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TV Media: To broadcast or to produce

Nov 21, 2007

In the previous article we had mentioned ways in which one could participate in the media growth story. In this article, we shall see how the companies in the two major subsegments of the television media industry viz. broadcasting and content have performed financially in the last four years. Broadcasters:
In case of television broadcasters, we have considered the broadcasters Zee Entertainment, TV 18 and NDTV. For analysis purposes, we have combined the financials of these broadcasters.

Revenue Growth:
It is observed that the combined revenues of these broadcasters have grown at a CAGR of 47% from FY04 to FY07. India's robust economic growth has an attractive proxy in its advertising industry. The advertisement revenues of the broadcasters have surged in this period. The penetration of television is increasing and besides this, a lot of homes having terrestrial television are opting for satellite television. Besides this, the average revenue per user is also increasing. Thus the subscription revenues of the broadcasters have also increased. Zee Entertainment has also been able to tap the Indian Diaspora to garner international subscription revenues.

Net profit Growth:
The combined net profits of the three broadcasters have grown at CAGR of 48%. Zee Entertainment's flagship channel Zee TV has been able to improve its TRP ratings and gain market share in the GEC space. Currently, Zee Entertainment has a market share of 30% within the Hindi GEC space. The improvement in TRP ratings has helped Zee Entertainment to implement ad rate hikes. Infact, the advertisement revenues of Zee Entertainment have increased 31% YoY in FY07. This has helped the company to increase its net profits at a CAGR of 27% from FY04 to FY07.

TV 18- The standout performer
TV 18 has performed the best between FY04 and FY07. TV 18's PAT has increased at a CAGR of 40% during the period. During this period, the Indian stock markets rallied which helped in increasing the viewership of its flagship channel CNBC TV 18. This helped the company to increase its advertisement rates, as it is the dominant player in the business news and stock market news segment.

Content Providers:
In case of content providers, we have analyzed the financials of only Balaji Telefilms, as it dominates this space. Most of the other content providers are not listed or are too small in size. Its revenues have grown at a CAGR of 25% from FY04 to FY07. This increase has been possible due to the 7% CAGR increase in programming hour per year and the increase in realizations per hour from Rs 1.2 m in FY04 to Rs 1.84 m in FY07. The net profits have increased at a CAGR of 12% from FY04 to FY07. Though the operating margins have declined over a course of time, the company has clocked operating margins of 36% in FY07.

Future Outlook:
The broadcasters who are able to maintain high viewership ratings, garner high subscription revenues, manage content and employee costs effectively would succeed. Balaji Telefilms on the other hand, would be able to increase its programming hours as well as its realizations per hour on the entry of more players in the GEC space.

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