Tough days ahead for media firms as profits shrink

New Delhi, Nov 11 : Hit by a fall in advertisement revenues, media sector firms have witnessed a sharp drop in profits in the September quarter and experts believe they are likely to remain under pressure for the next one year.

According to an analysis of the quarterly earnings of the ten leading media houses including NDTV, HT Media, TV Eighteen and Zee Entertainment as many as seven firms have suffered a significant impact on their bottomlines in the second quarter this fiscal.

Prannoy Roy led-NDTV widened its net loss to Rs 119.38 crore for the second quarter ended 30 September, while HT Media, which publishes Hindutsan Times, Mint and Hindustan, posted a 49 per cent decline in net profit at Rs 16.28 crore in the same period.

The key reason for media firms’ profits getting impacted is the clear fall in the ad spends which have been impacted by the economic environment.

“Pressure is likely to continue in the Media and Entertainment space for the next one year in line with the overall economy,” consultancy firm BMR Advisors Partner for Media and Entertainment Industry Practice Vivek Gupta said.

“However, the long term scenario remains bullish as a lot of the consuming class has still not been penetrated. And several triggers exist in the industry,” Gupta added.

Media conglomerate Television Eighteen posted a net profit of Rs 18.12 crore, whereas it had a net profit of Rs 26.27 crore in the corresponding period previous financial year.

Meanwhile, two media houses, TV Today and Subhash Chandra — led Zee Entertainment Enterprises — posted a growth in their net profit in the second quarter of current fiscal.

Zee Entertainment posted a positive result with a net profit of Rs 178.1 crore, a 45.53 per cent growth as compared to Rs 97 crore for the same period a year ago. While, TV Today Group, which broadcasts news channel Headlines Today and Aaj Tak, posted a net profit of Rs 7.57 crore against Rs 5.35 crore a year ago.

Another analyst from leading brokerage firm believes as corporate houses are cutting their advertisement expenditures, the media sector including print and TV are likely to witness an impact on their revenues.

South-based Deccan Chronicle, who owns Hyderabad team of Indian Premier League (IPL) and publishes Asian Age and Deccan Chronicle, suffered a 45 per cent drop in profits at Rs 45.27 crore against Rs 82.60 for the quarter ended 30 September, 2007.

Globally, the media sector has also not performed well and ad revenues have decline amid the economic crisis impacting the the corporate sector.

Media services firm Zenith Optimedia has cut its forecast for global adspend growth to 4.3 per cent in 2008 down from its earlier 6.6 per cent expectations.