• JANUARY 4, 2005

Media 2004: The show is not over yet!

The year 2004 was not much different for the Indian media sector as compared to 2003 as there was no major policy development in the sector. However, thanks to some hectic activity witnessed in the sector (from the stock market point of view) in the final quarter of 2004, media stocks ended the year 2004 in the positive. Just to put things in perspective, an index (calculated on a simple average basis) created of the media stocks listed in the tables below has registered a 16% rise in 2004 compared to the 13% gains of the BSE-Sensex.

2004 vs. 2003:
CAS: The biggest uncertainty of 2004 continued to be with respect to the implementation of Conditional Access System (CAS). In the backdrop of debates over the implementation of this system, the fate of CAS continued to be determined by the political interests. After a deferment of the implementation of CAS in early 2004 by 3 months (seemingly owing to the General elections in May), the matter was further postponed until after assembly elections that were to be held in November 2004. However, even after this, there has been no clear stand taken by the newly appointed regulator for the media industry, Telecom Regulatory Authority of India (TRAI), as yet. To add to this, the regulator imposed a freeze on the tariff of pay channels with a revision only at the end of the year, which was allowed on the basis of inflation for the year 2004.

DTH: While the fate of CAS continues to be in doldrums, 2004 saw some other developments in the sector. One of this being the initial success of Zee's DTH service, which has now been launched nationwide. Further, other players that are in the fray are the Star-Tatas combine (yet to launch) and the national broadcaster, Prasar Bharti who launched its DTH services in November 2004. The launch of this service is aimed at resolving the issue pertaining to the subscriber base. It must be noted that as per broadcasters, cable operators consistently under-declare the subscriber numbers as they have the last mile advantage thus affecting their revenues. The biggest advantage of DTH here is that broadcasters will be able to keep a tab on the number of subscribers that have subscribed to their channels thus helping to curtail the under-declaration menace.

TV Channels: Further, 2004 saw the launch of several new channels, which included Times Groups' Zoom, Star's Star One and Star Utsav, Walt Disney's Disney Channel and Toon Disney, Sony's Animax and UTV's Hungama. Further, while the Indian television news space continued to remain in the limelight throughout 2004 on the back of various important events like two Budgets, two elections (May & November) and the ill-fated Tsunami disaster at the close of 2004. In the business television news space, while CNBC-TV18 continues to dominate the segment, NDTV has received the approval to launch its 24-hour business news channel, which is likely to heat up the competition in 2005.

Content providers: Balaji Telefilms continues to rule the television software industry, which is evident from the Television Rating Points (TRPs). Balaji's dominance can be gauged from the fact that its programmes continue to control over 50% of the total TRP points, a trend that it has managed to maintain over the last couple of years. Further, 2004 witnessed the emergence of other content providers like Cinevista and BAG Films, which may provide competition to the current leader in this space considering the quality of various programmes produced by them.

Films, Music and Exhibition: Helped by the recovery in Bollywood in 2004, the Indian music industry and the film exhibition business witnessed better times relative to 2003. Also, Indian films have managed to garner a wider audience by going all out to tap the Indian diaspora in the international markets. Further, 2004 also saw many multiplexes being launched.

Deals & Controversies: There was one big deal and one big controversy that hogged the limelight in 2004. The deal was that of Star acquiring a stake in India's leading content provider Balaji Telefilms. This deal is a win-win situation for both. While Star benefits from backward integration, Balaji benefits from the Star Network platform, its global exposure and management skills. It must be noted that while Star Plus commands about 75% of the total TRP points, almost 2/3rd of this is derived from Balaji's serials.

The controversy that erupted during the year was that between Zee-ESPN-BCCI over the awarding of the cricket rights. While Zee managed to outbid ESPN and bag the cricket telecast rights of the Indian cricket team for the next 4 years, questions were raised by the latter with respect to the eligibility of Zee (it does not have the experience with respect to telecasting of cricket). This then led to the ultimate withdrawal of the rights by the BCCI, as the matter was taken to court by ESPN. The rights currently rest with the national broadcaster, Prasar Bharti.

Outperformers of the year:

Media: In the limelight
CompanyPrice on Dec
31, 2003 (Rs)
Price on Dec
31, 2004 (Rs)
BSE-Sensex 5,839 6,603 13.1%
MID-DAY MULTI.35 66 88.4%
CREST COMM.48 80 67.6%
SAREGAMA99 130 31.4%
SRI ADHIKARI BROS.85 108 27.7%
TV 18190 227 19.6%
BAG FILMS12 14 17.4%
ZEE TELE150 171 14.0%
MUKTA ARTS68 76 12.0%

As can be seen in the table above, while many small and mid-cap media stocks witnessed significant activity in 2004, much of this coming only in the final quarter of 2004, it would be inappropriate to comment on the gains witnessed in stocks, which are not under our research coverage. However, while gains in Balaji Telefilms can be attributed to the Star-Balaji deal and the consequent announcement of a huge dividend of Rs 16 per share in the final week of December 2004, the Zee Telefilms stock has been in the reckoning ever since the Zee-ESPN-BCCI controversy erupted. Strong subscriber additions and a favourable advertising market have aided the performance of the company. Further, TV18 continues to reap the benefits of a favourable stock market scenario, as its channel, CNBC-TV18, is the leader in the business news segment.

Laggards of the year:

Media: Flop shows
CompanyPrice on
Dec 31, 2003 (Rs)
Price on
Dec 31, 2004 (Rs)
ADLABS FILMS128 117 -8.4%
TIPS INDS.51 48 -6.0%
CREATIVE EYE16 15 -3.3%
CINEVISTA46 45 -2.3%

Padmalaya Telefilms topped the losers chart during the year. It must be noted that recently, Zee Telefilms has announced taking legal action against Padmalaya Enterprises, a subsidiary of Padmalaya Telefilms, citing certain irregularities in the functioning of the company.

What to expect?
We remain bullish over the long-term prospects of the industry. India has near 85 m television homes of which over 50% homes have cable and satellite (C&S) connection and this number is expected to continue to grow substantially over the next few years. With new players and channels (including regional channels) having sprung up in niche segments like news, fashion and sports, television continues to remain the preferred mode of entertainment for the masses. Further, going forward, ad-revenues of major broadcasters are expected to improve with the economy showing strength, as corporates would increasingly look at increasing adspend to garner larger revenues. Moreover, with new sectors opening up like telecom, healthcare and insurance, advertisements by these segments would also aid the adspend growth.

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