The Indian media and entertainment¹ (M&E) sector may log revenue growth of 12-14% on-year to ~Rs 1.6 lakh crore in fiscal 2024, against ~16% growth expected this fiscal.

Advertisement (ad) revenue, which accounts for ~55% of the sector’s revenue, will grow 14% given its strong correlation with economic activity. Also, the general elections expected in mid-2024 will trigger an increase in ad spend in the last quarter of next fiscal.

Subscription revenue², accounting for the balance ~45%, will grow at a slower pace of ~12%, led by strong recovery in films. Excluding film exhibition, the revenue growth would be modest at 4-5%.

Says Naveen Vaidyanathan, Director, CRISIL Ratings, “While television (TV) will continue to dominate ad revenue share given its wider reach, digital will lead in growth, rising 15-18% annually over the medium term. It has emerged as the medium of choice in the past few years amid accelerated adoption of over-the-top (OTT) platforms, online gaming, e-commerce, e-learning, and online news platforms. After the pandemic, digital has become the second-largest segment after TV in terms of ad spends. Together, they account for over three-fourths of the ad revenue for the M&E sector, followed by the print segment with a one-fifth share.”

While the print media, too, will see healthy ad revenue growth of ~15% on-year next fiscal, it would still trail the pre-pandemic level by 800-1000 basis points. That is because of slow recovery in ad yields, especially for English editions. Other hyperlocal media such as radio and outdoor could reach pre-pandemic levels next fiscal spurred by increased commuting as well as higher ad budgets for micro, small and medium enterprises, the key drivers for these segments.

As for non-ad revenue, theatre collections for film exhibition, which was the most affected by Covid-19, may surpass pre-pandemic levels with strong growth of ~30% on-year next fiscal, after making a strong comeback this fiscal. The addition of screens amid rising occupancy will support the growth. Subscription revenue growth for TV and print would be driven by moderate improvement in realisations in the near term but would bear the heat of shifting consumer preference towards digital medium in the long term.

Says Rakshit Kachhal, Associate Director, CRISIL Ratings, “Increasing digitalisation would affect TV and print subscription in the long run, necessitating accelerated integration of digital media into traditional segments. Moreover, while moviegoers are back in cinema halls, increased OTT consumption could impact theatrical collections. Some of the pandemic-driven changes in consumer behaviour may lead to structural changes in business models in the M&E sector over the long term and will need to be monitored.”

Nevertheless, credit profiles of large M&E companies rated by CRISIL Ratings remain cushioned by strong balance sheets (with most of them net debt free), while strong recovery in topline can help even small and mid-sized companies sustain their credit profiles over the medium term.

Our base case assumes no new variants of Covid-19 pandemic having a material bearing on economic activity. The developments on this count will be a monitorable.

¹ Comprises TV, Digital, Print, Film Exhibition, Radio and Outdoor media
² Includes all non-ad revenue including film exhibition revenue