Multiplexes and broadcasters are likely to report contrasting results in Q1FY23. While strong box-office collections are likely to drive growth for multiplexes, a slew of near-term headwinds are likely to result in muted growth for broadcasters, according to a latest report by Emkay Global Financial Services. The report highlights that for multiplexes, regional and Hollywood movies should continue to compensate for the lack of high-quality Bollywood content. As for broadcasters, ad revenues should be impacted by input cost inflation faced by advertisers. For both Zee and Sun TV, subscription revenues will likely continue to be affected by delay in the implementation of NTO 2.0.
The first quarter of FY23 marked a full quarter of operations after the pandemic for multiplexes, the report stated. Strong performances by regional, Hollywood and select Bollywood movies have resulted in record box-office collections in Q1FY23 with KGF-Chapter 2 becoming one of the highest grossing movies, Vikram, Beast and Sarkaru Vaari Paata being the other regional movies to do exceptionally well. Among Hollywood movies, Doctor Strange in the Multiverse of Madness, Top Gun: Maverick and Jurassic World Dominion did well in the quarter. Bhool Bhulaiyaa 2 was the standout movie among Bollywood releases, even as some big-budget movies failed to make a mark at the box office. According to the report, although higher collections of regional movies will not translate into proportional gains for PVR and Inox, they are still likely to report ticket sales well above the pre-covid levels, supported by average ticket price (ATP) increases. Operating metrics should track well, with stable ATP and SPH quarter-on-quarter, along with a recovery in ad revenues. The companies should see positive cash generation as well.
For broadcasters, the unfavorable macroeconomic scenario is likely to weigh on the growth of both Zee and Sun TV in Q1FY23. Advertisers have curtailed discretionary spending due to high input cost inflation, adversely affecting broadcasters’ ad revenues. For Zee, the report anticipates, it is likely to be a double whammy as it has been unable to recoup the market share losses and has also removed the Hindi GEC from the free dish platform, which could negatively affect ad revenues. For broadcasters, the delayed implementation of NTO 2.0 should keep subscription revenues under pressure as well. For Sun TV, though Q1 is generally a stronger quarter sequentially. In addition, the recovery in the base quarter was slow and it has maintained market share in the last few quarters, both of which should lead to better ad revenue growth compared with Zee.
The report summarises that the broadcasting business is facing multiple near-term headwinds in the form of high inflation hitting advertising revenues hard. With companies continuing to invest aggressively in content as well to avoid falling behind, margins are also likely to be under pressure. As for multiplexes, the report states that despite ATP and SPH being well above pre-covid levels, footfalls have remained strong, indicating the resilience of the business model. However, Bollywood movies continue to underperform and their recovery is essential for driving multiplexes’ earnings ahead. Furthermore, the report states that the upcoming festive season in Q2 and Q3FY23 will be the deciding factor for ad revenue recovery for broadcasters. The implementation of NTO 2.0 from November 30, 2022 will further delay any recovery in subscription revenues, the report claimed adding that the subscription revenues are only likely to stabilise in FY24 after the initial hiccups post the implementation of NTO 2.0.
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