Media and entertainment show growth despite currency drop
The combination of a softening Indian economy and the end of the U.S. stimulus program has caused the Indian currency to fall to record lows. It dropped 13% in August, including 4% in a single day on Aug. 28 to 68.7 rupees per $1, hitting 65.7 rupees per $1 at the end of the week.
But the media and entertainment sectors seem relatively unscathed so far.
Economic growth is forecast at 5% nationally, compared with nearly 10% two years ago. And the industrial sector may crawl along with 1% growth in 2013, compared with more than 8% in 2011. In contrast, the Indian film industry is expected to outperform those markers, with expansion this year at 9.1%. Advertising is also healthy: Print ad expenditure is up 13% in the first half of the year, and TV advertising has risen 16% in that same time period.
That’s because, despite the slowdown, other macroeconomic factors, such as demographics and literacy rates, are increasing the potential audience for film and TV. Also, over the past couple of growth years, Bollywood studios have pumped money into production, expanding the number and scale of films that will be seen onscreen in 2013-14. That bodes well for box office.
If the slowdown continues, there will likely be a negative impact on advertising rates — there is already evidence that cars and consumer goods sales are softening. But significant industry restructuring may still help TV groups — most notably the rollout of digital cable systems that bring more households into the (legal) pay-TV loop.
A falling currency makes imports more expensive and boosts the value of exports. While Bollywood enjoys moderate overseas sales, it is India’s export-driven service sectors that could really benefit, as the cheaper currency will help them undercut competitors. Companies in this group include Prasad (post ), Reliance MediaWorks (post-production and film restoration), Prime Focus (3D conversion and effects) and Red Chillies Entertainment (vfx).