The Indian media and entertainment industry’s revenue in the current financial year is expected to decline by 16%, or INR 25,000 crore, to INR 1.3 lakh crore due to the COVID-19 induced economic slowdown, according to a report by rating agency Crisil. The analysis is based on 78 media and entertainment companies rated by Crisil.
Advertisement revenue, which accounts for about 45% of the overall revenue, will see a sharper cut of 18%, while subscription revenue, which accounts for approximately 55%, will be relatively resilient with a likely decline of 14%. TV, print, and digital are the top three segments in terms of advertisement revenue for the media and entertainment industry.
The Crisil report says that advertisement revenue, which correlates strongly with economic growth, will take a hit as India’s gross domestic product growth is expected to hit a multi-decade low in the current financial year owing to the extended lockdown driven by the COVID-19 pandemic. Weak economic conditions had kept advertisement revenue muted even last fiscal, the report said.
Revenue in the digital segment will continue to grow but at a slower pace. All the traditional segments such as TV, print, radio, out-of-home media, and films, will see a significant decline. According to the report, if not for digital, the overall decline would be worse at about 25%.
The resilience of the digital segment is driven by the increasing use of devices and applications. For TV, the impact on advertising revenue will also be because of the lack of new content on popular channels and postponement of major sporting events such as the Indian Premier League. For newspapers, longer recovery time for key advertiser-industries such as automobiles, real estate, and e-commerce would keep advertisement spend muted.
The top three segments for subscription revenue are TV, print, and cinema, of which, TV continues to be healthy even during the lockdown, according to the report. Newspapers have faced distribution challenges in certain areas leading to a temporary blip in the circulation revenue.
The report says that the large companies will surmount the stress given their ample liquidity and strong financials. But smaller players could see a sharp impact on their credit profiles as revenues decline and liquidity gets squeezed.
Any rebound in advertising revenue depends on the economic growth, the report said, adding that given the low base likely this fiscal, next fiscal would see revenue grow 18-20%.