GMA Network Inc. earns despite ad spending cut

(2nd Update) MANILA, Philippines - GMA Network Inc., which runs the Philippines’ leading free television channel, managed to post double-digit profit growth for the first quarter despite an industry cut in advertising expenditures. Earnings from January to March this year reached P501 million, 10.4 percent higher than last year’s P454 million, GMA vice-president for finance Ronaldo P. Mastrili said. “Despite a seemingly soft economy, the network was able to grow by double digits despite a three percent reduction in total advertising minutes," he told analysts and reporters in a briefing at its Quezon City headquarters. Gross revenues for the period rose by three percent to P2.651 billion, boosted by sales from TV and radio which took a 91 percent share in total gross revenues. Mastrili said there is a shift in revenue contribution as the network is only contributing 85 percent from 88.4 percent in the same period last year. It dipped by 0.6 percent to P2.27 billion from P2.25 billion. “I can still recall at the turn of the millennium, 95 percent of the revenues come from Channel 7. In less than 10 years, it has dropped by 10 percent owing to other businesses we are into," he added. Revenues generated by its other free TV channel – Q Channel 11 – climbed 38 percent for the first three months to P96 million from P69 million. Its contribution went up to 3.6 percent from 2.7 percent. Airtime revenues from radio, which contributed 2.6 percent, grew 17 percent to P68 million from P58 million. With over 210,000 paying subscribers worldwide for GMA Pinoy TV and over 112,000 paying subscribers for GMA Life TV, the listed company saw its subscription revenues from GMA International growing by 56 percent to P185 million from P118 million. “It is actually fresh source of revenues. They were practically nil the same period last year," Mastrili said. These two are now available in the US, Canada, Europe, Middle East, North Africa, Australia, New Zealand and other countries. Operating expenses inched up by six percent to P1.62 billion with production cost, which comprise 53 percent of the total, grew by only five percent to P847 million. General and administrative expenses rose eight percent to P762 million on higher personnel cost as it increased manpower complement, higher depreciation from regional expansion projects, new GMA Studios housing state-of-the-art broadcast equipment and facilities. Strong airtime sales prompted GMA chairman, president, and chief executive officer Felipe L. Gozon to say that the company will exceed earnings forecast of P2.8 billion this year. “Airtime revenues already edged closer to P1 billion as of May," Gozon said during an analysts’ briefing on Friday. “Definitely, [earnings] will be much more than 2008. Where it will come from is anybody’s guess." As of May 13, the network generated sales worth P934.86 million after a 10 percent increase in ad rates implemented in April. “We devised sales strategy very early before the advent of the negotiation. We have succeeded in the target we aimed to get. At the same time, we were able to increase our rate. We are expecting sales to shoot up as the months go towards the end of the year," Gozon said. During the first three months, GMA Network’s competitive loading went up by 5.1 percent to 21,826 minutes from 20,763 minutes. Next: GMA Network gets more airtime revenues due to advertisers’ ‘flight to quality’ GMA Network gets more airtime revenues due to advertisers’ ‘flight to quality’ For his part, Gilberto R. Duavit, Jr., executive vice president and chief operating officer, said there seems to be a bigger allocation of minutes and absolute pesos being directed towards the network. He attributed this to advertisers’ “flight to quality." “There have been efforts to increase our reach. It is obvious that program ratings have either maintained or improved. The economic situation triggered flight to quality. We are presently the most cost efficient media buy," he added. Meanwhile, as presidential candidates are now advertising ahead of the 2010 polls, Gozon said political ads have tendency to add rather than completely displace traditional advertisers. Some advertisers stay out of the market during the frenzy for political advertisements, he added. Political advertisements are always more expensive than regular advertisements, Mastrili added. For his part, Chief Financial Officer Felipe S. Yalong said the network is experiencing boom sales in May. “If we are lucky, probably, we will be showing much better numbers than what was reported," he said. GMA Network Inc. is the parent of GMA New Media, which in turn fully owns Media Merge Corp., the company that manages GMANews.TV. Shares of GMA Network Inc. remained unchanged at P4.85 apiece during Friday’s trading at the Philippine Stock Exchange (PSE). - With Robert JA Basilio Jr., GMANews.TV