Electronic Media

The broadcasting & cable TV market consists of all terrestrial, cable and satellite broadcasters of
digital and analog television programming. The market is valued as the revenues generated by
broadcasters through advertising, licensing (or public donations) and subscriptions.
Television industry is projected to continue to be the major contributor to the overall industry
revenue pie and is estimated to grow at a stable rate of 11.4% cumulatively over the next five
years, from an estimated Rs. 244.7 billion in 2008. The overall television industry is projected to
reach Rs. 420.0 billion by 2013.
In the Television pie, television distribution is projected to garner a share of 60% in 2013. On the
other hand, television advertising industry is projected to command a share of 41.0% in 2013,
having increased from a present share of 39.0% in the total ad industry pie.
Broadcasting and cable TV generated revenues of $5 billion in 2008, equating to 29.8% of the
industry's aggregate revenues.
The relative share of the television content industry is expected to remain constant at 4%.
Major Market Players

Television Broadcasters Sun TV, Zee news, Zee Entertainment, NDTV, TV18

Television Distributors Dish TV, WWIL, Hathway

Content Providers Balaji Tele, UTV Soft, Saregama

The chart below shows how elements in these categories interact while delivering the service to
consumers and how they receive their revenues.

This diagram explains this value chain in detail for all the three categories combined.
In next few parts of this report each of these sectors are explained in detail individually
Broadcasters
History
The significant growth in the entertainment industry in the last decade of the twentieth century
was largely triggered by the coming of age of television. For most of the last fifty years, it was a
monopoly of the public sector broadcaster. However, the nineties inspired private sector
enterprise across the television value chain. Since then, the rapid growth of the television
industry has made it the most significant component, in value terms, of the entertainment sector.
With increased hours of mass entertainment programming during prime time and better coverage
of popular events, it has seen an explosive growth in consumer mindshare. Its status as the
preferred mode of entertainment of the people is obvious from the fact that it now contributes
more than 60 percent of the entertainment industry's revenues.
The second spark came in the early nineties with the broadcast of satellite TV by foreign
programmers like CNN followed by Star TV and a little later by domestic channels such as Zee
TV and Sun TV into Indian homes. Prior to this, Indian viewers had to make do with DD's
chosen fare which was dull, non-commercial in nature, directed towards only education and
socio-economic development. Entertainment programs were few and far between. And when the
solitary few soaps like Hum Log (1984), and mythological dramas: Ramayan (1987-88) and
Mahabharat (1988-89) were televised, millions of viewers stayed glued to their sets. After
 coming of satellite channels the scenario has changed drastically. This sector is now not only
generating huge revenues but also giving employment to a large no. of people.
Value Chain Analysis
Revenue coming from advertisements and subscription are the two major source of income for
the broadcasters.
Television generates Rs 8,500 crore as advertising revenue. Of this, the Hindi general
entertainment channels grab nearly 50 per cent. The detailed break up is as explained in the pie
chart below.

Challenges
• All the major MNCs in the world are hit by recession and have reduced their promotional
expenses significantly. This has impacted the Ad revenues of most of the broadcasters.
• Yield from advertising is on the decline and subscription income is stagnant, while
programming, marketing and distribution costs are rising.
• Increased competition, especially in the Hindi general entertainment segment, has lead to a
surge in availability of commercial airtime. In less than a year, two players – 9X and NDTV
Imagine – with significant financial backing have appeared on the horizon.
• There is a huge supply demand mismatch. Fierce competition and under-cutting has led to a 20
per cent drop in spot rates in the general entertainment segment Channel yields are falling
because the advertiser is getting more for the same money.
• Even for pay channels like Star and Zee the subscription income has not grown either. (This
revenue stream is not available to free-to-air news and entertainment channels.) The bouquet
price of channels was last fixed by the Trai in 2003 and has just seen one revision since.
• The total commercial air time that a channel can utilise is also fixed at 10 minutes of advertising
for every hour of programming.
• While income is low, operational costs are rising. Carriage fees, has escalated by 40-50 per cent
for most channels. In fact, some of the new broadcasters are said to be spending between Rs 60
crore and Rs 70 crore a year to be seen in cable homes.
• Programming costs are up too. Producers of serials, soaps and reality shows are asking for more
money. This could be either because they are flooded with project offers from the new channels
or because their costs are rising as studios and artists charge more. On an average, production
costs are said to have gone up by 20-30 per cent. New channels are causing the existing
channels a fair amount of grief and distress given that their new shows cost more to produce and
market.
• One of the major roadblocks to the growth of pay television is carriage fee, which is paid by
broadcasters to cable operators to place their channels in the prime band. MPA estimates that of
the money that broadcasters made in distribution revenue, about half was paid back to operators
and distributors as carriage or placement fees.
• Broadcasters in India get barely 20 per cent of the total subscription revenue collected -- the
majority share goes to the local cable operators and the MSO.

Why Subscription is more reliable

Subscription is a great source of profit because it's a stable revenue base, and it often continues in
spite of the economic downturn. So, it has something to do with the structural economic process
as opposed to the macro-economic process. On the contrary advertizing revenues are very much
correlated to the economic conditions.
Major Players
Zee Int.
Company Financials
Comparing Advertisement and subscription revenue

Y-o-Y Growth
Subscription Revenue
FY09 Cr. 901 23%
Subscription Revenue
FY08 Cr. 732
Advertizements
Revenue FY09 1061 13.50%
Advertizements
Revenue FY08 934
Key Developments

• ZEEL has formed a subsidiary with Asia TV called Zee CIS Holdings in Russia, to
operate its Zee Russia channel.
• Subsidiary Zee Entertainment Studios is producing movies under the banners Zee
Limelight and Zee Motion Pictures.
• It has formed more subsidiaries - ZES Holdings, Mauritius; ZES International, UK
• Asia Today Ltd has 100% ownership of Zee Studio, Zee Cafe and Zee Trendz.
• Divested stake in Dubai venture - In February, ZEEL divested stake in its subsidiary Pan
Asia Infrastructure Ltd which was set up in 2006.
• The company's subscription revenue overtook its revenue from advertising January-
March 2009
• Currently half of ZEEL's subscription revenue comes from India and the other half from
abroad. In 2003, two thirds came from its international operations.
Star India :

Y-o-Y Growth
Revenue FY 09 Cr. 2200 10.00%
Revenue FY 08 Cr. 2000

Operating Income Cr. FY09 400 15.70%

Operating Income Cr. FY08 475

Subscription Revenue FY09 Cr. 850 55%

Subscription Revenue FY08 Cr. 550

Key Points :

• Advertisement Revenue decrease by 7% in the same period

• STAR India follows a July to June calender.
• Of the 65 channels offered by STAR, 29 channels are wholly-owned and operated
by STAR. In addition, STAR provides 36 channels owned and operated by third
parties or joint ventures between the company and other entities.
Sun TV
Finances Sun TV

Y-o-Y Growth
Revenue FY 09 Cr. 1106 19.50%
Revenue FY 08 Cr. 925

Net Profit FY 09 Cr. 386 12.50%

Net Profit FY 08 Cr. 327

Subscription Revenue
FY09 Cr. 168 100
Subscription Revenue
FY08 Cr. 84

Key Points :

• Advertizing expensese for the same period increased by 12 %

• Sun TV is the market leader in three of the four southern markets but industry watchers
suspect the broadcaster could be losing market share in Andhra Pradesh, Karnataka and
 perhaps in Kerala where it is the number two player after Asianet. However, Sun remains
a strong player in the lucrative Tamil Nadu market.
• It has around 49% stake in the well-established ‘RED FM’ channel.
• Radio is considered a major source of revenue for future. Losses have reduced from 75Cr.
To 45 Cr. Operates 42 FM radio stations across India

NDTV

Key Points :
• NDTV claims that their English News channel was 24×7 emerged as the clear leader with
53 percent viewership on Election Day according to the GfK-Mode survey of the top 13
cities in India
• NDTV India is among the top 4 Hindi News channels
• According to TAM data, NDTV HINDU, launched this May, has garnered an
8.2% market share, over the last 8 weeks in Chennai city, overtaking channels like
Headlines Today, NewsX and BBC World in the English News genre.
• The company claims that the TV show ”Rakhi Ka Swayamvar” had a record breaking
opening of 4.1 TVR, taking NDTV Imagines’ weekly GRPs to 138.
• The effect of cost-cutting and layoffs announced at the and of FY09 by media
company NDTV is evident in this quarters financial results: personnel expenditure was
down 9.89 percent from Q1 2008-09, and 51.38 percent quarter on quarter on a
standalone basis.

Television Distribution

This industry can be divided into two major categories namely, the cable operators and Direct-
To-Home(DTH) services
The table below helps us in estimating the current size and market potential of TV distribution
market.

No. of Homes In India 220m

Houses with TV 130m
Cable 72m
DTH 13m
Govt. 45m

These distributors are important source of revenue for broadcasters. But the cable TV operators
grossly underreport the subscriptions leading to huge revenue losses to the broadcasters. Till
2005 cable TV enjoyed monopoly on television distribution market but since then as it can be
seen from the diagram below things have started changing. The violet colored bar in the graph
shows the cable connections. But we can see as we move further from that the digital
transmission that is through DTH and IPTV are slowly but steadily increasing their market
penetration.

Major players and their relative position in distribution market:

 Marke
Transponder Subscrib t
Channel Capacity ers Share
DTH Provider Count of 36 MHZ (Million) (%)

Dishtv 240 12 5.6 40

Sun Direct 200+ 6 4 28.5
Big Tv 200+ 8
Tata Sky 185 11
Airtel Digital TV 170 7
Videocon d2h 160 6

Sun Direct has a substantial presence in South but the figures for other providers are not
available.
Market Size and Potential
The last-mile of television distribution has seen a lot of action in the near future due to entry of
new Direct to Home (DTH) broadcasters, Internet Protocol based Television (IP-TV),
broadcasting services using Digital Subscriber Line (DSL) technologies, etc. They will also give
broadcasters direct access to consumers by enabling them with the ability to provide customized
value-added services, such as video on demand.
Presently the distribution of subscription revenues is heavily skewed towards the cable operator
because of lack of transparency in the declaration of subscribers by the Local Cable Operator to
the pay television broadcaster. The introduction of these new platforms and the consequent
addressability will facilitate a more equitable distribution of revenues.
The DTH market which began commercial operations in 2003 has been able to acquire over 14
Million subscribers during the past five years. The number of DTH subscribers has nearly tripled
in 2008 compared to the previous year, driven by the entry of two new players.

As per a research report “Indian DTH Market Forecast to 2012”, the number of DTH subscribers
is forecasted to grow at a CAGR of around 25% during 2009-2012.

USPs Market Players

Dishtv • First Mover advantage

• Tied up with portals shaadi.com,
yatra.com,monster.com to provide these
services to subscribers.
• Large expansion plan in rural areas

TATA Sky • Riding the huge equity of TATA Brand

Sun Direct • Capitalized on good will in south

 • Price warrior. Lowest installation and
packages
Airtel Digital TV • Innovation in services
• High decibel Campaign

Major Players:

Dish TV (Financials)
in Crores 2008 2007 2006 2005
Revenue 415.72 194.32 31.49 9.56
% Growth 113.9 517.1 229.4 -11.6
EBIDTA -216.62 -185.54 -203.29 -26.8
% Growth -16.8 8.7 -658.5 80.4
PAT -413.2 -251.88 -207.83 -27.89
% Growth -64 -21.2 -645.2 79.9
Equity Shares 42.82 42.82 71.57 71.57
EBITDA Margin -52.41 -97.18 -646.19 -286.02
PAT Margin -99.98 -131.93 -660.62 -297.65
Debt 544.52 193.01 26.25 16.56
.
As it can be seen in the table above that Dish TV has made significant progress in revenue
growth and is expected to break even in the next quarter.

Challenges faced by DTH Providers

• Cable has established itself in large cities and can lower their charges by underreporting
the no. of subscribers.
• Tax : Around 40 per cent of revenues are siphoned off to pay taxes and license fee and
another 12 per cent for services imposed by the Central government. Apart from this,
there are entertainment taxes that differ from state to state.
Oppurtunities

• Huge available market.

• Rural markets
•
Government Policies

• Restrictions on vertical integration in the television sector are the offing. The Trai
(Telecom Regulatory Authority of India) on Wednesday recommended that there should
not be common ownership of content and carriage. A TV channel owner, it has said, can't
have more than 20% stake in cable, multi-system operator, DTH, headend-in-the-sky,
mobile TV.
• This means that certain players in broadcasting, like Zee, Sun and Star, which are both
TV broadcasters and distributors might have to wind down their holding in one of their
businesses. The regulator has proposed that such companies are given three years to
restructure their business.
• Freeze on pay channel pricing is bound to hurt the broadcasters.

International Trends
• In the U. S. stations are not bound by commercial limits. Stations must be careful about
how many minutes to exploit each hour, but there are no regulatory limits which would
certainly hurt revenues.
• with the transition to digital looming, many TV broadcasters are hoping their digital sub-
channels will bring new revenue streams.
• Another growing revenue stream for US TV operators is through their web sites and
affiliate brands
• Many TV stations and groups are aggressively going after money via retransmission
consent with cable