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Media Sector Analysis Report 

[Key Points | Financial Year '11 | Prospects | Sector Do's and dont's]

  • Indian media industry is expected to grow at an annual average growth rate of 14% over the next 5 years. The industry comprises of print, electronic, radio, internet and outdoor segments. The size of the print segment is about Rs 193 bn, while the radio segment is about Rs 10 bn. Advertising revenue will continue to be the industry's growth driver. In print, the contribution from advertising revenue is likely to change from 65% at present to 75% by 2015.
  • There are nearly 138 m television households in India. Cable penetration has reached 80% with the help of Direct to Home (DTH) platform. DTH segment comprises of 28 m homes. The digital subscribers are expected to outdo the analog subscribers by 2013. The players in the electronic media can be classified into a three-link chain. First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolleys, which include the cable and satellite channels, multiplex theatres, MSOs and the DTH players.
  • In India, the ratio of advertising expenditure to GDP is about 0.4%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the media reach increases, the advertising expenditure to GDP ratio is expected to increase over the next 5 years.

How to Research the Media Sector (Key Points)

  • Supply
  • Of the more than 70,000 newspapers printed in India, around 90% are published in Hindi and other vernacular languages. In the electronic media, the total number of channels presently available to viewers in India stands at close to 550.
  • Demand
  • The demand for regional print media is growing at a faster pace than that of English language print media. In the electronic media, the highly fragmented viewership has led to an increasing preference for niche channels.
  • Barriers to entry
  • In the electronic media, it is high for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programmes and finance their production. Hence margins are lower. The broadcasters are finding it increasingly difficult to retain their key personnel. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past.
  • Bargaining power of suppliers
  • In the print media, high for newsprint suppliers. It is medium to low for content providers in the electronic media. Terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.
  • Bargaining power of customers
  • Relatively high in both print and electronic media. The consumer finds a surfeit of players to choose from. The rollout of CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power.
  • Competition
  • High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan, HT Media and Deccan Chronicle. Regional print media too is seeing increasing competition. Competition is high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV.

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Financial Year '11

  • This year saw a surge in DTH subscription number which was 28 m as in December 2010. This implied a growth of 75% over the previous year. The government is attempting to shift towards complete compulsory digitization by March 2015.
  • Two television industry giants (Zee and Star) came together to sign a distribution alliance for distributing their content. This is set to change the industry dynamics in the medium term by resolving issues of piracy and under reported numbers by cable operators. The year also saw active participation from the private equity players.
  • In anticipation of the growing demand in the regional markets, media players have been aggressively targeting these. While print companies entered into newer territories by launching newspapers in the local languages, television channels have been focusing on regional channels as well as content suited for regional audience.
  • This year saw substantial growth in advertising revenue. Advertising accounted for 41% of the overall revenues in the sector in CY 2010. Advertising revenue from all segments of the print industry grew substantially.

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Prospects:

  • The fortunes of the media industry are linked to the growth in the economy. India is set to grow at a rate of at least 8% in years to come. Rising incomes in the hands of people encourage them to spend more on discretionary items like media and entertainment.
  • New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitization will radically alter the ways in which consumers receive channels. Also, these distribution platforms will give broadcasters direct access to consumers providing not just routine content but also customized value added services (like video on demand). As a result of this, the average revenue per user will increase significantly. Moreover, broadcasters are also expected to rake in larger advertisement revenues, as ad spend is likely to go up on the back of the robust economic growth.
  • With metros already being saturated, regional markets provide ample scope for growth in the media sector. In print media, newspapers are being published in vernacular language, In Television, newer channels are introduced in local languages. Tier II and Tier III cities and towns are set to drive the Indian consumption story in the next few years.
  • New Media is gaining more and more importance. 3G services have now been launched in India. Although the initial response is not so good, it is expected that people will start using the digital mode for viewing content once the infrastructure issues get resolved.

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Related Links for Media Sector
Quarterly Results | Sector Quote | Over The Years

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