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Coronavirus impact | Despite increased viewership, TV ad revenue to remain subdued

According to Elara Capital research, TV ad spends is likely to remain weak throughout FY21

April 28, 2020 / 08:32 PM IST
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Representative image

There is no denying that TV viewership is seeing significant growth due to novel coronavirus, or COVID-19, pandemic. People are stuck in their homes with fewer options of entertainment, of which TV is one of them. But will the increased viewership translate into strong revenue for broadcasters? Not really.

According to Elara Capital research, TV ad spends is likely to remain weak throughout FY21.

“Mumbai is a key market, where most shootings are held. Given the number of positive COVID-19 cases in the city, there is a high probability the lockdown will be extended beyond May 3. This will have a negative impact on TV ad growth despite overall TV consumption growing 40 percent in the past month,” the report stated.

Ad growth will remain weak as several brands look to cut discretionary spend and new product launches are getting delayed. Hence, increasing consumption can only offset some negative overhang on ad growth this year.

“COVID-19 pandemic has been negatively affecting the business environment across major verticals, such as FMCG, auto, BFSI and real estate. We expect these sectors to cut ad spend for H1 FY21. This may continue until operations normalise from H2,” the report added.


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Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

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Also, money saved by brands on large sporting events, which have been called off due to the outbreak will not be diverted to GECs and other entertainment genres.

But there are certain aspects that work in favour of broadcasters along with increased viewership

Even after the lockdown is lifted, people may continue watching TV for entertainment and to avoid large gatherings, which will translate in a rise in TV consumption.

Subscription revenue growth will outperform due to addition of new consumers.

There will be healthy growth in subscription revenue if the new tariff order (NTO 2.0) gets delayed and is not implemented this year. Subscriber revenue contributes 35-40 percent to overall TV revenue.

Also, Average Revenue per user (ARPU) is expected to stabilise at current levels for broadcasters due to delay in implementation of NTO 2.0.

In addition, pricing cap on a-la-carte channels will not hurt broadcasters as they currently constitute a mere five percent of total channels and a majority of channels are clubbed into packages.
Maryam Farooqui
first published: Apr 28, 2020 08:32 pm
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