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Media: What's in store for content providers? - Views on News from Equitymaster
 
 
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  • Aug 31, 2007

    Media: What's in store for content providers?

    In the previous article we had dealt with the prospects of the television broadcasters. In this article we follow that up with a discussion on the prospects of the content providers.

    The content providers produce software content for various broadcasters. The major content providers are Balaji Telefilms, UTV, Creative Eye. The programmmes produced are either commissioned or sponsored.

    • Sponsored: In this structure, the content provider makes an upfront payment to the broadcaster to buy a telecast time band and receives free commercial time (FCT). The investment is recouped by either getting sponsors for its programmes or by selling FCTs to advertisers. The intellectual property rights (IPR) remain with the content provider for such programmes. It is a high-risk high return strategy.

    • Commissioned: In this structure, the customer commissions the content provider to produce episodes on a specific fee per episode basis along with incentivised TRP linked rate structure. When programmes became successful, the content provider renegotiates its remuneration rates in line with its popularity. It is a low risk moderate return strategy.

    Increase in the demand for content: As mentioned earlier, around 82 channels across various languages and genres are slated to be launched in the near future, which will obviously increase the demand for suitable content in a higher proportion. This would increase the bargaining power of the content providers vis-a-vis the broadcasters and help them price their content higher. This trend is already visible in the increasing realisations per hour of Balaji Telefilms. Balaji's realizations per hour increased from 1.7 m in FY07 to 2.2 m in 1QFY08. Besides, in order to maintain or gain market share (through higher TRP ratings) the broadcasters will be more willing to spend on quality content.

    Digitisation: The rollout of CAS and DTH will increase the subscription revenues of the broadcasters. Besides, the economic buoyancy is expected to boost the advertisement revenues of the broadcasters. Thus the overall ability of the broadcasters to spend on quality content in the longer term bodes well for the content providers.

    Problem of scalability: Most of the production houses have only one or two serials on air at a time. They find it very difficult to scale up their operations due to the lack of management bandwidth. Balaji has been one of the few exceptions in the past, but is likely to encounter more competition in the near future.

    High dependence on key personnel: Production of content is a very creative process. Due to this the content producers rely heavily on their creative personnel. The exit of any important creative member can seriously hamper the growth prospects of the firm. Eg: Balaji Telefilms is heavily dependent on its creative director Ekta Kapoor and certain key actors.

    While the launch of more channels inadvertently augurs well for the content providers, the challenge lies in producing quality content and garnering profitable realisations for the same. The pricing power of the content producers again is subject to retention of key talent and operating efficiency. However, we believe that the content producers who are able to scale up their operations would be better placed than those who are unable to do so.

     

     

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