Media & Entertainment adspend to pick up in 2H13: India Ratings

14 Feb,2013

By A Correspondent

 

India Ratings has a negative outlook for the media & entertainment (M&E) sector for 1H13, as moderate economic growth and cost reduction initiatives by corporates are leading to sluggish growth in advertising spending (adspend). The outlook is stable for 2H13, as the Indian economy is likely to start picking up thus driving higher adspend by corporates.

 

Overall, the financial performance of TV broadcasters is likely to be moderate in 1H13 before improving in 2H13. India Ratings expects TV broadcasters and multi-system operators (MSOs) to benefit due to mandatory digitization as local cable operators (LCOs) will not be able to underreport subscriber numbers. Mandatory digitization will also be highly positive for DTH operators, as the overall market expands. TV broadcasters are also likely to benefit from the government’s decision to increase foreign direct investment limit in the sector to 74% from 49% earlier. However, digitization process is highly capital extensive as cable and DTH operators sell set-top boxes at subsidized rates.

 

The agency expects margin pressure on the print media industry to remain for most of the year. The industry is hurt from both revenue and cost sides as adspend growth is low and newsprint prices have remained firm. Over the last one year, there has not been any volatility in newsprint prices, but publishers using imported newsprint have suffered due to INR depreciation.

 

India Ratings expects that online advertising will be the fastest growing segment over the medium to long term, but its contribution to the M&E industry may remain smaller than that of TV and print.

 

Improved corporate revenue and margins leading to higher adspend would be a positive for the industry. Also, a significant fall in domestic and international newsprint prices and/or rupee appreciation against the US dollar would help improve margins for newspaper publishers and thus may resulting in a stable outlook for the print media sector.

 

However, a continuation of the current economic slowdown, muted corporate growth and stressed margins may put pressure on adspend growth, thus further aggravating problems for the industry.

 

India Ratings-rated M&E companies include: Hathway Cable & Datacom Ltd. (‘IND A-‘/Stable), Prime Focus Limited (‘IND A-‘/Stable), Rajasthan Patrika Private Limited (‘IND BBB+’/Stable) and Stargaze Entertainment Private Limited (‘IND BB-‘/Negative).

 

The full report, 2013 Outlook: Indian Media & Entertainment, is available at www.indiaratings.co.in.

 

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