The operating margins of Indian television (TV) broadcasters are projected to expand by 300 basis points (bps) to 15% by FY27, primarily fueled by the rapid growth in digital offerings, according to a Crisil Ratings report. The report, which covers 90% of the industry’s revenue, highlights that digital revenue is expected to grow at a double-digit rate, boosting overall profitability and advertisement revenues.

Key Drivers of Margin Expansion

The digital transformation in the Indian media landscape has accelerated post-pandemic, with broadcasters aggressively venturing into digital platforms to capture a larger audience base. Crisil's analysis points to several factors contributing to the expected 300 bps increase in operating margins:

• Digital Revenue Growth: The surge in digital consumption through over-the-top (OTT) platforms and direct-to-consumer (D2C) services is expected to double digital revenues by FY27.
• Increased Ad Revenue: Advertisers are increasingly shifting budgets to digital platforms, contributing to higher ad revenues and improved monetisation of content.
• Economies of Scale: Broadcasters are leveraging better operational efficiency through digital platforms, leading to lower fixed costs and higher content monetisation potential.

Revenue Contribution from Digital to Hit 25% by FY27

With traditional TV revenues stagnating between 2021-22 and 2024-25 due to the shift towards OTT platforms and social media, broadcasters have been investing heavily in launching their digital platforms and offering live sports and news content to retain and grow their viewership base.

Crisil’s report projects that the revenue contribution from digital platforms will rise to 25% by FY27, further strengthening the financial health of TV broadcasters. This shift to digital will allow broadcasters to diversify their revenue streams and reduce their dependence on traditional TV advertising and subscription models.

Challenges and Competition from OTT Platforms

Despite the promising growth trajectory, success will depend on broadcasters’ ability to compete with digital platforms while leveraging economies of scale. The report underscores that:

• OTT Competition: Broadcasters must innovate their content offerings to retain viewership in the face of stiff competition from established OTT platforms such as Netflix, Amazon Prime, and Disney+ Hotstar.
• Live Sports and News Strategy: Live content, especially sports and news, is emerging as a critical area for audience retention and revenue growth. Broadcasters are increasingly focusing on securing exclusive rights to popular sports leagues to attract loyal viewers.

Return on Capital to Improve but Stay Below Pre-Pandemic Levels

Crisil’s report further indicates that improved profitability will elevate returns on capital to 10-12% by FY27, although these figures will remain below pre-pandemic levels of 12-15%.

The pandemic-induced shift in viewer preferences towards digital platforms caused a significant decline in traditional TV revenues, impacting overall returns on capital. While broadcasters are poised to recover some of these losses, structural changes in the media consumption landscape will keep returns below the pre-pandemic range.

Broadcasters’ Digital Strategy: Building Sustainable Growth Models

To combat stagnating traditional TV revenues and tap into digital growth, Indian broadcasters have adopted a multi-pronged digital strategy focused on:

• Exclusive Content Offerings: Launching original digital content and securing streaming rights for popular shows, movies, and live sports.
• Subscription Models and Ad Monetisation: Leveraging a mix of subscription-based models and ad-supported content to maximise digital revenue.
• AI and Data Analytics for Viewer Insights: Using AI-powered content recommendations and viewer analytics to tailor offerings and enhance user engagement.

Focus on Live Sports and News: Key to Audience Retention

To retain viewership and drive ad revenues, TV broadcasters are investing in live sports and news content. Exclusive sports streaming rights have become a critical differentiator in retaining loyal audiences and attracting advertisers. The strategy includes:

• Bidding for Major Sports Leagues: Broadcasters are competing aggressively to secure broadcasting rights for IPL, ISL, and other prominent leagues.
• Enhanced Digital Viewing Experience: Improving video streaming quality, multi-language support, and real-time analytics to enrich the digital experience.

Impact on Advertisement Revenue and Content Monetisation

The rise in digital viewership is expected to positively impact advertisement revenue as advertisers allocate higher budgets to digital platforms. Key developments include:

• Targeted Advertising and Personalisation: Leveraging data-driven ad targeting and personalised ad delivery to improve ad ROI and viewer engagement.
• Programmatic Ad Buying: Adoption of programmatic advertising technologies to automate ad buying and optimise ad placements across platforms.

Projected Growth and Industry Outlook

Crisil’s outlook remains optimistic about the future growth trajectory of TV broadcasters, with the following projections:

• Digital Revenue Share: Digital platforms to contribute 25% of broadcasters’ revenue by FY27, up from 12-15% in FY24.
• Operating Margins: Margins to improve by 300 bps, reaching 15% by FY27.
• Return on Capital: Improvement to 10-12% by FY27, although below pre-pandemic levels.

Conclusion: A Positive Outlook with Digital-Led Growth

As the Indian media landscape undergoes a significant digital transformation, TV broadcasters are well-positioned to capitalize on digital growth and enhance their operating margins over the next three years. While challenges remain in competing with OTT platforms and adapting to changing consumer preferences, strategic investments in digital platforms, live sports, and ad monetisation will help broadcasters build sustainable revenue models and drive long-term growth.

By embracing innovation and digital integration, TV broadcasters can not only recapture lost revenues but also establish a competitive edge in an increasingly digital-first world.

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