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India
Cricket World Cup rules—Part 1. The ICC Cricket World Cup (CWC) 2011 ruled the
minds of Indian viewership with strong ratings of 8.6 TRPs for India matches and a
credible 1.2 TRPs for non-India matches. The ratings of other genres, notably Indian
language GE channels, declined by 4-16% in March as a result. More important, CWC
2011 ratings are ahead of leading Hindi, Kannada, Marathi and Bengali GE channels
and runner-up Tamil, Telugu and Malayalam channels, justifying the estimated 10-15%
impact on advertising revenues during this period. We retain moderately positive stance
on Indian broadcasters given fair valuations; strong advertising spends on cricket give
comfort on continued robust advertising environment.
ICC CWC 2011 rules thus far: the journey ahead depends on Indian team’s performance
Exhibit 1 presents ratings performance of ICC CWC 2011 for the initial league matches; we
highlight the strong performance of the India matches with average all-India 8.6 TRPs, much
ahead of leading Hindi GE programs. The ratings of non-India matches have been predictably
lower but nonetheless robust at 1.2 TRPs. The overall ratings performance has been largely in line
with expectations (2.4 TRPs) thus far, given the league stages of the tournament and significant
number of one-side matches during this stage.
Exhibit 2 presents potential advertising revenue for the broadcaster ESPN-Star Sports from the ICC
CWC 2011, estimated to be between Rs5 bn and Rs7 bn depending on the performance of the
Indian cricket team; the Indian’s team exciting though tame draw against England (top-rated
match of the tournament so far with 11.0 TRPs) may end up costing ESPN-Star Sports (and not just
the Indian team) heavily if India is eliminated in the league stages (we are keeping our fingers
crossed). The ratings of non-India matches will likely increase to 3-4 TRPs but India’s matches in
the knockout stage will likely deliver >15 TRPs; this would be critical in the broadcasters’ ability to
monetize spot advertising (~15% of total inventory/volumes).
Advertising impact on other broadcasting genres such as GECs: Potentially between 10 and 15%
Exhibits 3-9 highlight the 4-16% impact on ratings of various Indian language GECs in March,
arguably on account of ICC CWC 2011. More important, we highlight that combined ratings of
ESPN-Star Sports channels (including DD1) has been ahead of (1) leading Hindi, Kannada, Marathi
and Bengali channels and (2) runner-up Tamil, Telugu and Malayalam channels thus far in March.
The impact on advertising revenues of GECs is estimated at 10-15% during this period given
pressure on yields and shift in advertising volumes.
Exhibit 10 presents potential advertising revenue for broadcaster SET-MAX from IPL Season 4, the
other flagship cricket tournament following ICC CWC 2011, estimated at Rs8 bn. The estimates
may be conservative given (1) our assumed flat average advertising rates (advertisers have choice
of CWC or IPL) given (2) higher inventory due to increased 74 matches in Season 4 (versus 60
matches in Season 3). However, IPL being a professional franchise league format, its performance
is consistent and not dependent on the fortunes of individual teams.
Exhibit 11 presents the list of presenting as well as associate sponsors associated with CWC and
IPL in CY2011E. The key cause for concern for Indian language GECs (beyond the short-term
advertising impact) is (1) rising and disproportionate share of sports/cricket in advertising budgets
of national advertisers and (2) flagship annual cricket properties like IPL (versus once-in-2/4-year
tournaments like CWC). Most important, IPL’s stickiness with male and youth viewership is valued
across advertising categories; the trend of rising consumer (L’Oreal) and durable advertisers on IPL
will likely impact GECs over the long term.
Retain moderately positive view on broadcasters, cricket notwithstanding
Exhibit 12 presents the valuation summary of broadcasters under our coverage; we maintain
our moderately positively stance on Indian broadcasters on account of (1) continued robust
advertising environment in general and (2) continued strong DTH growth as well as potential
benefits of mandatory digitization on subscription revenues coupled with (3) relatively fair
valuations (19X FY2012E consolidated EPS for both Zee TV and Sun TV; 16X FY2012E EPS
for Zee TV based on core – ex. sports – business). Strong advertising spends on cricket
provide comfort on continued robust advertising environment.
However, we highlight the impact of CWC and IPL in 4QFY11-1QFY12E but potentially in
2QFY12E as well (seasonally weak quarter coming on the back of above-average advertising
spending). In the long run, we are more concerned about competition and fragmentation in
the Indian C&S TV segment, which would force investors to take cognizance of potential
negative surprises in earnings and valuations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Media
India
Cricket World Cup rules—Part 1. The ICC Cricket World Cup (CWC) 2011 ruled the
minds of Indian viewership with strong ratings of 8.6 TRPs for India matches and a
credible 1.2 TRPs for non-India matches. The ratings of other genres, notably Indian
language GE channels, declined by 4-16% in March as a result. More important, CWC
2011 ratings are ahead of leading Hindi, Kannada, Marathi and Bengali GE channels
and runner-up Tamil, Telugu and Malayalam channels, justifying the estimated 10-15%
impact on advertising revenues during this period. We retain moderately positive stance
on Indian broadcasters given fair valuations; strong advertising spends on cricket give
comfort on continued robust advertising environment.
ICC CWC 2011 rules thus far: the journey ahead depends on Indian team’s performance
Exhibit 1 presents ratings performance of ICC CWC 2011 for the initial league matches; we
highlight the strong performance of the India matches with average all-India 8.6 TRPs, much
ahead of leading Hindi GE programs. The ratings of non-India matches have been predictably
lower but nonetheless robust at 1.2 TRPs. The overall ratings performance has been largely in line
with expectations (2.4 TRPs) thus far, given the league stages of the tournament and significant
number of one-side matches during this stage.
Exhibit 2 presents potential advertising revenue for the broadcaster ESPN-Star Sports from the ICC
CWC 2011, estimated to be between Rs5 bn and Rs7 bn depending on the performance of the
Indian cricket team; the Indian’s team exciting though tame draw against England (top-rated
match of the tournament so far with 11.0 TRPs) may end up costing ESPN-Star Sports (and not just
the Indian team) heavily if India is eliminated in the league stages (we are keeping our fingers
crossed). The ratings of non-India matches will likely increase to 3-4 TRPs but India’s matches in
the knockout stage will likely deliver >15 TRPs; this would be critical in the broadcasters’ ability to
monetize spot advertising (~15% of total inventory/volumes).
Advertising impact on other broadcasting genres such as GECs: Potentially between 10 and 15%
Exhibits 3-9 highlight the 4-16% impact on ratings of various Indian language GECs in March,
arguably on account of ICC CWC 2011. More important, we highlight that combined ratings of
ESPN-Star Sports channels (including DD1) has been ahead of (1) leading Hindi, Kannada, Marathi
and Bengali channels and (2) runner-up Tamil, Telugu and Malayalam channels thus far in March.
The impact on advertising revenues of GECs is estimated at 10-15% during this period given
pressure on yields and shift in advertising volumes.
Exhibit 10 presents potential advertising revenue for broadcaster SET-MAX from IPL Season 4, the
other flagship cricket tournament following ICC CWC 2011, estimated at Rs8 bn. The estimates
may be conservative given (1) our assumed flat average advertising rates (advertisers have choice
of CWC or IPL) given (2) higher inventory due to increased 74 matches in Season 4 (versus 60
matches in Season 3). However, IPL being a professional franchise league format, its performance
is consistent and not dependent on the fortunes of individual teams.
Exhibit 11 presents the list of presenting as well as associate sponsors associated with CWC and
IPL in CY2011E. The key cause for concern for Indian language GECs (beyond the short-term
advertising impact) is (1) rising and disproportionate share of sports/cricket in advertising budgets
of national advertisers and (2) flagship annual cricket properties like IPL (versus once-in-2/4-year
tournaments like CWC). Most important, IPL’s stickiness with male and youth viewership is valued
across advertising categories; the trend of rising consumer (L’Oreal) and durable advertisers on IPL
will likely impact GECs over the long term.
Retain moderately positive view on broadcasters, cricket notwithstanding
Exhibit 12 presents the valuation summary of broadcasters under our coverage; we maintain
our moderately positively stance on Indian broadcasters on account of (1) continued robust
advertising environment in general and (2) continued strong DTH growth as well as potential
benefits of mandatory digitization on subscription revenues coupled with (3) relatively fair
valuations (19X FY2012E consolidated EPS for both Zee TV and Sun TV; 16X FY2012E EPS
for Zee TV based on core – ex. sports – business). Strong advertising spends on cricket
provide comfort on continued robust advertising environment.
However, we highlight the impact of CWC and IPL in 4QFY11-1QFY12E but potentially in
2QFY12E as well (seasonally weak quarter coming on the back of above-average advertising
spending). In the long run, we are more concerned about competition and fragmentation in
the Indian C&S TV segment, which would force investors to take cognizance of potential
negative surprises in earnings and valuations.
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