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Media Sector Analysis Report 

[Key Points | Financial Year '20 | Prospects | Sector Do's and dont's]

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  • The Indian media and entertainment (M&E) sector can be split into ten segments – radio, television, online gaming, animation & VFX, out of home (OOH), music, digital media, live events, film entertainment and print.
  • Rising income and evolving lifestyles have led to a higher demand for services in the media and entertainment sector. Higher rural penetration and a rapidly growing young population coupled with increased usage of 3G, 4G and portable devices have also augmented demand.
  • The Government of India (GoI) has supported the industry’s growth by taking various initiatives such as the digitization of cable distribution and ease of institutional finance to improve profitability for the sector.
  • It has increased the Foreign Direct Investment (FDI) limit in the sector from 74% to 100%. There is also no restriction on foreign investment for up-linking and down-linking of TV channels other than news and current affairs. FDI inflow in the information and broadcasting sector during April 2000 to March 2020 stood at US$ 9.2 billion.
  • FDI limit in radio including private FM channels has also been increased from 26% to 49%. Private operators are allowed to own multiple channels in a city subject to a limit of 40% of total channels in the city. Private players are also allowed to carry news bulletins of All India Radio.
  • With respect to print media, FDI investment of up to 26% is allowed in publication of newspapers and periodicals as well as in publications of Indian editions of foreign magazines. FDI investment of up to 100% is allowed in publications of scientific and technical magazines and specialty journals and periodicals.

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. There are over 800 private satellite TV channels, permitted by the Information and Broadcasting Ministry.
  • Demand
  • The demand for regional 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
  • High, for broadcasting since it is very capital-intensive. Low for content providers.
  • Bargaining power of suppliers
  • Low as the number of suppliers is high. There is an increasing number of content providers.
  • Bargaining power of customers
  • High, as a variety of entertainment sources are available.
  • Competition
  • High in print media, especially in Hindi dailies and regional print media too. Competition is also high amongst broadcasters especially for general entertainment channels.
  • Threat of Substitutes
  • The internet as well as significant cultural events/sporting events pose a significant threat to existing forms of media and entertainment.

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Financial Year '20

  • During FY20, the Indian media and entertainment sector registered a revenue growth of 9%YoY at Rs 1.8 trillion (US$ 25.7 billion). While television retained its strength as the largest choice of advertising, digital media overtook filmed entertainment in FY20 to become the third-largest segment of the media sector.
  • Advertising grew 5.3% YoY while subscription grew 9.3% YoY in FY20. Except for the IPL and general election spikes, advertising growth was muted due to an overall economic slowdown in the second half of the year, which also impacted festive ad spending and resulted in a skew of spending on high-impact properties.
  • The net increase of Rs 40 billion in ad spend was because of a Rs 37 billion growth in digital and a Rs 15 billion growth in television, reduced by a fall of Rs 12 billion across local traditional media (print, radio, OOH). Traditional segments like print and radio ended the year with a drop in ad revenue.
  • Subscription growth was driven by OTT video consumption (111%), film (10%) and television (7.5%). It is expected that advertising will grow at a 9% CAGR over the next three years.
  • During FY20, the New Tariff Order, led to a 6% reduction in time spent watching television during the second half of the year. It also meant that many channels saw their audience shrink.
  • Regional channels, however, saw an increase in subscription revenue with viewers opting to pay for them. In FY20, Free-To-Air television reached 171 million households, and there were over 4 million connected smart televisions at the end of the year.
  • The TV industry grew from Rs 740 billion to Rs 788 billion in FY20, a growth of 6.5% YoY. TV advertising grew 5% YoY to Rs 320 billion while subscription grew 7%YoY to Rs 468 billion. Ad volumes for regional channels grew by 4%YoY. However, in contrast, they fell by 6% for national channels. The IPL and the ICC World Cup, and the general elections were among the big drivers of the 5% growth in television advertising for this financial year.
  • The news genre witnessed a growth of 9% in viewership, up from about 7.3% in FY19. This was largely due to tentpole events such as the general elections, the abrogation of Article 370 in Kashmir, and the introduction of the Citizenship (Amendment) Act and the protests that followed.
  • In FY20, digital media (including advertising and subscription) grew 31% YoY to reach Rs 221 billion. Digital advertising, a subset of digital media, grew at 24% YoY to Rs 192 billion in FY20, driven by higher consumption of content on digital platforms and advertisers’ focus on very specific metrics to measure performance.
  • SME and long-tail advertisers increased their spend on digital media too. Pay digital subscribers crossed 10 million for the first time as Sports and other premium content were put behind a paywall. Consequently, subscription revenue grew 106%YoY to Rs 29 billion in the year 2019. Video streaming increased by 16%YoY, audio streaming by 33%YoY and news consumption by 22%YoY.
  • In September 2020, the Government of India announced its plan to develop an Animation, Visual Effects, Gaming and Comic (AGVC) Centre for Excellence in collaboration with IIT Bombay. The centre is expected to launch in the next 1-2 years (2021-2022)

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  • Since the pandemic, there has been a perceptible increase in media consumption – TV, digital and gaming, especially as people remained home on account of the lockdown. However, going forward, monetization of this trend could prove challenging as the media and entertainment sector in India derives a majority of its revenue from the advertising spend of other industries.
  • The recessionary impact on FMCG, financial services, automotive and e-commerce, therefore, could have a knock-on effect. The Indian Broadcasting Foundation claims that advertising has gone down by almost 50% owing to various factors including the cancellation of big events like IPL, repeat content on television, and the slowdown in other industries.
  • However, on the back of a greater focus on monetization of an emerging digital business model, growth is expected in retail advertisement due to factors such as e-commerce gaining more popularity in the country, and domestic companies testing out the waters. The rural region is also a potentially profitable target.
  • Digital is expected to be relied upon as a dominant force going ahead and is expected to pull in the most elevated advertising spend among all media positions. Advertising revenue in India is expected to grow at a CAGR of 15.2% to US$ 18.4 billion in FY23 from US$ 9.4 billion in FY18.
  • The Indian film industry is projected to grow at a CAGR of 7.6% during FY18-FY23 and is expected to touch US$ 3.4 billion by FY23. In order to promote the industry, the government has signed co-production treaties with various countries such as Italy, Brazil, UK and Germany to increase the export potential of film industry. The government has also granted ‘industry’ status to the segment in 2001 for easy access to institutional finance.
  • The government has also subsumed the entertainment tax in the Goods and Services Tax (GST) to create a uniform tax rate regime across all states and to reduce the tax burden on the sector.
  • The Indian animation and VFX industry is projected to grow at a CAGR of 15.5% and is expected to expand to US$ 2.3 billion by FY24 from US$ 1.2 billion in FY19. Growth in international animation films, especially 3D productions and the subsequent work for Indian production houses will help growth of this segment.
  • The Indian radio industry is projected to grow at a CAGR of 10.2% and is expected to reach US$ 628 million by FY23 up from US$ 402 million in FY18. Phase III of e-auctions for FM radio licenses will provide an impetus to the segment. Radio advertising is another area likely to experience accelerated growth.

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FAQs on the Media Sector

How has the media sector performed in the past decade and when is a good time to invest in the sector?

The media sector has provided investors healthy returns in certain time periods during the past decade but overall, the performance of the sector has been underwhelming.

The best time to buy stocks from this sector is when companies that have strong fundamentals are trading at attractive valuations.

To know more about the sector's past and ongoing performance, have a look at the performance of the NIFTY Media Index.

Where can I find a list of media stocks?

The details of listed media companies can be found on the NSE and BSE website. However, the overload of financial information on these websites can be overwhelming.

For a more direct and concise view of this information, you can check out our list of media stocks.

Which steel stocks were the top performers over the last 5 years?

Saregama, TV18 Broadcast and PVR were the top performers over the last 5 years in terms of sales and profit growth.

Saregama's growth can be attributed to its position in the domestic music industry, its strong promoter group, and its comfortable capital structure whereas TV18 Broadcast's growth can be attributed to its strong parentage, which lends support to the company's financial profile and provides a significant refinancing ability.

PVR has also done well as the largest multiplex chain in India with a screen market share of 28% on account of its strong revenue growth and robust margin profile.

To know which other companies performed well over the last 5 years, check out our entire list of top performers.

What kind of dividend yields do media stocks offer?

There is no consistent trend of dividends across the industry, with different companies having different dividend policies.

For more details, check out our list of top media stocks offering high dividend yields.

Which are the media stocks with the best return on equity?

Return on equity (RoE) is a measure of the profitability of a business in relation to the equity. This profitability helps gauge a company's effectiveness when it comes to using equity funding to run their daily operations.

In the Indian stock market, Sun TV, Navneet Education and DB Corporation are the top media stocks right now with the best return on equity.

To know which other media stocks offer great return on equity, you can check out the top media stocks offering the best returns here.

Which are the best media stocks to invest in currently?

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Two commonly used financial ratios used in the valuation of stocks are -

  • Price to Earnings Ratio (P/E) - It compares the company's stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

    To find stocks with favorable P/E Ratios, check out our list of media stocks according to their P/E Ratios

  • Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

    To find stocks with favorable P/BV Ratios, check out our list of media stocks according to their P/BV Ratios