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With digital advertising growing at 32% a year, measurement systems will help accelerate the growth of this ecosystem. Photo: iStockphoto
With digital advertising growing at 32% a year, measurement systems will help accelerate the growth of this ecosystem. Photo: iStockphoto

Media & entertainment sector's ad, subscription revenue to rebound FY22: Crisil

  • The time taken to bounce back to pre-pandemic levels will be relatively shorter for segments such as digital and television, while print, films, outdoor, and radio would take longer

New Delhi: Advertising and subscription revenue for India’s media and entertainment (M&E) sector is expected to rebound to 1.37 lakh crore in fiscal 2022, after contracting an estimated 26% this fiscal, according to rating agency Crisil. The time taken to bounce back to pre-pandemic levels will be relatively shorter for segments such as digital and television, while print, films, outdoor, and radio would take longer.

Credit profiles of large media companies would be unaffected due to strong balance sheets, liquidity and the revenue rebound, while mid-sized and small ones could see stress, an analysis of over 80 such firms rated by Crisil Ratings shows.

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“Advertisement and subscription revenues contribute nearly equally to the overall M&E sector’s topline, but since the former correlates strongly with economic growth, the pandemic has had a bigger impact on it," Nitesh Jain, director, Crisil Ratings said in a statement. “Next fiscal, with strong economic rebound on the cards, ad revenue should grow 31% on-year and subscription revenue 24%," he added.

The TV segment, contributing around half of the sector’s topline, has recovered fully and will report healthy growth next fiscal, the rating agency said. Ad revenue saw a sharp contraction initially, but recovered swiftly thereafter, aided by airing of new content, sports events such as the Indian Premier League (IPL) and a strong festive season. As far as subscriptions go, TV was resilient even during the peak of pandemic as people remained indoors.

The print segment, contributing a fifth of the M&E sector's topline, is recovering, though at a much slower pace, and should be able to rebound fully only by the end of next fiscal. Print is losing share in ad revenue mainly to the digital segment while circulation too, especially for English language, could see a loss of 8-10%, because of increased preference for e-papers in the metros. However, print companies are rebooting their cost structure and accelerating digital adoption to stay relevant.

Film business, contributing a sixth to the sector's topline, is one of the most impacted segments. But occupancies in theatres should improve with the vaccination rollout and a strong pipeline of content, Crisil said. However, this segment is likely to remain impacted even next fiscal due to social distancing norms and fear of closed spaces, it added.

Other traditional media, including radio and outdoor, continue to struggle, and will likely take much longer to recover. This is because commuting as well as ad budgets for micro, small and medium enterprises, key drivers for these segments, will remain restricted even in fiscal 2022.

Given the sharp impact on revenue, cash accruals this fiscal will weaken for all M&E companies except TV distributors. Credit profiles of the large companies are cushioned by strong balance sheets (with most of them net debt free), while those of small and mid-sized media companies have weakened. Further, M&E companies have adopted aggressive cost rationalisation initiatives. Besides, the pandemic-led change in consumer behaviour has accelerated monetisation opportunities for these players through integration of digital media into their traditional businesses.

“Digital has emerged as the medium of choice. The pandemic accelerated adoption of OTT platforms, online gaming, e-commerce, e-learning, e-papers and online news platforms. This has meant the focus of advertisers has shifted from traditional to digital media," Rakshit Kachhal, associate director, Crisil Ratings said in a statement adding that the agency expects the digital segment revenue to grow 14-16% annually over the medium term. Its share of M&E sector revenue is expected to double to 20% by FY2024 compared to last year.

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