Just over six months into 2021 and the profound financial impact the pandemic had on the media industry is just beginning to be truly understood.
Naveen Sarma, senior director of S&P Global Ratings, has closely studied the myriad ways the sector has been shaken up from his vantage point as a credit analyst. On the latest episode of the Variety podcast “Strictly Business,” he offers a broad perspective on how entertainment companies are faring as every aspect of their operations adjusts to a period in which there’s no such thing as business as usual.
Of particular concern to Sarma is the heavy costs that come with studios spending more than ever on original programming to fuel their affiliated streaming services.
“It’s putting stress on a lot of companies’ balance sheets because you know the revenue is not going to come in for a while, especially streaming services as you grow that, and so you’re going to see 2022, 23, 24 before any of these these streaming services even achieve breakeven status,” cautioned Sarma. “Eventually the problem is if a company doesn’t win, and it spends all that money and doesn’t grow out of that, they’re locked in longer term with credit measures that are weaker.”
This episode, which was recorded June 22 for the Monaco Streaming Film Festival, is Sarma’s second appearance on “Strictly Business,” having first appeared on the podcast back in February 2019.
“Strictly Business” is Variety‘s weekly podcast featuring conversations with industry leaders about the business of media and entertainment. A new episode debuts each Wednesday and can be downloaded on iTunes, Spotify, Stitcher and SoundCloud.