The media and entertainment sector is expected to see a 16% drop in revenue for FY21, due to lower advertising and subscription revenue following the coronavirus-induced lockdown, the company said. rating agency Crisil.
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The industry would take a hit of about 18% in advertising revenue which accounts for nearly 45% of total revenue, while subscription revenue which contributes 55% will be relatively resilient with a likely 14% decline, a said Crisil. in a report.
Overall, the industry is expected to have a revenue of around Rs 1.3 lakh crore this financial year, he added.
“The ongoing economic downturn, compounded by the COVID-19 pandemic, is expected to reduce Indian media and entertainment industry revenue by 16% – or Rs 25,000 crore – to Rs 1.3 lakh crore this fiscal year” , did he declare.
In FY20, the media and entertainment industry is expected to generate revenue of Rs 1.55 lakh crore with CAGR growth of 9%, while in FY19, it had registered a growth of nearly 10% to Rs 1.42 lakh crore.
“The sharp decline in revenue will affect industry debt metrics, while balance sheet strength and time to recovery will determine the overall impact on credit profiles,” the ratings agency said in a statement.
While advertising revenue, which is strongly correlated with economic growth, will be hit as India’s GDP growth rushes to a multi-decade low this fiscal year due to the prolonged lockdown to contain the pandemic, it said. he said, adding that “weak economic conditions had kept advertising revenues muted even last fiscal year.”
“The overall revenue loss of Rs 25,000 crore for the industry will result in a significant drop in profits for the companies despite the cost cutting measures,” he added.
The analysis is based on 78 media and entertainment companies rated by Crisil, he added.
“Overall advertising revenue will drop 18% this fiscal year, with varying impact across segments. In digital, it will continue to grow, but at a slower pace. All traditional segments – television (TV), print print, radio, non-home media and movies, in order of low to high impact – will see a significant decline,” said Sachin Gupta, senior director of Crisil Ratings.
Television, print and digital are the top three segments in terms of advertising revenue.
The resilience of the digital segment is driven by the growing use of devices and applications.
“For television, the impact on advertising revenue will also be due to the lack of new content on popular channels and the postponement of major sporting events such as the Indian Premier League. For newspapers, a longer recovery time for key advertising sectors such as automotive, real estate and e-commerce would keep ad spending muted,” he said.
The three main segments of subscription revenue are television, print and cinema, of which television continues to be healthy even during the lockdown.
The newspapers faced distribution problems in some regions, which led to a temporary drop in circulation revenue. But a sharp drop in box office receipts will reduce subscription revenue, he added.
“Given the sharp reduction in revenue, debt protection measures will certainly weaken this exercise for media and entertainment companies. The big ones are weathering the stress given their abundant cash and strong finances. players could see a significant impact on their credit profiles as income drops and liquidity is reduced,” Crisil Ratings Director Nitesh Jain said.
Multiplexes that have had strong credit profiles will see further credit pressure due to a longer road to recovery, he added.