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TV Media- Ways to ride the story - Views on News from Equitymaster
 
 
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  • Nov 19, 2007

    TV Media- Ways to ride the story

    There are various ways to participate in the television media growth story. The industry is divided into broadcasters, content providers and the distributors. One can invest in these different players to participate in the media growth story. Hence, let us see how these different sub-segments of the television media stack up against each other.

    Broadcasters: Robust growth in the Indian economy has led to a surge in the ad spends of India Inc., thereby increasing the topline of the major broadcasters. Rollout of CAS and DTH services would increase the penetration of cable and satellite television and also increase the average revenue per user. Thus, regulatory bottlenecks notwithstanding, the subscription revenues are expected to be the major growth driver.

    The major listed broadcasters are Zee Entertainment, NDTV, TV18, Sun TV. The TRP's of Zee Entertainment's various channels have increased over the last year, helping the company to increase its advertisement revenues by 30% YoY. However, Zee Entertainment's flagship channel 'Zee TV' would face intense competition from the new entrants '9X' and 'NDTV Imagine'. The content and the employee costs are also expected to increase. The new channel 'Kalaignar TV' launched by Raj TV is providing tough competition to Sun TV. TV 18's flagship channel is far ahead of its competitors and its viewership base is also expected to increase with the growing interest in the Indian equity markets. However, a downturn in the stock markets would negatively impact its advertisement and subscription revenues. NDTV, which is currently offering only news channels and a niche channel is launching a Hindi General Entertainment channel and also plans to launch more city centric news channels and niche channels. Though the company would face intense competition, a successful foray in the Hindi General Entertainment space could create enormous shareholder wealth.

    Content providers: It is rightly said that content is 'king'. Any channel to succeed needs to have the right content. The major content producers are Balaji Telefilms, Creative Eye Limited and Red Hats Production. The foray of broadcasters NDTV, UTV, Viacom-18 in the Hindi GEC space has increased the demand for quality content. The content providers would be able to increase their revenues by increasing their programming hours and also their realizations per hour. However, it is not an easily scalable business with Balaji Telefilms proving to be the only exception.

    Distributors: The distributors are the MSOs, the local cable operators and the DTH operators. Digitisation would check the malpractice of underdeclaration of subscribers by the local cable operators. It is expected that the share of the MSO's in the total subscription revenues would increase from the current 5% to 30% on the implementation of CAS. (Source: Zee Entertainment Presentation August 2007).WWIL, the largest MSO in India, is present in more than 43 cities and operates through more than 4000 local franchisee operators. WWIL is rolling out the Headend in the Sky (HITS) technology, which would enable it to provide high quality digital services to a pan India audience. Though the company currently is incurring an operating loss of 12%, it could be a major beneficiary of the strong growth expected in the sector. There are expected to be 89 m homes connected to cable by 2011 (except DTH). The ARPU is expected to be Rs 470 and the operating margin is expected to be 25%.

    DISH TV, with a gross subscriber base of 2.4 m and a market share of 68% of the pay DTH industry, is the largest private sector DTH operator in India. Competition for Dish TV is on the rise with Tata Sky offering marketing and consumer subsidies. Entry of new players such as Sun TV, Reliance and Bharti would increase the competition further and put further pressure on the ARPU's. The current ARPU at Rs 126 (incremental subscriber ARPU is Rs 210) is very low. However, the ARPUs are expected to increase substantially going forward as the ARPUs in India are very low compared to developing and developed countries.

    We feel that the broadcasters who are able to sustain high TRP ratings and achieve high levels of distribution, the content providers who are able to deliver quality content consistently and scale up their operations and distributors who offer high quality services and have a pan India presence would succeed.

     

     

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