Digital to push TV operating margins 300 bps by 2027: Crisil

The operating margins of television broadcasters are set to rise 300 basis points (bps) to 15% by fiscal 2027, with increasing digital offerings beaming up economies of scale.

A Crisil Ratings analysis of TV broadcasters accounting for 90% of the industry revenue, indicates as much.

Their revenue was almost stagnant between fiscals 2022 and 2025 as consumers increasingly opted for digital content such as over-the-top (OTT) applications on TV or mobile, or pure-plays such as YouTube and Instagram.

According to the Crisil report, this trend is expected to continue because of accelerating broadband and internet penetration and the natural advantages of the digital medium, such as on-demand availability of content and ability to actively engage with it. As a result, revenue from traditional linear broadcasting3 is expected to be stable or fall marginally.

Broadcasters have already launched digital platforms (in the form of mobile apps or dedicated apps for smart TVs) for content such as live sports and news.

The growth in the digital segment is also helping broadcasters capture higher advertisement revenues from sectors such as fast-moving consumer goods, automobiles, e-commerce and real estate. These segments have gravitated towards digital because of shifting consumer consumption preferences as well as the ability of the digital medium to deliver targeted and personalised advertisements through data-driven analytics.

Rising subscription revenue has also been supportive. Broadcasters, directly or indirectly, compete with OTTs and digital- only platforms for content acquisition and subscription revenue. Many platforms are moving content behind paywalls and exploring strategies to optimise content acquisition cost and pipe in more advertisements to generate more revenue.

Says Ankit Hakhu, Director, Crisil Ratings “As a result, digital revenues of these broadcasters grew ~15% on average over fiscals 2022-2025 and will continue to grow at in double-digits over the next two fiscals. With linear broadcasting segment nearly flat, this will increase the revenue contribution of digital to ~25% by fiscal 2027.”

Rising revenues with increased contribution of digital will lead to improvement in operating profitability as fixed costs do not change materially with digital, providing an alternative to broadcasters to monetise their content.

Says Varun Marwaha, Associate Director, Crisil Ratings “Ability to utilise their content for digital offerings is leading to amortisation of content cost over a wider consumer base and economies of scale in operating costs. As a result, the operating margins of broadcasters are expected to inch closer to the pre-Covid level of 16-18% over the next two years.”