Multiplexes set to brave out onslaught of inflation better than broadcasters

Despite looming inflationary woes, the multiplex industry is seeing a major resurgence in the post-Covid era; in contrast, broadcasters are feeling the pinch. Analysts say, in the first quarter of fiscal 2023, multiplexes and broadcasters are expected to report contrasting results. According to an Emkay report, “While strong box-office collections are likely to drive growth for multiplexes, a slew of near-term headwinds are likely to result in muted growth for broadcasters.”

According to the report, Q1FY23 also marks a full quarter of operations after the pandemic. Strong performances by regional, Hollywood and select Bollywood movies have resulted in record box-office collections in Q1FY23. “Although higher collections of regional movies will not translate into proportional gains for PVR and Inox, they are still likely to report ticket sales well above the pre-Covid levels, supported by ATP increases. Operating metrics should track well, with stable ATP and SPH QoQ, along with a recovery in ad revenues. The companies should see positive cash generation as well,” the report said.

In contrast, broadcasters are facing major headwinds, Advertisers have curtailed discretionary spending due to high input cost inflation, adversely affecting broadcasters’ ad revenues, the Emkay report said. The delayed implementation of NTO 2.0 should keep subscription revenues under pressure as well. Therefore, analysts predict flat revenue growth for entities such as SunTV and Zee.

Karan Tuarani of Elara Capital said this is likely to be the strongest quarter for multiplexes in a while, especially being led by successful runs such as RRR, KGF chapter 2 etc. Poor performance of major mainstream Bollywood content, however, will impact the revenue growth for multiplex major PVR Inox, according to Taurani. Another major hurdle for multiplexes is the dip in discretionary spends by advertisers as a result of inflation, which will have an impact on their bottomline.

Regarding television, the Elara report said , “TV was the first traditional medium to recover to pre-Covid levels in FY22. However, the recent inflationary pressure has seen a negative impact on ad spends recovery; we expect ad revenue growth to be lower vs pre-Covid levels, due to macro weakness and inflationary headwinds in May and June and reduced ad spends from FMCG and new age internet companies.”

Overall, Taurani believes that in the medium term, multiplexes are immune to the onslaught of OTT and bracing for inflation well. “Multiplexes cater to the middle class and upper middle-class audience, who are yet to see their discretionary spending be impacted as a result of inflation. OTT is likely to co-exist with multiplexes for a while, as going to the theatre remains one of the few activities or outing that Indian families can indulge in.” The Hindu BusinessLine