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UBS Investment Research
Indian Media Sector
Takeaways from FICCI-FRAMES 2011
India media & entertainment industry revenues to grow 14% in 2010-15
We attended FICCI FRAMES 2011—an annual media and entertainment
conference—last week. In this note, we summarise key takeaways from select
panel discussions held during the conference and key points from the FICCIKPMG
Indian Media and Entertainment industry report 2011 released during the
conference. According to the report, the India media and entertainment industry’s
revenue grew 11% in 2010 and is expected to grow at a CAGR of 14% over 2010-
15 to Rs1,276bn.
Takeaways from select panel discussions held at the conference
1) TRAI highlighted that it is not facing significant opposition to the
recommendations on mandatory digitisation. TRAI mentioned that the timelines
for implementing digitisation are being debated and the two primary concerns
being discussed are: availability of set-top boxes and the investment required by
MSOs [estimated to be Rs500bn]. 2) The regional media is growing rapidly, led by
favourable demographics, and increasing income and consumption in tier-2 and
tier-3 cities. Maharashtra, West Bengal, and the southern states are the fastest
growing regional markets. 3) While the usage of digital media is likely to increase
in the medium term, the traditional media platforms (TV and print) are likely to coexist
in India.
Maintain positive view on India media sector led by digitisation
We maintain Buy ratings on Zee Entertainment, IBN18, Dish TV, and Hathway as
we believe they will benefit from increasing digitisation in the long term. We
maintain our Sell rating on Sun TV as we believe the upcoming state elections and
any negative newsflow relating to the promoters’ involvement in the telecom
spectrum controversy could create an overhang on the stock price in the near term.
M&E industry revenues to grow 14% in 2010-15
According to the FICCI-KPMG Indian Media and Entertainment Industry
Report 2011, the India media and entertainment industry’s revenue grew 11% in
2010 and is expected to grow at 14% CAGR for 2010-15, from Rs653bn in 2010
to Rs1,276bn in 2015. While the share of television is expected to increase from
45% of total revenue in 2010 to 49% by 2015, the share of print is likely to
decline from 30% to 24%.
The TV industry reported a 15.6% growth in revenue in 2010 to Rs297bn and is
expected to grow at 14.8% in 2011, according to the FICCI-KPMG Indian
Media and Entertainment Industry Report 2011. The broadcasters’ share of
subscription revenue is expected to increase from 21% in 2010 to 30% by 2015,
primarily led by increasing adoption of digital platforms (DTH and digital cable).
Key takeaways from select panel discussions during FICCI-FRAMES 2011
media conference on 23-25 March 2011:
Confronting realities in television: overcoming regulatory hurdles: TRAI
discussed its recommendations on implementing digital cable systems in
India and highlighted that it has not faced significant opposition on
digitisation, except from a few local cable operators. Two concerns that are
being discussed are: 1) availability of set-top boxes; and 2) investment
required by multi-system operators (MSOs). TRAI mentioned that the
government has set up a committee of stakeholders to debate the timelines
for implementing digitisation.
India cable industry (specifically MSOs) needs to invest Rs500bn to
implement digital cable systems in India. The cable companies highlighted
their willingness to invest in subsidising STBs and making their networks
digital ready provided they get greater co-operation from broadcasters, in
terms of revenue sharing.
News in the internet age: how to give your best shot in the World Wide
Web: While news consumption on the internet is increasing globally, the
panellists believed that traditional print media is likely to co-exist with new
media (digital) in India. The credibility of news is important for most readers
and they rely on traditional print media for it. However, the traditional print
media companies might need to look at innovative ways of monetising online
content and evolve their business models in the medium term. For example, a
large proportion of people in India could be willing to share their
demographic details in order to consume online content, which could be a
valuable database for advertisers.
TV delivery infrastructure for the future: are we ready for it? The panel
discussed the changing definition of television as it moves away from
physical television to mobile phones and laptops. However, it concluded that
mobile devices and laptops can not replace television completely in India in
the medium to long term. These devices are likely to be used along with the
television, and television will continue to be used to view high quality
programming. One of the panellists highlighted that by 2015, more than
500bn hours of video content is expected to be available on the internet with
more than 12bn devices that can receive or download TV content from the
internet.
Resurgence of regional media: The panel discussed how regional media is
growing faster given favourable demographics, higher per capita income and
increasing consumption trends in tier 2 and tier 3 cities. The following
regional markets are the fastest growing: Marathi (Maharashtra), Bengali
(West Bengal) and the southern languages (Tamil Nadu, Kerela, Andhra
Pradesh and Karnataka). The per capita income of southern states is 18%
higher than the north Indian states. The critical success factors for operating
in a regional market are: 1) ability to source local content 2) distribution and
3) monetisation of reach.
Statement of Risk
We believe key risks for IBN18 are: 1) excessive competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory risk, as the news segment of the Indian broadcasting
industry is exposed to significant regulation on up-linking guidelines and
ownership. We believe key risks for Zee are excessive competition and high
sports costs. Content costs could increase for Dish TV if broadcasters negotiate
a variable fee structure based on the number of subscribers. Hathway faces
execution risk in implementing its business model of executing a stream of
value-accretive acquisitions. We see upside risks to our estimates and valuation,
if mandatory digitisation is implemented.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Indian Media Sector
Takeaways from FICCI-FRAMES 2011
India media & entertainment industry revenues to grow 14% in 2010-15
We attended FICCI FRAMES 2011—an annual media and entertainment
conference—last week. In this note, we summarise key takeaways from select
panel discussions held during the conference and key points from the FICCIKPMG
Indian Media and Entertainment industry report 2011 released during the
conference. According to the report, the India media and entertainment industry’s
revenue grew 11% in 2010 and is expected to grow at a CAGR of 14% over 2010-
15 to Rs1,276bn.
Takeaways from select panel discussions held at the conference
1) TRAI highlighted that it is not facing significant opposition to the
recommendations on mandatory digitisation. TRAI mentioned that the timelines
for implementing digitisation are being debated and the two primary concerns
being discussed are: availability of set-top boxes and the investment required by
MSOs [estimated to be Rs500bn]. 2) The regional media is growing rapidly, led by
favourable demographics, and increasing income and consumption in tier-2 and
tier-3 cities. Maharashtra, West Bengal, and the southern states are the fastest
growing regional markets. 3) While the usage of digital media is likely to increase
in the medium term, the traditional media platforms (TV and print) are likely to coexist
in India.
Maintain positive view on India media sector led by digitisation
We maintain Buy ratings on Zee Entertainment, IBN18, Dish TV, and Hathway as
we believe they will benefit from increasing digitisation in the long term. We
maintain our Sell rating on Sun TV as we believe the upcoming state elections and
any negative newsflow relating to the promoters’ involvement in the telecom
spectrum controversy could create an overhang on the stock price in the near term.
M&E industry revenues to grow 14% in 2010-15
According to the FICCI-KPMG Indian Media and Entertainment Industry
Report 2011, the India media and entertainment industry’s revenue grew 11% in
2010 and is expected to grow at 14% CAGR for 2010-15, from Rs653bn in 2010
to Rs1,276bn in 2015. While the share of television is expected to increase from
45% of total revenue in 2010 to 49% by 2015, the share of print is likely to
decline from 30% to 24%.
The TV industry reported a 15.6% growth in revenue in 2010 to Rs297bn and is
expected to grow at 14.8% in 2011, according to the FICCI-KPMG Indian
Media and Entertainment Industry Report 2011. The broadcasters’ share of
subscription revenue is expected to increase from 21% in 2010 to 30% by 2015,
primarily led by increasing adoption of digital platforms (DTH and digital cable).
Key takeaways from select panel discussions during FICCI-FRAMES 2011
media conference on 23-25 March 2011:
Confronting realities in television: overcoming regulatory hurdles: TRAI
discussed its recommendations on implementing digital cable systems in
India and highlighted that it has not faced significant opposition on
digitisation, except from a few local cable operators. Two concerns that are
being discussed are: 1) availability of set-top boxes; and 2) investment
required by multi-system operators (MSOs). TRAI mentioned that the
government has set up a committee of stakeholders to debate the timelines
for implementing digitisation.
India cable industry (specifically MSOs) needs to invest Rs500bn to
implement digital cable systems in India. The cable companies highlighted
their willingness to invest in subsidising STBs and making their networks
digital ready provided they get greater co-operation from broadcasters, in
terms of revenue sharing.
News in the internet age: how to give your best shot in the World Wide
Web: While news consumption on the internet is increasing globally, the
panellists believed that traditional print media is likely to co-exist with new
media (digital) in India. The credibility of news is important for most readers
and they rely on traditional print media for it. However, the traditional print
media companies might need to look at innovative ways of monetising online
content and evolve their business models in the medium term. For example, a
large proportion of people in India could be willing to share their
demographic details in order to consume online content, which could be a
valuable database for advertisers.
TV delivery infrastructure for the future: are we ready for it? The panel
discussed the changing definition of television as it moves away from
physical television to mobile phones and laptops. However, it concluded that
mobile devices and laptops can not replace television completely in India in
the medium to long term. These devices are likely to be used along with the
television, and television will continue to be used to view high quality
programming. One of the panellists highlighted that by 2015, more than
500bn hours of video content is expected to be available on the internet with
more than 12bn devices that can receive or download TV content from the
internet.
Resurgence of regional media: The panel discussed how regional media is
growing faster given favourable demographics, higher per capita income and
increasing consumption trends in tier 2 and tier 3 cities. The following
regional markets are the fastest growing: Marathi (Maharashtra), Bengali
(West Bengal) and the southern languages (Tamil Nadu, Kerela, Andhra
Pradesh and Karnataka). The per capita income of southern states is 18%
higher than the north Indian states. The critical success factors for operating
in a regional market are: 1) ability to source local content 2) distribution and
3) monetisation of reach.
Statement of Risk
We believe key risks for IBN18 are: 1) excessive competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory risk, as the news segment of the Indian broadcasting
industry is exposed to significant regulation on up-linking guidelines and
ownership. We believe key risks for Zee are excessive competition and high
sports costs. Content costs could increase for Dish TV if broadcasters negotiate
a variable fee structure based on the number of subscribers. Hathway faces
execution risk in implementing its business model of executing a stream of
value-accretive acquisitions. We see upside risks to our estimates and valuation,
if mandatory digitisation is implemented.
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