While multiplex companies, PVR Cinemas and INOX Leisure have been outliers on the back of blockbusters such as War, Goodnewzz, Bala, Houseful 4 and Dabangg 3, a recent report by Edelweiss Securities, says that Q3FY20 is likely to be one of the toughest quarters the media industry has seen in several years. "We estimate our media universe's revenue and EBITDA to fall nearly 13.7 per cent YoY (down 2.7 per cent in Q2FY20) and nearly 8.4 per cent YoY (up 10.6 per cent in Q2FY20)," says the Edelweiss report. Advertising revenue growth is going to be major area of concern across the board.
The report estimates Zee Entertainment's (ZEEL) ad revenue to decline nearly 13 per cent YoY (on high base of nearly 22 per cent) and Sun TV Network's ad revenue to fall nearly 14 per cent YoY (base of nearly 12 per cent) in Q3FY20. Ad revenue growth of print companies such as DB Corp and Jagran Prakashan is likely to decline by nearly 12 per cent YoY and nearly 13 per cent YoY, respectively. The ad revenue decline in Q3FY20 is primarily due to the economic slowdown that has resulted in cutback in ad spends by large categories such as consumer goods, auto, telecom and retail.
The report further expects Zee Entertainment's Q3FY20 revenues, EBITDA and PAT to decline nearly 5 per cent, 22 per cent and 21 per cent YoY, respectively. Similarly, SUN TV Network's Q3FY20 revenue, EBITDA and PAT are likely to decline by nearly 12 per cent, 26 per cent and 15 per cent YoY, respectively. While subscription revenue has been a saving grace for all broadcasters, regulator, TRAI's revised new tariff order (NTO2) could dampen the growth of subscription revenue of consumers.
As per the new regulation, channel rates have been capped at Rs 12 (vis-a-vis the current price of Rs 19). The new regulation has also capped bouquet discounting at 33 per cent, which certainly would be a huge setback for the broadcasters. In order to ensure reach, broadcasters discounted their bouquets by as much as 80 per cent and the consumer found it more lucrative to buy the broadcaster-created bouquets rather than buy channels a-la-carte. With bouquet discounting capped, it is now likely that consumers would buy bouquets. This would mean that several channels will not make it to consumer homes and if that happens it will not just impact distribution revenue, it will also impact advertising.
After all, advertisers advertise on TV channels for reach, and if that doesn't happen, ad revenue is bound to dry up. The broadcasters have been asked to publish the revised MRP rates and bouquets by January 15. "Overall, this is likely to be potentially negative for broadcasters given ad revenue growth has been sluggish YTD20 and resumption looks challenging; larger portion of growth for broadcasters in FY20 was has been driven by the subscription revenues," states the report.
The Edelweiss report is bullish about the multiplexes, and says that they would continue to shine owing to the good content response and steady expansion. "FY21 could be better for print players owing to decline in newsprint prices and a favourable base. Our key monitorables for the media sector are broadcasters' response to the TRAI amendment, screen expansion of multiplexes (PVR, INOX), aggression from OTTs and pick-up in JioFiber's expansion," says the report.