Demand recovery across entertainment, media value chain to drive growth: Ind-ra

India Ratings and Research (Ind-ra) has assigned a stable outlook to broadcasters, print media and multisystem operators (MSOS) for FY22.

The agency maintained a negative outlook for the multiplex sector given the delayed recovery curve and continued low attendances hampering cinema operators. In contrast, broadcaster, print media and MSO companies have seen improved prospects in FY22 underpinned by a strong return to advertising revenues in 2H FY21.

Ind-ra anticipates a weak demand recovery for movie exhibitors primarily driven by a smooth pick-up in advertising revenues for broadcasters as shooting for movies and general entertainment content resumed in 2QFY21.

Print media will continue to face challenges from digital initiatives cannibalising circulation which will necessitate companies investing in online ventures themselves. However, the improvement in ad revenue growth in 2H FY21 bolsters the near-term outlook.

Ind-ra believes MSOS should see stable revenue growth and improved EBITDA generation as work-from-home initiatives have meant an increased demand for broadband services, which should further boost MSOS’ financial profiles.

Ind-ra believes the lockdown has led to a shift in operating models across the media and entertainment space. During the lockdown, over-the-top companies were able to debut new movies on their digital platforms. Given the expected weak demand recovery for multiplexes, exhibitors will likely have to contend with over-the-top platforms as producers and film-houses look to maximise returns in a weak macro-economic environment.

Exhibitors are also exploring shared-lease rental models with mall developers, which could impact margins and scalability. However, should demand return to pre-covid levels, exhibitors will remain the preferred medium for watching movies, as well as the best option to generate the highest box-office returns. The lockdown has led to MSOS largely shifting to online collection models, which should reduce the use of fund-based limits and thus improve credit profiles. However, given the threat of digital news ventures, print media companies have invested in digital versions of their established publication to maintain market share.

These companies rely heavily on advertising revenues which are closely linked to the macroeconomic environment.

While ad revenues have certainly picked up in 2H FY21, any weakness in the operating environment in FY22 on account of new lockdowns or slow pick-up in vaccinations can lead to deterioration in financial profiles of print media companies.