The media and entertainment sector is expected to witness 16 per cent decline in revenue for FY21, due to fall in advertisement and subscription income in the wake of coronavirus-induced lockdown, rating agency Crisil said.
The industry would take a hit of around 18 per cent in revenue from advertisement that accounts for nearly 45 per cent of total income, while the subscription earning that contributes 55 per cent will be relatively resilient with a likely decline of 14 per cent, Crisil said in a report.
Overall, the industry is expected to have a turnover of around Rs 1.3 lakh crore this fiscal, it added.
"The ongoing economic slowdown, made worse by the COVID-19 pandemic, is set to cull Indian media and entertainment industry's revenue by 16 per cent or Rs 25,000 crore to Rs 1.3 lakh crore this fiscal," it said.
In FY20, the media and entertainment industry is expected to have a revenue of Rs 1.55 lakh crore with a CAGR growth of 9 per cent, while in FY19, it had reported almost 10 per cent growth to Rs 1.42 lakh crore.
"The sharp drop in revenues will impair the debt metrics of the industry, while balance sheet strength and time to recovery will determine the overall impact on credit profiles," the rating agency said in a statement.
While advertisement revenue, which correlates strongly with economic growth, will take a hit as India's GDP growth hurtles towards a multi-decade low this fiscal owing to the extended lockdown to contain the pandemic, it said, adding that "weak economic conditions had kept advertisement revenue muted even last fiscal".
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"The overall revenue loss of Rs 25,000 crore for the industry will translate to significantly lower profits for companies despite cost-cutting measures," it added.
The analysis is based on 78 media and entertainment companies rated by Crisil, it added.
"Overall ad revenue will plummet 18 per cent this fiscal, with the impact varying across segments. In digital, it will continue to grow but at a slower pace. All the traditional segments television (TV), print, radio, out-of-home media, and films, in the order of impact from low to high will see a significant decline," Crisil Ratings Senior Director Sachin Gupta said.
TV, print and digital are the top three segments in terms of advertisement revenue.
The resilience of the digital segment is driven by increasing use of devices and applications.
"For TV, impact on ad revenue will also be because of lack of new content on popular channels and postponement of major sporting events such as the Indian Premier League. For newspapers, longer recovery time for key advertiser-industries such as automobiles, real estate and e-commerce would keep ad spend muted," it said.
The top three segments for subscription revenue are TV, print and cinema, of which, TV continues to be healthy even during the lockdown.
Newspapers have faced distribution challenges in certain areas leading to a temporary blip in the circulation revenue. But a sharp fall in box office collections will curtail subscription revenue, it added.
"Given the sharp reduction in revenues, debt protection metrics will certainly weaken this fiscal for media and entertainment companies. The large ones will surmount the stress given their ample liquidity and strong financials. But smaller players could see a sharp impact on their credit profiles as revenues decline and liquidity gets squeezed," Crisil Ratings Director Nitesh Jain.
Multiplexes that have had strong credit profiles will see credit pressure aggravating because of longer road to recovery, he added.
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