Operating margins of television (TV) broadcasters are expected to improve by FY27 inching closer to pre-Covid levels on the back of rising revenues from their digital offerings, a report by CRISIL Ratings stated. It however added that this will depend on their ability to compete with digital platforms and shifting consumer preferences. The report is based on analysis of TV broadcasters accounting for nearly 90 per cent of the industry revenue.
“Operating margins of TV broadcasters is poised to rise 300 basis points (bps) to about 15 per cent by fiscal 2027 with increasing digital offerings beaming up economies of scale,” the report stated. Their revenue was almost stagnant between FY 2022 and 2025 as consumers increasingly opted for digital content such as over-the-top (OTT) applications on TV or mobile, or pure-plays such as YouTube and Instagram of the digital medium, such as on-demand availability of content and ability to actively engage with it. This means revenue from traditional linear broadcasting will either remain stable or fall marginally.
Ankit Hakhu, Director, Crisil Ratings, said, “As a result, digital revenues of these broadcasters grew at about 15 per cent on average over fiscals 2022-2025 and will continue to grow at in double-digits over the next two fiscals. With linear broadcasting segment nearly flat, this will increase the revenue contribution of digital to about 25 per cent by fiscal 2027.”
Broadcasters have already launched their own digital platforms (in the form of mobile apps or dedicated apps for smart TVs) for content such as live sports and news. This is also helping broadcasters capture higher advertisement revenues from sectors such as fast-moving consumer goods, automobiles, e-commerce and real estate. Broadcasters, directly or indirectly, compete with OTTs and digital-only platforms for content acquisition and subscription revenue. Many platforms are moving content behind paywalls and exploring strategies to optimise content acquisition cost and pipe in more advertisements to generate more revenue, the report added.
Rising revenues
Rising revenues with increased contribution of digital will lead to improvement in operating profitability as fixed costs do not change materially with digital, providing an alternative to broadcasters to monetise their content. Varun Marwaha, Associate Director, Crisil Ratings, said , “Ability to utilise their content for digital offerings is leading to amortisation of content cost over a wider consumer base and economies of scale in operating costs. As a result, the operating margins of broadcasters are expected to inch closer to the pre-Covid level of 16-18 per cent over the next two years.”
The improving profitability will bolster return on capital to 10-12 per cent by FY 2027, supporting credit profiles. But this will be lower than the 12-15 per cent seen before pandemic and the 15 per cent seen at the peak of television broadcasting the past two decades, the CRISIL Ratings noted.
