Inflation heat singes entertainment biz

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Mumbai, Jul 11: The rising inflation has taken its toll on the entertainment industry as well. Analysts feel that on a quarter-on-quarter basis, growth of the media and entertainment industry would be subdued on account of the current inflationary scenario which has hit leisure related expenditure.

“We expect a 69% growth in revenues of our coverage universe on the back of an increased consumer base. Operating profit of our coverage universe is likely to be muted due to cost pressures and flat realisations,” said a research analyst from Religare. He added that higher depreciation and lower other income would keep profit-after-tax (PAT) growth at 31% year-on-year.

Most multiplex players and film production companies would have a slow quarter due to the absence of major film hits. Flattish occupancies and ATPs would add to their troubles since the quarter is typically the school/college examination season as well as a non-festive period. Also, inflation would effectively dampen growth of the sector as a whole. However, according to IL&FS, the entertainment and media sector is poised for a robust growth as opportunities and growth embrace all its segments notwithstanding some short-term challenges especially for broadcasters and television distribution firms. With increased competition and introduction of newer broadcasters, content providers and distributors, the margins are expected to be under pressure.

The broadcast segment remains in the red. The sector is highly dependent on advertising revenue. In FY08-09, IL&FS estimates advertising spends to grow by 8-10 % unlike the industry prediction of 20%. Also, due to entry of new channels including regional and niche ones and newer formats, ad spends are fragmenting. Although television will remain on top of the advertiser’s spend, the heat will be felt as new channels as well new media options get included in their plans. The menace of carriage fee will only escalate with scheduled new launches and existing 300+ TV channels chasing bandwidth that can accommodate barely 80 of them. Addressable distribution platforms are expected to bring new lease of life through subscription revenue for broadcasters. Subscription revenues would increase both from the number of pay TV homes and increased subscription rates.