TV, Print showing signs of recovery: ICRA
ICRA noted that there has been a month-on-month recovery in newspaper circulation and this will eventually recover to pre-Covid levels by Q4 FY2021
Rating agency ICRA's recent sectoral update on media & entertainment (M&E) notes that there is some recovery in sight for the print media and television broadcasting segments even as the film exhibition segment is still on the rough road.
The outbreak of the Covid-19 pandemic followed by multiple lockdowns has severely impacted the revenues of the domestic media and entertainment (M&E) industry, including film exhibition, print media, and TV broadcasting segments.
Based on the aggregate of two listed film exhibitors, four listed print media entities, and six listed TV broadcasters, ICRA has said that the print media segment is expected to witness a 30% Y-o-Y decline in revenues in FY2021 while the TV broadcasting industry is likely to witness a Y-o-Y decline of 15-20%. The film exhibition industry is going through its worst phase ever due to the impact of the pandemic and ICRA expects an 80-85% Y-o-Y contraction in revenues in FY2021 for the industry players.
On the print segment, ICRA noted that the good part is that with effect from July 2020, there has been a month-on-month recovery in newspaper circulation and this will eventually recover to pre-Covid levels by Q4 FY2021.
Advertisement revenues have picked up well in Q3 FY2021, led by festive season demand, with most entities also witnessing an uptick in ad-rates. Overall, the advertisement revenues will improve sequentially, though will be lower by 7-8% on a Y-o-Y basis in H2 FY2021.
The rating agency expects the operating profit margins (OPM) of print media entities to be supported by savings in newsprint costs, thus witnessing a lower contraction by up to 200 bps Y-o-Y in FY2021.
ICRA's estimate about TV broadcasting is slightly revised upwards from the rating firm’s earlier estimates of a revenue contraction of 18-25% in FY2021, given the higher-than-expected growth in subscription revenues in H1 FY2021 and stronger Y-o-Y recovery in advertisement revenues since Q2 FY2021.
ICRA Vice President Kinjal Shah noted that subscription revenues for TV broadcasters will hold steady in H2 FY2021 as consumers are likely to continue their TV viewing amid limited outdoor avenues of entertainment. Overall, she expects subscription revenues to witness mid-single-digit revenue growth in FY2021.
According to Shah, ad revenues for TV broadcasting companies witnessed good traction during the festive season and will witness a strong recovery in H2 FY2021 (vis-a-vis H1 FY2021), as economic activity and growth improve; however, the same will be lower by 5% on a Y-o-Y basis.
"Given the 25% revenue decline in H1 FY2021 and the anticipated Y-o-Y revenue decline in H2 FY2021, we expect the OPM of TV broadcasters to contract by 400-500 bps in FY2021. Profitability pressures may also arise due to the increasing investments in content necessitated by increased competition from digital platforms.”
On the film exhibition business, ICRA noted that the steep revenue decline will lead to operating losses for the film exhibitors, though the industry’s monthly cash burn will reduce from Rs. 57 crore in H1 FY2021 to Rs. 25-30 crore in H2 FY2021 supported by a sequential uptick in revenues and increased cost rationalisation.
Given the above scenarios, ICRA has maintained its negative credit outlook for the film exhibition, print media, and TV broadcasting segments of the Indian M&E industry. While the credit metrics of film exhibitors will weaken materially in FY2021 due to the pandemic, the credit metrics of entities involved in print media and TV broadcasting segments will see a moderate impact.
According to ICRA Assistant Vice President Sakshi Suneja said, “While cinema operations have started in most states with 50% of their capacities, the occupancy levels at multiplexes are at present very low, at mid-single-digit percentage levels (of the permitted capacity). The occupancy levels will remain subdued during the balance four months of FY2021 as the consumers are likely to stay away from enclosed places, amid rising cases of Covid-19 infections. While over-the-top (OTT) platforms shall remain the preferred mode of release of small-to-mid-sized budget films during FY2021, producers of large budget films are expected to defer their releases to Q1 FY2022 and beyond. In the absence of fresh content, advertisement revenues will also remain muted.”
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