With the outlook for the world economic system changing into more and more gloomy, there may be nice expectation that a recession is looming.
However whether or not or not there may be one is irrelevant for Naveen Sarma, a senior director at S&P International Rankings, a veteran credit score analyst centered on the media enterprise. An financial downturn does not must cross into recession territory to have penalties for the leisure and expertise industries in myriad methods.
“If customers really feel confused and pressured, and so they select to chop their spending, that may in the end have an effect on the media and leisure sector, even when there isn’t a recession,” Sarma stated within the newest episode of selection Podcast “Strictly business”.
Hearken to the podcast right here:
From the hype to the twine slicing, there are all types of indicators you’re watching as a bear market takes maintain. Chief amongst their issues is that every one the streaming providers are combating for subscription dollars who might discover stiffer competitors if there are fewer dollars to go round.
“What occurs if you go right into a recession and customers have a look at how a lot they’re spending on streaming providers? They’re spending some huge cash and so they determine they’ll cut back the variety of providers or they don’t seem to be going to remain so long as they used to,” Sarma stated. “And that has implications for the working metrics, the money stream metrics and the monetary efficiency of media corporations.”
Rising rates of interest is a key metric of significance to Sarma as a result of he anticipates it can have a chilling impact on the consolidation that has been a development within the sector in recent times. “The price of capital has elevated significantly, and that has positively damage buying and selling and M&A,” Sarma stated. “We have heard anecdotal tales of companies that made it to the end line, however died resulting from costly financing.”
This episode marks an unprecedented third look on “Strictly Enterprise” by Sarma, who additionally mentioned the macroeconomic affect on media and leisure in 2019 and 2021.
“Strictly business” is SelectionThe weekly podcast that includes conversations with business leaders in regards to the enterprise of media and leisure. A brand new episode premieres each Wednesday and could be downloaded on iTunes, Spotify, Stitcher, and SoundCloud.