Q3FY2009 seems to be a bad quarter for most media companies as the rate of the yoy growth tapers off substantially in the wake of a significant cut in the advertising spends in the key sectors, such as BFSI, real estate and automobiles. Also, a general sense of rational advertisement spend and fragmentation across media verticals due to an increase in competition would lead to a slower revenue growth. The Hindi general entertainment channel space continues to witness hefty competition with Colors continuing to march ahead. The channel retained its number two position (Star Plus remains the leader with a 25.4% market share) throughout the quarter with a year-end market share of 21.9%, much ahead of Zee TV’s 16.4%.
The Q3-FY2009 witnessed two significant disruptions in November 2008 in the form of a strike by
television workers’ union and the terror attacks in Mumbai. The strike led to a lack of new content on the Hindi channels forcing them to air re-runs of old content. On the other hand, the terror attacks led to a shift in viewership to news channels. However, there may not be equivalent increase in the revenues of the news broadcasters due to the increase in viewership during the attacks because the event was aired without advertisements. However, the strike and terror attacks had a severe impact on the results of content producers like Balaji Telefilms due to lower hours of programming. Balaji Telefilms’ results will also be affected to a great extent by the closure of two of its most profitable shows — Kyunki Saas Bhi Kabhi Bahu Thi and Kahaani Ghar Ghar Ki — during this quarter. Also, the resolution of the dispute between producers and television workers led to a 15-30% increase in wages that is to be borne by the producers.
The third quarter of a financial year is, arguably, a good season for moviemakers and multiplexes. It had a reasonable slate of releases, the noticeable being Dostana, Rab Ne Bana Di Jodi, Fashion and Ghajini. However, these movies may not boost the revenues of multiplexes to a larger extent due to the general tightening of consumer spending & Mumbai terrorist attacks. Similarly, the margins of the Indian print media companies to be under stress in this quarter due to the slowdown in the advertisement rate growth, cut in advertisement spends by the key sectors and raw material cost pressure due to high newsprint prices.
Overall, the media and entertainment industry is in for tough times as advertisers tighten their advertisement spends in a bid to control costs. Also, fragmentation across media verticals has led advertisers to evaluate “bang for the buck spent”. On the other hand, alternate media such as radio and out-of-home advertising are likely to face higher pressure compared with the other verticals.
