New Delhi: India’s media and entertainment (M&E) companies are more profitable than their global peers as well as companies in other sectors in India, according to a report by audit and consulting firm Ernst and Young (E&Y).
An analysis of the financials of 37 publicly traded companies in the Indian M&E sector shows that gross profits from core operations, or Ebidta (earnings before interest, depreciation, tax and amortization), grew 31% in compounded terms between 2003 and 2007. That is 11 percentage points higher than the growth in the Bombay Stock Exchange’s benchmark Sensex index and the National Stock Exchange’s broader Nifty index in this period
The global M&E group, in which 75 companies were analysed, posted a 15% compounded growth in Ebidta between 2003 and 2007, lower than both FTSE 100 (16%) and S&P 500 (17%) but higher than Nikkei Index (8%).
The Indian M&E group was twice as profitable as its global counterparts.
“Indian M&E firms have shown healthy profitability. There are several large and very profitable privately held firms in this space. When you take them into account, the picture actually gets much better. The limitation of any such study is that only the listed firms can be studied,” said Farokh Balsara, national sector leader, M&E practice, E&Y.
In India, between 2003 and 2007, print enjoyed the highest compounded growth in Ebidta or operating profit margin of 61%, followed by film exhibition (41%), film and TV production (23%) and TV broadcast (13%). The story, however, is different if growth in Ebidta for 2007 is seen in isolation.
In terms of Ebidta margins (a measuring of operating profitability, this is just the operating profit expressed as a percentage of sales) film and TV production led with 36%, followed by print (22%), TV broadcast (21%) and film exhibition (18%). The India study analysed 37 companies across these four segments and segment-wise data for 2001-05 was unavailable.
Telecast and distribution
In a segment that is becoming increasingly competitive, Television Eighteen India Ltd, a listed subsidiary of Network18 Media and Investments Ltd, posted the highest compounded growth in Ebidta of 183.26% between 2003 and 2007, while TV Today Network Ltd, broadcaster of channels such as Aaj Tak and Headlines Today, was the poorest performer, with a corresponding figure of 4.89%.
In terms of profitability, in 2007, Sun TV Network Ltd, the Chennai-based conglomerate with a strong southern footprint, led with an Ebidta margin of 65%, while Dish TV India Ltd, the market leading (in terms of subscriber base) direct-to-home service provider that is the only listed entity in this segment, performed the poorest with –92%. The average Ebidta margin in 2007 for the segment was 21%.
“The good thing about television is that good quality, differentiated content is coming up now unlike in the recent past when the space was stuck with soaps and family dramas,” said Balsara.