Coming To Terms With Demonetisation


Despite a short-term decline in business, the production, media and entertainment industry is unlikely to be affected by demonetisation in the long run

By Satyam Nagwekar

Demonetisation has been a subject of endless discussion and intense scrutiny. With 86 percent of India’s currency nullified within days, the drive has been aimed at cleaning out the black market’s cash supply and counterfeit notes. The move’s effect has been felt across industries. Unorganised and informal sectors have been impacted the most as they predominantly deal in cash but even the organised domains have felt the ripple effect. We talk to stake holders in the production, media and entertainment (M&E) industry to ascertain how demonetisation has affected business.

How has demonetisation affected your business?

Vynsley Fernandes: We have been constantly analysing not just the market sentiment, in light of the demonetisation drive, but also the ground reality as things pan out. This is also facilitated by the fact that pay television businesses such as DTH, cable, and HITS platforms form a large part of our client base in India. Whilst demonetisation is a great initiative for the nation overall, it has, of course, had short-term impact on the ground, particularly for pay TV operators. The lack of notes in circulation has, therefore, had an impact on collections of subscription fees. Whilst in many cases,
consumers may be able to pay online, the reality is that a significant percentage of collections is still attributed to cash,
particularly in the cable market. It has been difficult for cable operators to collect funds from their subscribers and several platforms have been obliged to give some payment-deferment or a free window to their affiliates in order to help them with collections.

Jayant Hadke: Personally, nothing has changed for us since the government announced the demonetisation move in November. In advertising media, we deal mostly with companies where everything is accounted for fiscally. Initially, there were some hiccups with respect to video shooting as a few overheads, such as daily wages, were generally dispensed in cash. Thankfully, that was a temporary hurdle as the system soon switched to cheque payments without much resistance from most people.
Naresh Sharma: We are a part of the film education sector and some players charging high fees may be facing problems. We are an SME company and our fee collection is from many students is in instalments. Therefore, we remained largely unaffected as the old currency notes could be deposited in the bank account as fee directly by students. They can also pay their fees through online transfers, so it wasn’t too bad for us. Students in rural areas though are suffering due to the cash crunch as access to ATM machines and use of cards is limited.
However, as there is no cash in the market, buying of goods up to INR 20,000 is badly affected. People in India still want to save taxes. Hence, they will continue to go for with bill purchases whenever it is possible. Small players are facing tough times. Even in the film industry, where lightmen and other workers are paid on a daily basis in cash to the tune of INR one to two lakh, things look grim. It has been difficult for producers to organise such cash on short notice.

R Vijayakumar: Most businesses have been affected and the case for us is no different. Business has witnessed a decline of 25-30 percent but it is not something that we are fretting over. In around four months, I believe, things should be back to where they were. In the long-term, the pros will definitely outweigh the cons.

Which domains in the media, broadcasting, and production industry will be most affected by this move?
Vynsley Fernandes: Our analysis points out that demonetisation may have some impact in the short to medium term on the digitisation of phase IV markets where customers will now need to purchase set-top boxes that were usually paid for in cash during the previous DAS phases. Phase IV markets, where access to cash-less facilities are more constrained than other markets, may find this particularly challenging. We hope that this does not become the premise for seeking deferment of digitisation in such markets.

R Vijayakumar: Among the various domains, I think production will be the hardest hit. This is because most DOPs buy a lot of big-ticket equipment. The other domains will most likely remain unaffected to a great degree.

Jayant Hadke: The feature film industry, in my opinion, might be affected because the norm for most low-budget films is that they run a lot on cash. I don’t think that media and broadcasting will be affected to any large extent by demonetisation.

Naresh Sharma: Broadcasting remains unaffected as most transactions are in the form of cheque payments. It is the film production domain that has been the hardest hit. Many a time, 50 percent is paid in cash and the remaining amount is through cheques. It includes the salaries of various heads of film-making departments. Shooting abroad is also getting affected.

How will your business landscape evolve over the next six months?
R Vijayakumar: The business will gravitate towards digital payments as will be the case for most other companies. Digital payment platforms like Paytm are already becoming commonplace. Plastic money is definitely the way forward.

Naresh Sharma: If bank notes in the denomination of INR 500 and INR 100 are not in enough circulation and cash withdrawal limits of banks don’t turn out to be the way they were before, the crisis will continue. If the government does not encourage the push towards cashless economy with further use of e-wallets, especially in rural and semi-urban areas, some tough times may be in store as many students come from small town to study in metro cities.

Vynsley Fernandes: The next few months bode well for the pay TV industry. We are seeing some amount of traction there, that demonetisation may encourage more operators to move towards supporting online payments from their subscribers using mobile payments, online banking, or even wallet-based systems. Whilst DTH and HITS have already implemented most of these mechanisms and Castle Media has developed and deployed several of these B2B and B2C applications for the industry, a large part of the cable TV space is yet to really take to online payments and push it to their customers.

Jayant Hadke: As we have remained unaffected by developments, the business is expected to continue on its regular course.

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