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India Equity Research Reports, IPO and Stock News
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Broadcasting: Not a great year but an exception for few
Ad Revenue
TV continued to capture the dominant position in the total Ad revenue pie increasing
its ad contribution from 44.5% in 2010 to 44.8% in 2011.
TV ad revenues grew just 9% as a result of saturating demand mainly led by cut in
FMCG ad spends. FMCG advertising contribution declined from 54.5% in 2010 to
52.8% in 2011.
The year 2011 saw a fall in demand for advertising. There was no growth in the TV ad
space sold during the last six months despite festive season which usually contributes
to an uptrend in ad spends. In retrospect, the first half of the year turned out to be
better than the performance in the second half.
Star and Sony witnessed a double digit advertising growth, but most other channels
including Sun TV and Zee TV recorded lower single digit growth.
Regional market is expected to grow at a faster pace than national market owing to
greater consumption and penetration in the regional area.
Sports properties: The sentiment for the IPL 5 is at an all-time low, with very few
sponsors tied up till now.
Cost per 10 seconds has reduced, even though the cost per rating point has increased,
resulting in lower yields that translate into lower ad revenues. The total TV GRPs have
remained at the same level, even though the no. of channels is rapidly multiplying
leading to a fragmentation of the overall market.
Even with an increase in inventory by ~15% in 2011 led by launch of new channels, the
FCT per channel remained stagnant. TV viewership also remained constant.
Subscription Revenue
Subscription revenue for broadcaster has grown however share of broadcaster in
subscription pie has not grown.
Broadcaster revenue and revenue proportion in the total subscription will get addressed
with mandatory Digitisation.
Going forward subscription revenues will rise also on account of HD content (which is
offered at a premium rate).
Digitisation - a big hope
TV households grew marginally by 4%, C&S homes grew by 9% and Digital cable
homes grew magnificently by 63%. The growth pace is expected to continue with
mandatory Digitisation.
Uptake in digital penetration witnessed mainly in the rural areas as its focus was
initially on cable-dark areas.
Currently the focus has shifted to urban area – because of Phase wise implementation
and also because it is a high ARPU market.
With increased revenue proportion from subscription, dependence on ad revenue will
decrease and might also make the shelf space cheaper.
The first phase of Digitisation will definitely kick in, though it may see a delay of 3
months. With the advent of digitisation, the carriage fee paid by broadcasters will
reduce but not to a great extent as the MSOs will not let go of it easily.
Delivery of Niche content will increase with digitisation falling through and broadcasters
will charge a premium so as to earn more from subscription revenue.
If pricing of channels is left to market forces, ARPUs will see a tremendous upward
shift depending on the content offered.
Fixed content deals with MSOs and DTH operators will eventually get converted to per
subscriber deals
Challenges for Broadcasters with digitisation
Piracy - Short term risk of consumers getting pirated pay channels without STB may
adversely impact subscription revenues. In the past we have seen that CAS resulted
in broadcasters paying for piracy to maintain ratings.
Pricing of channels - One of the major risks broadcasters will be faced with is their
channels not being a part of the basic package of the MSO.
Cost Pressure
Revenue is increasing but simultaneously cost is rising at a higher pace leading to
margin pressure.
Cost of original content both for fiction and non-fiction has increased significantly
because of competitive pressure. Cost of star cast has risen; acquisition cost of movies
has also increased resulting in higher production cost per TRP.
Carriage cost has become a concern in the ad slowdown scenario. However, with
implementation of mandatory digitisation it is expected to reduce significantly.
Competition: Changing Landscape
Entry of new players (like Disney and Reliance) may lead to changes in the broadcasting
landscape with respect to cost structure, distribution and reach. For instance - entry
of Colors channel changed the viewership gamut of the Industry.
Competitive pressure within the existing players has increased enormously which has
resulted in increase of content cost, movie acquisition cost has resulted in margin
pressure. Example – Satellite rights for new movies has increased tremendously
(3 Idiots –Rs360mn, RaOne –Rs400mn, Agneepath-Rs410mn)
Outlook for 2012
Advertising Revenue - Cautiously optimistic outlook for the immediate future. Even
with the ad slowdown, TV will continue to be the highest contributor to the advertising
pie. TV advertising is expected to grow at 10% in 2012 to Rs126bn and increase its
contribution to the Ad pie to 45.1% from 44.8% currently.
Subscription Revenue – Broadcasters current share of 12-15% is expected to manifold
3-4x in the next 3-4yrs with complete implementation of digitisation
Print: Regional outperformed English
The year 2011 witnessed a slump in ad spends on print media from most of the critical
advertisers. Some months saw negative growth in print ad space sold. Hence, the
overall print advertising grew at 8% in 2011.
No big IPOs, no big launches impacted Ad revenues hence the focus of the players
was more on regional consolidation with existing players launching new editions into
existing and new markets.
English Print ads contribute 60% of the total ad revenues with TOI contributing 40% of
the English ad pie and 25% of the total print advertising. In 2011, the English advertising
segment was hit in a big way with some months of negative growth in print ad space
sold, lowering ad revenues for TOI, thus having an effect on the total Print advertising.
Advertisers saw a growth of 13 % in space consumed in English dailies in Q1 of 2011
as compared to the corresponding period in 2010, in Q4 the growth turned negative to
-13%. In comparison, language dailies still saw a 5% growth in space consumed by
advertisements.
Share of Education in ad contribution declined to 10.6% in 2011 from 14.6%, FMCG
ad contribution on print increased to 8.9% from 7.4% in 2010 and auto Ad spends
surged to 9.8% from 7.1% in 2010.
In 2011, a daily on an average consumed only 4.5 lakh cc(column centimeter), lower
than 4.7 lakh cc in 2010.
Outlook for 2012
Print Media advertising is expected to be similar to the trends in 2011 with slowing ad
spends from major sectors. Automobile segment is expected to be the one segment
that will continue to spend, mainly because of continuous new launches. FMCG
spends on Print will be higher. The expectation is that Print advertising growth will
lower to 6% for 2012 to reach Rs114bn.
Few of the dominant regional players have no plans to expand into new geographies
however will expand through multimedia in its currently penetrated markets. Some
players are also considering expansion on new domains, eg. Amar Ujala plans to
launch a regional TV channel in 2012.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Broadcasting: Not a great year but an exception for few
Ad Revenue
TV continued to capture the dominant position in the total Ad revenue pie increasing
its ad contribution from 44.5% in 2010 to 44.8% in 2011.
TV ad revenues grew just 9% as a result of saturating demand mainly led by cut in
FMCG ad spends. FMCG advertising contribution declined from 54.5% in 2010 to
52.8% in 2011.
The year 2011 saw a fall in demand for advertising. There was no growth in the TV ad
space sold during the last six months despite festive season which usually contributes
to an uptrend in ad spends. In retrospect, the first half of the year turned out to be
better than the performance in the second half.
Star and Sony witnessed a double digit advertising growth, but most other channels
including Sun TV and Zee TV recorded lower single digit growth.
Regional market is expected to grow at a faster pace than national market owing to
greater consumption and penetration in the regional area.
Sports properties: The sentiment for the IPL 5 is at an all-time low, with very few
sponsors tied up till now.
Cost per 10 seconds has reduced, even though the cost per rating point has increased,
resulting in lower yields that translate into lower ad revenues. The total TV GRPs have
remained at the same level, even though the no. of channels is rapidly multiplying
leading to a fragmentation of the overall market.
Even with an increase in inventory by ~15% in 2011 led by launch of new channels, the
FCT per channel remained stagnant. TV viewership also remained constant.
Subscription Revenue
Subscription revenue for broadcaster has grown however share of broadcaster in
subscription pie has not grown.
Broadcaster revenue and revenue proportion in the total subscription will get addressed
with mandatory Digitisation.
Going forward subscription revenues will rise also on account of HD content (which is
offered at a premium rate).
Digitisation - a big hope
TV households grew marginally by 4%, C&S homes grew by 9% and Digital cable
homes grew magnificently by 63%. The growth pace is expected to continue with
mandatory Digitisation.
Uptake in digital penetration witnessed mainly in the rural areas as its focus was
initially on cable-dark areas.
Currently the focus has shifted to urban area – because of Phase wise implementation
and also because it is a high ARPU market.
With increased revenue proportion from subscription, dependence on ad revenue will
decrease and might also make the shelf space cheaper.
The first phase of Digitisation will definitely kick in, though it may see a delay of 3
months. With the advent of digitisation, the carriage fee paid by broadcasters will
reduce but not to a great extent as the MSOs will not let go of it easily.
Delivery of Niche content will increase with digitisation falling through and broadcasters
will charge a premium so as to earn more from subscription revenue.
If pricing of channels is left to market forces, ARPUs will see a tremendous upward
shift depending on the content offered.
Fixed content deals with MSOs and DTH operators will eventually get converted to per
subscriber deals
Challenges for Broadcasters with digitisation
Piracy - Short term risk of consumers getting pirated pay channels without STB may
adversely impact subscription revenues. In the past we have seen that CAS resulted
in broadcasters paying for piracy to maintain ratings.
Pricing of channels - One of the major risks broadcasters will be faced with is their
channels not being a part of the basic package of the MSO.
Cost Pressure
Revenue is increasing but simultaneously cost is rising at a higher pace leading to
margin pressure.
Cost of original content both for fiction and non-fiction has increased significantly
because of competitive pressure. Cost of star cast has risen; acquisition cost of movies
has also increased resulting in higher production cost per TRP.
Carriage cost has become a concern in the ad slowdown scenario. However, with
implementation of mandatory digitisation it is expected to reduce significantly.
Competition: Changing Landscape
Entry of new players (like Disney and Reliance) may lead to changes in the broadcasting
landscape with respect to cost structure, distribution and reach. For instance - entry
of Colors channel changed the viewership gamut of the Industry.
Competitive pressure within the existing players has increased enormously which has
resulted in increase of content cost, movie acquisition cost has resulted in margin
pressure. Example – Satellite rights for new movies has increased tremendously
(3 Idiots –Rs360mn, RaOne –Rs400mn, Agneepath-Rs410mn)
Outlook for 2012
Advertising Revenue - Cautiously optimistic outlook for the immediate future. Even
with the ad slowdown, TV will continue to be the highest contributor to the advertising
pie. TV advertising is expected to grow at 10% in 2012 to Rs126bn and increase its
contribution to the Ad pie to 45.1% from 44.8% currently.
Subscription Revenue – Broadcasters current share of 12-15% is expected to manifold
3-4x in the next 3-4yrs with complete implementation of digitisation
Print: Regional outperformed English
The year 2011 witnessed a slump in ad spends on print media from most of the critical
advertisers. Some months saw negative growth in print ad space sold. Hence, the
overall print advertising grew at 8% in 2011.
No big IPOs, no big launches impacted Ad revenues hence the focus of the players
was more on regional consolidation with existing players launching new editions into
existing and new markets.
English Print ads contribute 60% of the total ad revenues with TOI contributing 40% of
the English ad pie and 25% of the total print advertising. In 2011, the English advertising
segment was hit in a big way with some months of negative growth in print ad space
sold, lowering ad revenues for TOI, thus having an effect on the total Print advertising.
Advertisers saw a growth of 13 % in space consumed in English dailies in Q1 of 2011
as compared to the corresponding period in 2010, in Q4 the growth turned negative to
-13%. In comparison, language dailies still saw a 5% growth in space consumed by
advertisements.
Share of Education in ad contribution declined to 10.6% in 2011 from 14.6%, FMCG
ad contribution on print increased to 8.9% from 7.4% in 2010 and auto Ad spends
surged to 9.8% from 7.1% in 2010.
In 2011, a daily on an average consumed only 4.5 lakh cc(column centimeter), lower
than 4.7 lakh cc in 2010.
Outlook for 2012
Print Media advertising is expected to be similar to the trends in 2011 with slowing ad
spends from major sectors. Automobile segment is expected to be the one segment
that will continue to spend, mainly because of continuous new launches. FMCG
spends on Print will be higher. The expectation is that Print advertising growth will
lower to 6% for 2012 to reach Rs114bn.
Few of the dominant regional players have no plans to expand into new geographies
however will expand through multimedia in its currently penetrated markets. Some
players are also considering expansion on new domains, eg. Amar Ujala plans to
launch a regional TV channel in 2012.
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