300 basis points. So I cannot comment on the global scenario for television, but I can certainly comment on the Indian scenario for television. It's going to be continuing to be a very healthy environment for television in this country, at least for the foreseeable future. So from that perspective or I think your company and our company is well poised to take advantage of that and therefore, continue to deliver on what we have promised all the time. As far as the pressures of Disney what they are facing, I can only speculate on the basis of what a reason the press just like you. So I'm sure those press articles are not incorrect, but that will be our speculation. And certainly, we will be a seeing reliance investing a lot of capital behind this business. But I have maintained that to win in the media landscape, capital is not the only thing. We need a lot of creativity. We need a lot of talent that is required to make that happen. So we will continue to we focused on delivering and working towards delivering our market share and therefore, our business from that point of time.
Okay. Second question is on the OTT business. Currently, it contributes around 10% of your revenue. If one were to think about this business maybe 5 years sense. What do you expect the revenue contribution of OTT to the overall business from the point of view of, let's say, the merged entity or the alone?
So it's difficult to [indiscernible] Vivekanand, but I would say what I would like and not what I think it will happen. What I would like and I'd be happy with is that the OTT business would contribute about 30% of the top line of this company, that will be something that will be satisfactory in my view, and that will be a successful business from my perspective at that matter.
Okay. Fair enough. And where do you think the growth comes from incrementally? Is it more from advertising or just the subscription part scaling up the way you've done it in the last couple of years?
It's a combination of both, so it's not just one thing. The larger part of it will come from subscription, but there will be a significant part coming from advertising as well.
The next question is from the line of Kunal Vora from BNP Paribas.
First, I wanted to understand the PTV subscription mix. So how many subthemes will you now have came BPH and [indiscernible]. And if you also can provide some insights on how are the ARPUs in other [indiscernible].
Kunal, you think what's the industry split in terms of ...?
Yes, not industry, but if you can, like say, industry or your mix on cable DTH and [indiscernible] to the home. And if you can talk about the ARPU realization on all of Zee channels.
We haven't given that sort of bandwidth on our subscription side of things, Kunal, but suffice it to say that a large part of this would be DTH and cable and that's 3 in number of subscribers, they would be reasonably close to each other.
Cable [indiscernible] DTH will be similar or cable DTH will be be similar?
Cable DTH will be similar.
And how are these number standing are the, let's say, calendar been declining year-on-year or we are holding up.
There was -- I mean, if you look at recent -- on the DTH side of things, the numbers are largely holding up. I mean if you look at last 4 to 5 months, data post NTO sort of think BT for the numbers have largely held up.
Okay. That's fine. I will take more on that offline. But the next one is what is the continuation of movies to profitability in this quarter? And also, if you can talk about the margin outlook for the second half.
So let me take the movie and then hand it over to Rohit for margin outlook. So if you look at the way we report other sales fee services has largely performance from we do on movies on the theatrical side and the broader syndication and so on. So that line item largely capture it, but it's not just movies from the theatrical side of it, there will also do syndication. And if I see where you're getting the question too, if this quarter's performance is not entirely moving. So even if you would have had a relatively lean movie performance, the underlying operating performance with the linear and digital would have still improved. Movies have, of course, added and given it a little bit more boost to it. But even without movies, the underlying performance has improved on the digital side.
Yes. And onto your question on the margin, we are reselling some giving any guidance on that. But like I already mentioned in my opening remarks, we have a very good operating leverage. And as the ad recovery starts coming in, I think the margin improvement is given. So one is just there are 3 factors. One is the movies have then with in quarter 2 in H2 as well, they are movies which will come out, which should help secondly, our recovery. And subscription, as you see 8% growth has covered in H1 already. So that will continue as well.
Sure. This is on margin, what I wanted to understand was the 13.6% which you reported, what would that number have been if the performance is not been decent.
Look, Kunal, we haven't given the split, but let me just point you to a number you can validate, right? Leave the movies aside for a minute. Just go and look at ZEE5, which is where we have given EBITDA. You see quarter-on-quarter roughly INR 82 crores, INR 88 crores, I think INR 88 crores. The swing has just come from quarterly performance there. So yes, we wouldn't be able to break it down by content in terms of movie linear digital, but even if you take movies out, underlying performance like-for-like would have improved.
Okay. Okay. Understood. And last couple of small questions. receivables have increased from INR 16 million to INR 22 million during the last 6 months, so what's driving that?
Three things. One is that the movies all the revenue that is approved for the movies in September. Actually, a lot of it has got liquidated in quarter 3 in October, specifically. And these are large collections, which came in, in the month end. Similarly subscription revenues, we've seen an increase, and there has been a bit at the quarter end, which got a lease in quarter 3 and for expense. So there has been a little seasonal aspect to it. Most of it is getting released in the quarter 3.
Understood. Understood. Quite a timing issue. And on ad revenue, FMCG companies have spent like much larger amounts this quarter compared to last year. So year sizable increase in expense by then, but we haven't seen that kind of increment to you. So in your case, FMCG has done well or even FMCG has not done very well.
So Kunal, I think a couple of things has happened. One, FMCG has done well. So the only thing which you're talking about relatively is the pace of improvement. And keep in mind that you look at September, October, November time, it's also a fairly busy cricket season, right? And given at this point in time, the hot money funded start-ups have been not that active and so on, the pricing on the sports property has also been a little bit more lucrative. So there's a little bit more money compared to what you typically see in a busy export season, which has gone from FMCG with sports. So underlying, yes, we see the improvement, but we would want to monitor and see how things settle down post Diwali because then the fact will be out of the way and a busy sport calendar will be out of the way. Underlying yes, there is improvement. But keep in mind that there's some big going on in the cricket side.
The next question is from the line of Karan Taurani from Elara Capital.
I have 2 questions. The first 1 was on the advertising front. So you mentioned the second half fuel even demand because of [indiscernible] so you also mentioned the sports part, right, is of the sports properties in a ad spend. So what is the kind of growth that we can see maybe in the next quarter or maybe in the second half, not for the guidance, but could we expect high single digit, double digit almost in the digits? Any indication of others there?
I can tell you this 1 current that the industry will see a high single-digit growth.
Right. That's helpful. Secondly, in terms of subscription revenue, of course, this year is going to be good because of the ARPU and the price hike after NTO 3.0, but what we are seeing is that the number of TV households specifically on the cable and the MSO side is declining. And let's assume that if we take a 3% to 4% price hike going ahead structurally, and then the number of outlet by 8 percentage points and the growth rate there is a bit flattish. Any indication there in terms of where subscription revenue stating for main terms of growth?
Also we have to look at the fact that even if the cable TV households are shifting, they are shifting to either connected TVs or to GTH. And therefore, we are present on that -- those platforms as well. So it's not like we are losing on those revenues. We are pretty much capturing those also in our revenue line. And I do not expect that the subscription revenue on the linear side will slow down any time soon. And as stated that we have already seen an 8% growth in H1, and we expect that to continue.
The next round of provision to be pricing will happen in February, March of the coming year. And we will be working on the factor to how much price increase, et cetera, we will be able to taken and work to adapt so that we can continue to deliver, if not good growth, at least modest growth for a future.
And lastly, on ZEE5, I mean, what led to this reduction in the losses is it revenue numbers scaling up to a certain extent, I do believe the even numbers have kind of surged or is it the cost control measures at some kind of industry doing the right way in terms of content cost coming down? What led to this entire [indiscernible] in terms of loss is coming down.
It is a combination of all that you have said. So it's not just one thing. It's not so much as cost control, but prudent cost spending.
Right. And anything on the positive buy side that maybe you have now find a quarter indication in terms of what content work, what does the experimentation probably has come off. Just any color on that.
Difficult for us to comment here right now on that. There is a lot of content we put out there. You will see from our presentation, almost 22 basis of content we put out in this quarter some work, some doing work. And in the content business, not just on ZEE5, but even on television. It's a constant trial and areas that we work with. We are -- as I've maintained all this on we can do 40% in time, okay. If you go right better in that, you're doing wonderfully well. If anything is below the 40% mark, then we could be having some pain.
The next question is from the line of Abhisek Banerjee from ICICI Securities.
My first question, please, all the the ZEE5 and monetization right? So is there -- I mean, if we think about the post merger also, do you think ad monetization can be a much bigger lever to drive profitability in this business.
So I think we should leave the merged entity aside right on and on about our position as we exist today. There is potential to monetize advertising more, but it's a function of traffic and then also the right amount of traffic that we will generate. So there is potential to make a lot more or a lot more monetization on the advertising side. But yes. So we will be working on that to generate the traffic that we need to monetize that better. But as I've said in the past, the subscription line is armor lucrative and some more profitable for us than the advertising in this business.
Understood. And if I am talking about ad spends from FMCG companies, obviously, there has been a very heavy season. But what is your outlook on the second half of this quarter?
I think when you look at slightly medium term, let's say, 3, 4, 5 months out, we feel quite optimistic about the potential on which spends can structurally recover. I think at this point in time, there are very early green shoots. But as soon as -- at least in our channel checks, in our conversations with clients, there is a lot more optimism about volumes and generally rural demand recovers when you really take a 2 quarter. So to that extent, I think as you really look out calendar year '24, there is optimism. The only debate here is the pace of the recovery. But clearly, given how much the spending has historically been cut out of ads and as volumes come in and everyone acknowledging and recognizing that AMP has to be a driver to drive volume and demand. August well, when you really look at, let's say, calendar year '24 point of view.
Understood. But in your conversations with these companies, do they look at linear advertising as a driver of or rural demand? Or do we think that it can still drive high-quality urban demand?
Both actually, right? I think when you look at -- even on the TV, right, there are a fair bit of impact properties. The demographics is fairly broad based. So it's not just a rural play, right? When we really look at any brand building effort, any national outreach kind of plan, it gets figured and factored in demographics and reach in the kind of shows getting page and time for getting back and all that. It's quite broad-based. It's not an either road situation.
Understood. And just one final question. So in terms of longer time ad cycle, would you have any observation on how advertising has typically been in pre-election years?
Sorry, how advertising has been?
In pre-election years.
Yes. Advertising preelection year certainly has spiked, and it was brought up significantly from the political advertising point of view. But our company does not get impacted by that, either positively or negatively because a large part of that, a significant part of that goes towards the new network and does not come to the entertainment channel.
The next question is from the line of Arun Prasath from Avendus Park.
My first question is on the costs in deep. If you look at the run rate, today, we are at our own INR 2,000 crore annual run rate in terms of costs. Just obviously, last year, it was around INR 1,500 crore before it was around INR 1,000 crores. So this large part of this incremental run rate can will you attribute it to the unit cost going up or the customer acquisition costs? Or is it like more towards the volume of the content produced.
A significant part of this would be towards the technology cost, which we have to incur on a variable basis because things like CDN, hosting and all those things are variable costs. And as you more consumption as you had more user base, this cost continues to go up. I do not think -- we only are the parts that Rohit talk about a little bit in detail. There's also some of the catch-up amortizing cost that's coming in because we are still running the amortization like when it will not [indiscernible] business where it's pretty much running in line with our business because [indiscernible].
So Arun, as we have mentioned, we have been making investments in the 3 areas, primarily in the first green the platform and the technologies on a has been content and in marketing. There were some initial investments we had to make, which was always supposed to be coming down. So from that standpoint, those peak investments have been made. Content investments will go on. And like we said, we are producing all kinds of content and only 2 pieces of content, which got translated this quarter. So it will depend on that. And then, of course, marketing spend, we have been prudent and will continue to be prudent on that.
So if I had to put it in 2 buckets, there were variable costs and fixed costs. Variable costs typically is what percentage of your revenue, ZEE5 revenue.
We haven't given that fixed and variable cost stress given the landscape we are in that's basically the heart of the cost structure in a way.
Right, right No, no. At least on the -- you said that, let me put a understand -- I think the way when you think of this modeling and going forward. Think of it, let's say that business was in fairly early stages from coming out of COVID, '21, '22. A large part of heavy lifting in terms of building the cost 0 to 1 is done with. From here on, the increases will largely uses linked, like -- we don't have to really go from 0 to a few hundred people in tech centers. We don't have to go and start from 0 to start building some of our initial content catalog and all that, right? So a large part of heavy lifting from a fixed cost standpoint is behind us.
Now on cost increases will be function of how the users and consumption estate. So to that extent, there is going to be a lot more correlation of revenues to cost as we go forward.
Talking about the revenue itself in Zee side. Our understanding is this is still largely a subscription-based platform. But still, we are seeing the -- usually subscription is very sticky in nature. But still, we are seeing quarterly actuation even on -- I mean, on a sequential basis, which shouldn't be ideally be there if there is largely driven by city subscriptions, so how should we look at this volatility on this revenue part.
I think B2C, what you said is largely true in terms of recurring nature and all that. There's always been a little bit of churn, but you've always acquire more. So I think what you said is in B2C. But keep in mind that B2B are lumpy, sometimes when you sort of complete a term on a B2B for [indiscernible] some time when you renew a new B2B to increase and so on. So that's 1 part, which causes us volatility. And then there could be potentially other service line items, which generates revenues that you had indication come in, in a few quarters of the digital property and so on come from I really have a business you prefer more revenue, right. On more what revenue?
More revenue from B2C rather than a B2B in this -- at least in this side of the business.
I mean, in early stage, you need both. You need B2B to give you certain scale and sampling that we need B2C structurally to drive a lot more user engagement and lifetime sort of data insight knowing your customer what you could do with that data, ensuring the advertising side and other things. So -- and do you have -- I mean, we've spoken about this in parts without giving it.
We have a slightly highest Q2 B2C compared to where the industry is, that's what I believe it.
Okay. Okay. My second question is on the [indiscernible]. Again, broadly taking your financials and and excluding the 5, we get a sense that the margin is in declining trend even in the DTV but is expect ZEE5 business. Is it more related to the mix change in the revenue? Or it's, again, cost of content is increasing, how should we look at it? So the 2 points on that. One, if you look at where our viewership share is trending, you come to 17.9% and you're coming on the journey. So yes, we're going through a phase where that is focused marketing investment, even on the TV side of things to revise viewership in specific pockets. So that's 1 again, not structural, so I wouldn't really make a broader call out on the underlying margins of the business. It's just a conscious choice we're making, and the results are showing in terms of how viewership share is coming.
Second, typically, when you are in Q2 and heading into festive season, you will invest behind some of those properties in terms of viewership and all of it to take advantage of stronger festive season coming in. So those are the factors which you played out, nothing broader to extrapolate beyond.
The next question is from the line of Aditya Chandrasekar from UBS.
A couple of questions on my side. The first one, following up with what I think Abhishek was asking. So we are seeing FMCG companies, they have kind of increased their ad spend over the last, say, year or so, but not a lot of that has translated to our ad revenues. For one reason is, of course, sports because some of the sporting events because they are the first to allocate some of it is ports. But are we seeing any kind of structural trends that allocating more of their ad spend to digital, and so it's not kind of flowing through to a linear per advertising. That's 1 question.
Second question is that on a sequential basis, we have seen our TV subscription revenues come down. I think you mentioned there was some kind of lumpiness in Q1. I just wanted to clarify because I missed that.
So I'll take the first one, and then I'll give Mahesh the second one. As I've many times said that linear television is the best suited television of -- best suited medium, sorry, for the reach that you can achieve for advertising. No amount of digital advertising can still achieve the kind of reach television can achieve. Therefore, for brand pending exercise, television still remains to be the most focused and most effective from both reach and pricing point of view medium. And therefore, we are not seeing that should happen.
Yes, when advertisers have limited budgets and they are looking at only transaction-based gains for the short term or for the medium term, they were looking at digital because that gives them a far more focused reach to our clients or the viewers that they want to reach. But I don't think we are seeing any structural change happening so far. It's still early days.
As I said earlier in my opening remarks and also answering somebody else that we are seeing gains in TV viewership, even as we speak, last quarter, we have seen a 300 basis point gain in the absolute viewership of television. So therefore, there is no structural change that we can talk about. Rohit, you want take the second one.
Sure. [indiscernible] second question about subscription ample yes, you got that right [Technical Difficulty]
So to that extent, we had some bit of base effect there in naan when you compare Q1 to Q2, you're seeing some sequential sort of moderation and that is where you're pointing people to look at Y-o-Y sort of growth rate.
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited.
I have a small bookkeeping question. If I look at our interest cost, it appears to be a cash high when I compare it with the historical run rate. And also the figure for 1Q and 2Q appears to be quite similar in nature. So is there an element of amortization over here?
So Jinesh, the interest cost that we have is very similar to what we had in quarter 1 as well. And as we have disclosed we are paying a certain amount of interest on the SAR ICC contract, where we have -- I mean the contract or we have association with staff. So that is forming part of that. And therefore, you see on the year-on-year, you see that the growth, but on a quarter-on-quarter, it's pretty flat.
So a INR 23 crore this year run rate, which one should be building in, right?
There is about INR 18 crores, which are finance charges and other things, which are approximately -- and yes, okay. And then the other part is that there is a lease accounting aspect based on which some long-term leases do get classified and there is an interest agreement, which is also forming part of this.
My second question pertains to your remark to one of the questions which was asked earlier, continuing to build up in receivables. And I think we mentioned that the buildup is predominantly because of the movie business and the liquidation should happen soon. But I just want to get this right. [indiscernible] released on 15th of August, and we still had a 45-day for collection, so just wanted to understand how does this receivable accounting basically work with the multiple [indiscernible].
So generally, typically, rest receivables starts within 2 to 3 weeks of the movie release. But you have to keep in mind that [indiscernible] also ran for 56 days, which means it was not just the 15th August 1-day release. And therefore, the sections accounted for accumulated over the 45-day theater, including even running into October. From that point of view, it's not just a simple [indiscernible] of 15th August. Actually, the movie was release on August 11. It's not really just simple this thing because the revenue buildup is on a daily basis, and therefore, the billing also happens on that business.
I just wanted 1 small clarification. I think with respect to ZEE5 revenues, it was mentioned in the opening remarks that there was some digital syndication deal as well, if I had it right. If you can just clarify what does this pertain to?
Yes, Mahesh.
Yes. So that pertains to a content piece which we have syndicated out Jinesh. So what happens is when you do something like this, you take -- you basically have corresponding cost and revenue coming in the P&L?
I will just elaborate that finish. So we continuously -- see we buy content a lot of content, which is even bundled with our television content, right? And therefore, at times, we believe closer to realizing that this content may not be suitable for our platform in the best form and that certain we decide to go and setting it out. And our team felt that we were getting a farmer return on that piece of content. If we were to syndicate out at and keep it for our own platform, and that's what we are seeing there.
Thank you, as that was the last question for today from the participants, I now hand the conference over to Mr. Mahesh Pratap Singh for closing comments. Over to you, sir.
Thanks, Sanjay. Thank you, everyone. Thanks for joining us today and wish you and your family a very happy and festive Diwali. So feel free to reach out to us if there are any follow-up questions as you do a deeper study of numbers. We'll be available and look forward to speaking to you. Thank you so much, and have a great festive season.
Thank you so much. On behalf of Zee Entertainment Enterprises Limited, that concludes this conference. Thanks for joining us, and you may now disconnect your lines. Thank you, everybody.