India’s credit rating agency ICRA has released its analysis on Media and Entertainment Industry. The agency believes Covid-19 outbreak is a credit negative for the Indian media and entertainment (M&E) industry. While the impact is high for the film production and exhibition segments, it is medium for television broadcasters, film distribution and print media, and low for the distribution platform operators (DPOs).
ICRA said that it does not foresee any significant immediate adverse impact of the COVID-19 outbreak on television (TV) broadcasters as consumers are likely to increase their TV viewing during social distancing. Hence, subscription revenues for television broadcasters are expected to hold steady. The major challenge for the broadcasters would be fresh content production. Given the shutdowns and travelling restrictions, broadcasters will face an issue with programming and will have to rely on re-runs as the pipeline of fresh content dries up.
Furthermore, over-the-top (OTT) platforms are poised for growth. Besides direct impact by way of lost sales due to the shut-down of cinema halls, given the adverse impact on the overall economy, corporates are likely to curtail their advertisement spends over the short-term. This, in turn, will dampen the revenues and profitability of the Indian M&E industry.
Sakshi Suneja, assistant vice-president, ICRA, said: “Film exhibition, digital equipment providers and film production have been worst impacted amid coronavirus outbreak. While the virus fears had already impacted the footfalls in theatres in the month of March 2020 by 30-40%, mandated closure of cinema halls across states starting March 10, 2020 has brought the film exhibition business to a complete standstill. Around 40% of the total costs of the exhibitors is fixed in nature, with lease rental being the major component. Such shutdown of operations is thus a significant credit negative for the industry. However, many of these exhibitors have invoked force major clauses in their agreements so that they do not have to pay lease rentals during this period of shutdown, thereby limiting impact on their losses.”