ICRA says TV broadcasters improving faster than expected

ICRA survey results

Credit rating agency ICRA has revised its revenue target for the TV broadcasting sector in India due to a faster than expected bounce-back in advertisement revenue and strong growth in subscription incomes.

The ratings company, however, kept its forecast for the print industry unchanged, predicting a decline of 30% for the ongoing financial year.


ICRA had earlier predicted that the TV broadcasting industry would see its revenue fall by about 18-25% this year due to the impact of the COVID-19 pandemic.

However, in its latest update, it guided for a faster recovery, and said industry revenue is now likely to be down only by about 15-20%, and not 18-25% as projected earlier.

Many TV broadcasting groups have reported a bounce-back in their advertising revenue — which used to account for around 60-65% of industry revenue — during the latest festival season, as economic activity picked up after a punishing lock-down in April and May.

“Advertisement revenues witnessed a good traction during the festive season and most of the TV broadcasters have witnessed an uptick in ad-rates in Q3 FY2021,” it said, referring to the period from October to December 2020.

“Industry players expect to reach pre-Covid advertisement revenues in Q3 FY2021. Advertisement revenues will thus witness a strong recovery in H2 FY2021, as economic activity and growth improves; however, the same will be lower by 5% on a YoY basis.”

While many had expected the second source of revenue — pay channel subscription fees paid by customers — to remain flat or even decline during the current year, they have remained surprisingly resilient throughout the lock-down, possibly because people did not have any other means of entertainment.

Many industry observers believe that people redirected part of their spending from sectors such as travel and outdoor shopping to indoor entertainment and durable purchases during the lock-down.

“Subscription revenues for TV broadcasters are expected to hold steady in H2 FY2021 [October-March] as consumers are likely to continue their TV viewing amid limited outdoor avenues of entertainment. Overall, subscription revenues are expected to witness mid-single digit revenue growth in FY2021,” it said.

Despite frantic efforts to cut costs, ICRA expects profits to remain under pressure, and profit margins to fall by around 4 to 5 percentage points for the year as a whole.

“Profitability pressures also arise due to the increasing investments in content necessitated by increased competition from digital platforms,” it said.


Things, however, are not as good for the print segment, for which the agency maintained its earlier projection of a 30% contraction in revenue, compared to 15-20% for TV.

While TV broadcasters expect ad revenues to recover to pre-COVID levels during the ongoing quarter (October-December), ICRA believes they are likely to remain 7-8% below pre-COVID levels for the print segment during the second half of the current financial year (October-March).

“In the backdrop of expected recovery in advertisement revenues as well as to boost advertisers’ confidence, many entities had also launched their mega city-wise editions. The pagination is thus, expected to improve to upto pre-Covid levels in Q4 FY2021,” it said.

While profit margins are likely to take a knock of around 4 to 5 percentage points in the TV broadcasting sector, the impact will be only to the extent of around 2 percentage points in the print sector due to a sharp decline in newsprint costs, ICRA said.

“With around 78% of total revenues of the print media segment contributed by advertisement, a decline in the same will adversely impact the profit margins of print media companies, though ICRA expects the same to be partly offset by savings in newsprint costs.”