With digital offerings providing them with economies of scale, the operating margins of television (TV) broadcasters are expected to rise by 3% (300 basis points) to ~15% by financial year 2027, according to the latest report by Crisil Ratings.
While this growth would bring their profitability levels closer to the pre-pandemic era, their continued business success will depend on their ability to compete with other digital platforms amid shifting consumer preferences, the report observes.
As consumers increasingly opted for digital content such as OTT applications on TV or mobile, or social apps such as YouTube and Instagram, the revenues of traditional television broadcasters stayed nearly stagnant between FY2022 and FY2025.
The trend to continue due to accelerating broadband and internet penetration and the natural advantages of the digital medium, such as on-demand content availability and the active engagement features that digital platforms offer. As a result, revenue from traditional linear broadcasting is expected to remain stable or marginally fall, states Crisil Ratings in its report.
Many TV broadcasters have already launched their own digital platforms for content streaming across domains such as live sports and news. These are either in the form of mobile apps or dedicated apps for smart TVs to make the most of the rise in the popularity of digital media.
The growth in the digital segment is helping broadcasters capture higher advertisement revenues from sectors such as FMCG, automobiles, e-commerce, and real estate. With consumers shifting to digital and brands leveraging it through data-driven analytics to deliver targeted, personalised advertising, these segments have gravitated towards digital platforms.
TV broadcasters have also benefited from rising subscription revenue. They 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.
Ankit Hakhu, director, Crisil Ratings, said, “As a result, digital revenues of these broadcasters grew ~15% 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 ~25% by fiscal 2027.”
Crisil Ratings expects that the rise in revenues with increased contribution of digital will lead to improvement in operating profits for broadcasters as fixed costs may not change materially with digital, thus, providing them with an alternative to monetise their content.
Varun Marwaha, associate director, Crisil Ratings, said, “TV broadcasters’ ability to utilise their content for digital offerings is leading to amortisation of content cost over a wider consumer-base and [providing] 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% over the next two years.”
The improving profitability is expected to boost return on capital (ROC) to 10-12% by fiscal 2027, supporting credit profiles. However, this will still be lower than the pre-pandemic levels of 12-15% and the two-decade the peak of 15% for television broadcasting.
