The gloom this Diwali has forced me to write this piece. If the Indian economy is slowing down, what does this mean for the Indian media and entertainment business? A look at the revenue streams and the investment flow into the $ 12 billion media and entertainment business will probably give better answers.

Take the two main revenue streams, advertising and pay or subscription revenues. Since advertising has a direct and strong correlation with GDP growth, any slowing of the rate will not mean a shrinking, but a slowing down of the growth rate by a few percentage points.

The two slowdowns that I have seen in 16 years of working saw a fall of 3-5 per cent at most in ad spend growth. These were in 1997 and 2001. Going by the most pessimistic estimate therefore, ad spends should grow at an annual rate of 15 per cent instead of the expected 20 per cent.

That is pretty good compared to the US ad market which is well on its way to a 2 per cent fall in absolute terms in 2008 and in 2009. Of course you could quibble that the size of the Indian ad market at a $ 4-odd billion (Rs 20,000 crore or Rs 200 billion) is hardly a patch on the $ 193 billion (Rs 965,000 crore or Rs 9,650 billion) US ad market.

True, but the double digit growth is still a given in India, while in the US it has shrunk in a year that had both the elections and the Olympics, two of the biggest advertising events in the American calendar.

It is what this five percentage point fall in the advertising market's growth rate translates into that is important. Salil Pitale, head of media and entertainment at Enam Investment Banking reckons that the sectors which are bearing the brunt of the slowdown -- realty, banking and finance -- are the ones that will pull back on ad spend. That is bad news.

The banking and financial services have typically been among the top 10 categories of advertisers across the media. So any shrinking of spends from this sector will affect all media -- television, print, radio and the internet.

Now for revenue stream number two, pay. Most newspaper make just about 10-20 per cent from pay. The average cable pay out is about Rs 200 a month, internet costs anywhere between Rs 100-500 a month. By any standard, Indian consumers pay some of the lowest prices for their media. So any impact on subscription revenue "doesn't matter," says Pitale.

That is actually good news in television. For long, broadcasters got barely 20 per cent of the Rs 17,000-odd crore (Rs 170 billion) collected on the ground by cable operators. The spread of direct-to-home or DTH means complete transparency in reach and collection numbers.

Already broadcasters are getting about 40 per cent or more of the Rs 200 per month that DTH operators collect from 7-odd million paying homes on an average. Since all the DTH operators (Tata-Sky, Bharti, Reliance [Get Quote] and so on) are well-capitalised, penetration will keep increasing rapidly. This in turn means contribution from pay revenues will keep going up. That a slowdown will not affect this means at least one rising stream of revenues.

On investment flow, "companies that are making money will not have a problem. It is the ones that are still building their businesses, not yet making money and are not well-funded, that will have a problem," says Pitale. So working capital woes will hit many of the new ventures. Look out for projects on hold or shelved -- like the Jagran Prakashan-Network18 plan to launch a Hindi business paper or that of several publishers to bring in foreign titles into India.

Some of the newer, more expensive general entertainment launches will cut down on programming and marketing costs; film production companies will hopefully learn to budget better.

Like all slowdowns this one will precipitate the shut down of unviable businesses that were riding high on easy capital. It will also mean some consolidation, especially in the television and publishing businesses where several small to medium scale firms are ripe for takeover. The positive for media owners is that salaries which have been galloping totally out of sync with talent and experience will hopefully see some correction. For one generation of media professionals who have never known what it means to 'look for a job' this may not be a bad thing to happen.

The writer is a media consultant and author of The Indian Media Business. She can be contacted at vanitakohli@hotmail.com