The dismal third quarter results awaiting media companies may result in the first shake-out in the general entertainment channel (GEC) space.
Profits of general entertainment channels will be hit further as ad spends slow and costs rise
MUMBAI: The dismal third quarter results awaiting media companies may result in the first shake-out in the general entertainment channel (GEC) space.
The ongoing economic slowdown has hit revenues as advertisers cut back spending. The second quarter also proved a disappointment after a significant escalation in programming and carriage fees saw profits nosedive.
To make matters worse, analysts say, the strike by workers’ unions that ended Monday will significantly impact margins, mainly due to a severe jolt in ad revenue growth.
Facing programming blackout, GECs are showing re-runs. This has caused advertisers to switch their spending to sports, movies and news channels.
A slowdown in sectors like real estate and finance — among the biggest advertisers on television — will see such players reduce ad spends further.
The impact of these negatives will be felt in the third quarter.
Analysts with Edelweiss — Abneesh Roy, Sharad Todi and Kartik Gaba — in their Media and Entertainment report for November, said: “Over the next 6-12 months, inventory utilisation is going to drop for most broadcasters due to a subdued business environment across the country. GEC players will find it difficult to maintain their margins, failing to bring down production costs in tandem with revenues.”
Subscription revenues from DTH and cable providers might still save the day, but it is doubtful if those will sufficiently make up for the drop in ad revenues.
“Subscription revenues for Zee Entertainment Enterprises Ltd (ZEEL), Zee News Ltd (ZNL) and TV18 are expected to grow at a CAGR of 17.7%, 33.7% and 28.6% respectively,” said the Edelweiss report.
Analysts, therefore, assert the importance of pay TV revenues, since programming and people costs will continue to remain high.
Vikash Mantri and Suchitra WL, analysts at ICICI Securities, find this state of the Indian broadcasting sector “interestingly poised”.
“On the one hand, pay TV is charting a J curve owing to surging addressability through digitalisation and on the other, intensifying competition is leading to high business costs.
We believe the surge in traffic in the wake of digitalisation will strain broadcasting
players’ financials and companies with the capability to entice viewers and diversify business across properties will emerge as winners,” they said.
They also pointed out a few programming moves from GECs to combat Colors, from the Viacom18 stable, which has taken second spot within five months of launch.
“Zee TV has increased movies in its programming and its focus on programming in the extended prime time slot of 7.30 pm. Star Plus has announced a major revamp by extending its key programme Bidayi to an hour and replacing the two long-running Balaji Telefilms (BTL) serials Kyunki Saas Bhi Kabhi Bahu Thi and Kahaani Ghar Ghar Ki, with fresh content,” said Mantri and Suchitra from ICICI Securities.
They’ve also highlighted the performance of Star Pravah (Marathi GEC), Zee Tamizh (Tamil GEC) and Zee Telugu News as key developments to watch out for in the next few months.
c_arcopol@dnaindia.net
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