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ENIL: SWOT analysis - Views on News from Equitymaster
 
 
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  • Dec 24, 2007

    ENIL: SWOT analysis

    In an earlier article, we had provided an overview of ENIL's business. In this article, we shall analyze the company by doing a SWOT analysis of it.

    Strengths
    Presence in major cities: Entertainment Netwotk (ENIL) operates radio stations in the top 13 A and A+ cities. Thus its listeners comprise the higher socio economic class of the country having higher disposable income. It has a first mover advantage in many of these cities. This helps ENIL to garner higher advertisement revenues.

    High listenership: ENIL's programming focus in radio is on contemporary film music shows and celebrity interviews. ENIL has developed good relationships with the film industry in India helping it to have innovative and creative content. This helps 'Radio Mirchi' (ENIL's radio station) to secure broadcasting rights of the music of leading films for up to two weeks after the initial release of the music. Inspite of being present in diverse regions of India, ENIL has been able to attract listeners everywhere and be the market leader as it has been able to customize its content to local tastes. In Delhi and Mumbai, Radio Mirchi is the clear market leader, capturing 5.9 m out of 11.2 m daily listeners. In Kolkata, Radio Mirchi has over 50% market share and is the second largest media vehicle after the leading Bengali daily.

    Good experience in event management: ENIL has a presence in the event management business through its arm '360 Degrees'. It has managed prestigious events such as 51st 'Filmfare Awards' and 'Femina Miss India 2006' contest. This experience of managing high profile events would help it in capturing a larger pie of the expected growth in this industry.

    Owns some of the best OOH properties: ENIL's 100% subsidiary Times Innovative Media Pvt Ltd owns some of the best properties such as the advertising rights at Delhi International Airport and Mumbai International Airport. Both these airports cater to combined annual travelers of about 42 m.

    Weaknesses
    No subscription revenues in radio: FM radio stations are offered free to air and do not receive any subscription revenues. This makes them totally dependent on advertisement revenues for survival.

    Lack of differentiation between different FM radio stations: The content played on different FM radio stations is very similar in nature. Most of them play popular film and pop music and very few cater to the niche audience. Listeners frequently switch between stations leading to listenership fragmentation.

    High music royalties: ENIL has to pay a high amount of royalty to the music companies for the music content procured from them. This increases the operating expenses of its radio business, hurting its bottomline.

    Capital intensive business: The OOH business and even the radio business require huge investments upfront and the revenues start flowing in gradually. In the OOH business, upfront payment has to be made for acquiring the advertising rights for multiple years. Similarly, license fees have to be paid upfront for operating FM radio stations. Thus ENIL needs a lot of capital to fund its growth plans.

    Opportunities
    Benefit from the robust growth in the FM radio industry: The radio industry recorded a growth of nearly 58% in 2006. The share of radio in the total advertising industry increased from 2.4% to 3.1% during the same year. The size of the radio industry is projected to increase at a CAGR of 28% from Rs 5 bn in 2006 to Rs 17 bn by 2011 as per the FICCI PwC report on the Indian entertainment and media sector. Robust growth of the Indian economy, favorable demographics, corporatisation of the Indian film industry and government regulation is driving the growth of the FM radio industry. ENIL would be a major beneficiary of this robust growth.

    Benefit from the robust growth in the OOH industry: As per the FICCI PwC report, the OOH industry is expected to grow at a CAGR of 13% from Rs 11 bn in 2006 to Rs 17.5 bn in 2010. Infrastructure development in the form of highways, expressways, airports, increase in commuting time, robust growth of the Indian economy would drive this growth. ENIL by virtue of being the leading player in this segment would be a prime beneficiary of this growth.

    Benefit from the robust growth in the live entertainment industry: As per the FICCI PwC report, the live entertainment industry is expected to grow from Rs 9.4 bn m in 2006 to Rs 18 bn in 2010. Increase in corporate sector's profitability, desire for more brand visibility and the increase in pageants, events and concerts have thrown open a huge market for event organizers like ENIL.

    Threats
    Economic downturn: The radio and the OOH business of ENIL garner revenues from advertisements. Advertising is a discretionary expenditure and is the first one to be pruned in case of an economic slowdown. Thus any potential slowdown in India's economy would adversely affect ENIL. The live entertainment business would also be adversely affected in case of an economic downturn as disposable incomes would reduce, affecting people's ability to spend on entertainment.

    Intense competition in the radio business: The FM radio business is extremely competitive. ENIL's major competitors Adlabs, South Asia, Radio city and Dainik Bhaskar are all well funded. Most of them have the right programming strategies in place.

    Loss of listenership in radio business: ENIL derives high advertisement revenues in its radio business due to the high listenership ratings of its radio stations. Any drop in these ratings would adversely affect its revenues.

    Slow rollout of infrastructure: The growth of the OOH business depends on the speed in the rollout of the infrastructure in India. Any delay in the rollout of infrastructure would adversely affect the growth of the OOH business.

     

     

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