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India Ratings gives negative outlook for media sector

Feb 13 2013, 07:39 IST
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SummaryRatings agency India Ratings has given a negative outlook for the media and entertainment sector in the first half of 2013.

Ratings agency India Ratings has given a negative outlook for the media and entertainment (M&E) sector in the first half of 2013.

However, for the second half of the year, the agency has maintained a stable outlook mainly on the back of likelihood of the economy picking up, which will lead to higher adspend by corporates.

Financial performance of TV broadcasters is likely to be moderate in H1 2013 before improving in second half, India Ratings said in a a statement here today.

The agency, however, expects margin pressure on the print media industry to remain for most of the year.

"TV broadcasters and multi-system operators (MSOs) will benefit due to mandatory digitisation as local cable operators (LCOs) will not be able to under report subscriber numbers. Mandatory digitisation will also be highly positive for DTH operators as the overall market expands," it said.

TV broadcasters are likely to benefit from the government's decision to increase FDI limit in the sector to 74 per cent from 49 per cent earlier, the agency said.

On performance of the print media industry, the agency said, "it is hurt from both revenue and cost sides as adspend growth is low and newsprint prices have remained firm. Over the last one year, there has not been any volatility in newsprint prices, but publishers using imported newsprint have suffered due to rupee depreciation."

India Ratings expects online advertising to be the fastest growing segment over the medium to long term, but its contribution to the M&E industry may remain smaller than that of TV and print.

"Improved corporate revenue and margins leading to higher adspend would be a positive for the industry. Also, a significant fall in domestic and international newsprint prices and/or rupee appreciation against the US dollar would help improve margins for newspaper publishers and thus may resulting in a stable outlook for the print media sector."

The agency maintained that continuation of the current economic slowdown, muted corporate growth and stressed margins may put pressure on adspend growth.

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