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Expected economic recovery to benefit media and entertainment industry: Ind-Ra report

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MUMBAI: Future seems to be optimistic for the Indian media and entertainment sector, at least that is what the India Ratings & Research (Ind-Ra) report says. The agency has revised the outlook on the media and entertainment sector for FY15 and it expects improvements in advertisement spending (ad spending) by corporates with a gradual economic recovery, eventually making the industry stable from negative.

The upcoming elections will also contribute to the increase in ad-spending in the Q4-FY14 and Q1-FY15. The agency maintains a “stable outlook” for most of Ind-Ra rated entities for FY15.





High newsprint prices due to currency movements along with limited capacity to pass on cost increases to end-consumers could continue to impact the profitability of print media players dependent on imported newsprint in FY15. However, some comfort is drawn from the expected improvement in ad revenue. 





Increasing digitisation of cable TV distribution in FY15 will increase subscription revenue for broadcasters and multi system operators (MSO), which would positively impact their business profile with reduced dependence on cyclical ad revenue. However, the agency believes timely completion of the digitisation regime remains the key as the capex undertaken by cable operators and direct-to-home operators towards distribution of set-top boxes will be monetised fully once the digitisation drive is complete. 



Telecom Regulatory Authority of India’s (TRAI) proposal for increasing foreign direct investment limits in the broadcasting sector, if implemented, could lead to increased investor interest in the sector. Investor interest would also be boosted by the digitisation impact. 





Ind-Ra expects print and TV media will continue to dominate the industry, commanding a major chunk of the ad spend over the medium term. However, online ad spend would be the fastest growing segment on the back of increasing penetration of Internet and Internet-enabled hand-held devices coupled with changing lifestyles.  

 

Ind-Ra does not envisage a positive outlook for the industry, given the industry’s continued strong dependence on ad revenue and only a moderate economic recovery expected in FY15. However, timely implementation of digitisation coupled with deleveraging of MSOs could result in a positive outlook as also a fall in newsprint prices. 

 



Lower economic growth unable to give a boost to corporate ad spending could result in a negative outlook. Furthermore, an increase in newsprint cost further straining profitability and impacting credit profiles could also result in a negative outlook.

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