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Media
India
4QFY12 ratings update: Zee strengthens, Sun weakens. Zee improved its ratings
performance in 4QFY12 post a weak 3QFY12 (lagged impact to 4QFY12 financials).
Additionally, market share data mask GRP gains in Hindi, Marathi and Bengali, the three
key markets for Zee. Sun faces more structural issues across its markets as competition
is increasingly active; Star’s success with KBC in Kannada and Tamil (modest) impacted
Sun somewhat. However, Sun’s proactive reaction with its own game show ‘Are You
Ready?’ found success in Tamil and Telugu, its two key markets. Retain positive view on
broadcasters led by (1) industry consolidation, (2) digitization gains and (3) reasonable
valuations. Advertising recovery is likely to be the key trigger.
C&S TV industry is in consolidation phase, for the most part
The Indian C&S TV industry is in consolidation mode, as witnessed by Turner’s decision to shut its
flagship Hindi GE channel ‘Imagine TV’. We note the sharp increase in competition and resultant
fragmentation of the Indian C&S TV market in 2006-09; the economic downturn thereafter was
the start of the consolidation phase, with multiple market actions such as Sun18 (distribution),
MediaPro (Zee-Star distribution), NW18-ETV, Sony-MaaTV et al. Though Viacom18/Colors was
successful, value-destruction at industry level far exceeded value-creation in Colors. We find stable
competitive dynamics in the market, barring few flashpoints, and expect large broadcasters such
as Zee, Sun and IBN18 to benefit from an advertising recovery.
Zee improves its performance in 4QFY12, led by flagship Zee TV
After a weak 3QFY12, Zee revamp of its content slate has resulted in improvement in its ratings
performance in 4QFY12 (Exhibits 2-4); the improved ratings performance of the flagship Zee TV
channel is also likely to have a salutary effect on the network. Moreover, the market share data in
Hindi, Marathi and Bengali mask the GRP gains for the GE genre (Exhibit 5-6); the C&S TV
penetration has improved significantly led by DTH in the hinterland though this could also partly
be the effect of changes to TAM (the ratings agency) panel.
Zee’s Cinema and regional channels also reported robust average ratings; strong performance in
Zee Bengali and Kannada has negated weakness in Zee Marathi. The company’s dependence on
Zee TV has declined post acquisition of regional channels.
Sun faces more structural challenges but responding proactively
Sun faces more structural challenges across its markets, notably the key Tamil market, as
competition has intensified. Star posed the first real test for Sun in a long time, launching the
South versions of popular game show ‘Who Wants to be a Millionaire’ (KBC). However, Sun
responded proactively with its own game show ‘Are You Ready?’, which found success in Tamil
(against KBC), its key market. KBC did well in the Kannada market and is going to be launched in
Star Asianet’s core Malayalam market soon (Exhibit 10). Sun’s gains in Malayalam partially negated
losses in Telugu and Kannada markets; the Tamil market remains a key challenge.
Retain positive view on Zee (BUY)/Sun (ADD) given structural drivers
We retain our positive view on large broadcasters Zee/Sun as structural drivers remain in place,
notably: (1) IPL’s overhang on rest of C&S TV segment has started to erode. (2) Diversification from
large bouquet of channels (expanding in case of Sun). (3) Potential benefits of digitization (else
robust DTH growth). (4) Robust balance sheets in a challenging macro-environment and
reasonable valuations. We await the recovery in C&S TV advertising in FY2013E (and beyond) led
by stable economic environment and growth to support the structural drivers
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