TV Shows Resilience In Wave-2; Cinemas Most Negatively Impacted

In a recent estimation by Elara Capital, it outlines the Media & Entertainment Q1FY22 preview as below:

TV: We expect the TV vertical to remain lower vs FY20, i.e. pre-Covid levels, impacted by Wave II of COVID-19, even though YoY will see sharp growth over a low base in Q1FY21. We expect Industry to report a 25% dip in ad spends versus Q1FY20 levels (~30% dip in GEC and regional genres). Zee Entertainment is expected to report outperformance on ad revenues reporting a decline of 20% v/s Q1FY20 i.e. 125.5% YoY on low base, while a decline of 25% v/s FY20 levels i.e. 119% YoY for SUNTV, largely since the ad spends after a V-shaped recovery in again witnessed a hit with COVID Wave II, as live GEC content too was at halt for 2 weeks in April. 

However, negative impact of Wave-2 was much lower  v/s Wave I as many broadcasters 1) shifted shoots to alternate locations states where there were no restrictions & were well-prepared v/s  last year (LY), 2) state-wise restrictions v/s nation-wide lockdown LY, allowing many business verticals to function through delivery/e-commerce mode 3) IPL was also held partially which helped better viewership vs Wave-1 wherein it was canceled. SUNTV may continue to underperform on ad. growth front, as viewership share for flagship channel has slipped from 40%+ mark, and has been unable to recoup these losses, due to 1) lack of new content initiatives (non-fiction) which drags incremental viewership, 2) strong competition from peers like STAR & Z within Tamil and other regional genres. TV Today is expected to continue outperformance, as 1) news genre regained the viewership attraction amidst the COVID Wave II, replicating LY trends to some extent, 2) Aaj Tak maintaining its strong market share despite blackout of BARC data, as ad. spends are estimated to decline mere 8% decline v/s pre-COVID levels i.e. 38.7% growth YoY on low base last year (Q1FY21) where it declined 33.7% YoY. On Subscription revenues, Z is expected to witness a 12% growth YoY largely on the back of some traction in ZEE5 post direct release of Radhe & reclassification of the music segment as core subscription revenues to remain in high single-digit bracket on a relatively low base of Q1FY21;  SunTV is expected to witness a 5% growth YoY on a high base quarter where it had demonstrated a 27.7% growth YoY, largely led by the Tamil Nadu digitization, as viewership led subs revenue remains under pressure with flagship channels struggling to recoup the lost viewership shares. Other operating revenues are expected to remain muted YoY for Z, however IPL revenues will partially recognized during the quarter for SUNTV. EBITDA margins for Z to decline 100bp QoQ at 26.5% as content investments continue for Zee5 coupled with the impact of Wave II, SUNTV is expected to witness a decline of 140bp QoQ & 20bp YoY to 68.5% as programming costs for GEC content, content investment for OTT platforms has not translated to viewership gains & consequent ad/subscription revenues for SunTV during the quarter, while we expect TVTN to report a 23% EBITDA margin, down 20bp QoQ as losses for Radio vertical bounced back with COVID Wave II, diluting the overall margins. 

Zee Entertainment

SUNTV

TV Today Network

Exhibitors: Inox/PVR are expected to report yet another wash-out quarter, as operational revenues for Q1FY22 are expected to be mere INR 261mn/426mn respectively, as apart from the initial two weeks of April, theatres remained shut throughout the quarter pan India. Exhibitors have been waiting for major states like Maharashtra, Southern states(Tamil Nadu, Karnataka etc.) to open up for re-opening, however only a few states like Punjab, Andhra Pradesh, UP, Jharkhand, Himachal etc. have eased the restrictions with allowing 50% occupancy and timing limits for night & weekend shows, which is not favourable for full-re-opening, as cash-burn spikes significantly while operating at low occupancy. Exhibitors are expected to report fixed costs cash-burn to the tune of INR 350-380mn per month for Inox, while INR 580-600mn for PVR. However, negotiations have been ongoing with landlords for shift towards revenue share based model, which might provide some relief in near-term.

PVR

Inox

Radio: We expect a revenue decline of 45%/50% v/s pre-COVID levels i.e. growth of 243% YoY and 143% YoY for the radio segment of ENIL and MBL respectively on low base as with the resurgence of COVID Wave II, radio vertical has again lost its QoQ recovery momentum, with 1) drop in ad volumes from local advertisers which took a hit amidst Wave II and contribute ~65-70% of the ad volumes for radio, 2) shift towards digital mediums for audio consumption, 3) weakness in the Government vertical, 4) Large states like Maharashtra & Delhi remaining shut for 70-75% of quarter & ad yields facing severe pressure(expected to be 40% down v/s pre-COVID, up from 25% discounting in Q4FY21) with heavy discounting to attract advertisers. Even, ENIL’s non-radio i.e. solutions business will remain muted at 30% decline v/s pre-COVID i.e. 18.5% growth YoY on low base, as the events, on-ground activations were shut entirely due to Wave II, which constitute ~60-65% of the solutions business & thus will continue to have a negative impact on the vertical. Digital solutions business which contributes 30-35% will continue to remain resilient, supporting the vertical. 

ENIL

Music Broadcast