Media and entertainment sector to pick up in H2 on economic recovery

India Ratings has a negative outlook for the media and entertainment (M&E) sector for the first half of 2013 as moderate economic growth and cost reduction initiatives by corporates are leading to sluggish growth in advertising spending (adspend), the rating agency said. 

However, the outlook is stable for the second half of the year as the Indian economy is likely to start picking up, thus, driving higher adspend by corporates, India Ratings said. 

Overall, the financial performance of TV broadcasters is likely to be moderate in the first half before improving in the later part of the year. India Ratings expects TV broadcasters and multi-system operators (MSOs) to benefit due to mandatory digitisation as local cable operators (LCOs) will not be able to under-report subscriber numbers. 

Mandatory digitisation 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 the foreign direct investment limit in the sector to 74 per cent from 49 per cent earlier. However, the digitisation process is highly capital intensive as cable and DTH operators sell set-top boxes at subsidised rates. 

The agency expects margin pressure on the print media industry to remain for most of the year. The industry is hurt from both the 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 result 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.

Source: http://cablequest.org/news/national-news/item/1694-media-and-entertainment-sector-to-pick-up-in-h2-on-economic-recovery.htmlSource: http://cablequest.org/news/national-news/item/1694-media-and-entertainment-sector-to-pick-up-in-h2-on-economic-recovery.html