DD vs. Zee: The giant stirs - Views on News from Equitymaster

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DD vs. Zee: The giant stirs

Apr 11, 2000

With media stocks in the limelight and almost ten Initial Public Offerings slated to hit the market in the near future, punters are going gaga over private media channels.While last week it was Sahara India, which launched its Hindi general entertainment channel yesterday, it was Sri Adhikari Brothers’ turn. Amidst all the hoopla the big daddy of the media industry i.e. Doordarshan (DD) has been quietly beefing up both its network and content.

The Prasar Bharti (which comprises both DD and All India Radio) has reported an all time high commercial and advertisement revenue of Rs 6.10 bn in FY 2000, a jump of 47% over last year’s revenue. Of this DDs contribution has been around Rs 5.20 bn, with AIR contributing the balance.

Compare this to Zee’s expected revenues of Rs 3.05 bn for FY2000 and factor in the fact that while Zee reaches around 20 m homes, DD reaches almost thrice that level of almost 70 m homes including the far flung rural areas. It has the best terrestrial network. (A Terrestrial network means television studios and or networks, which distribute signals through land based transmitters, wireless to home.) If one were take into account the market capitalisation that Zee enjoys, DD would enjoy a market capitalisation of almost Rs 630 bn, even higher than the market capitalisation of one of India’s respected companies Hindustan Lever!

Market cap
Zee 3,053 368,980
Doordarshan 5,200 629,200
HLL101,425 540,739
(all figures in Rs m)

DD has aggressive plans for the future. It has bagged the cricket rights for matches involving India for the next five years knocking out the likes of Star Sports, ESPN, Zee and Sony. This provides it valuable content for its newly launched sports channel. (In FY2000 revenue from cricket telecasts raked in Rs 1.59 bn when DD bagged the rights only in the second half of the cricketing season.) It has plans for extending the timing of all its regional channels to 24 hours.

In order to improve profitability it also has plans to distribute set top boxes to cable operators. Not only would this ensure adequate exposure to DD’s regional channels but also the user addressability would allow DD to determine how many customers are buying its product. DD would be dealing directly with its customers; the cable operator would become a mere distributor and not the one who decides which channel to give his subscribers.

Doordarshan in Hindi means ‘watch from a distance’. Over the next few years competitors, investors and most important the government (read disinvest) need to do just the opposite.

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