[Investec] India C&S TV Broadcasting - SR2PIN_112750

7/25/2019 [Investec] India C&S TV Broadcasting - SR2PIN_112750

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20 May 2015

Readers in all geographies please refer to important disclosures and disclaimers starting on page 44 In the United

Kingdom this document is a MARKETING COMMUNICATION. It has not been prepared in accordance with the rules in the

FCA Conduct of Business Sourcebook designed to promote the independence of research and is also not subject to any

prohibition on dealing ahead of the dissemination of research. The global contacts include: Andrew Fitchie (EU) and Leon

van Heerden (SA). Full analyst and global contact details are shown on the back page.

Amit Kumar

+91 (22) 6136 7400

[email protected]

Sec

torResearch

India C&S TV broadcastingAggregName2$

Sector review Company Rec Target

IndiaC&STV broadcasting :So whats there to watch on TV tonight?

Within the Indian Cable & Satellite TV market, broadcasters sit at the top of

the value chain above both content producers and distributors, resulting in

durable competitive advantages and a robust return profile. With a cyclical

recovery in ad revenue, founded on an improving economy, and Pay-TV

revenues, led by mandatory urban digitization by FY17E, the outlook is

positive for Indian C&S broadcasters. Competition is limited for now while

potential for disruption is also limited to a few regional markets. We initiate

coverage on Sun TV Network, the largest regional broadcaster, at BUY; andZee Entertainment, the second largest national broadcaster, at HOLD. Zee

has a stronger franchise, but this is factored into its FY18E P/E of c.27x.

Broadcasters benefit from structural strengths.The Indian C&S TV market

enjoys superior growth potential compared with global peers, and despite

already high c.80% Pay-TV penetration. Large broadcasters dominate the C&S

TV landscape with the top 5 in India capturing a c.69% share of viewership.

Unlike global markets, content IPR ownership (largely) rests with broadcasters in

India, with content producers a fragmented lot. The relatively unorganized,

fragmented C&S TV distribution market in India implies that negotiating power in

Pay-TV deals rests with broadcasters.

Near-term cyclical recovery in ad market. A stable Central government inIndia is stimulating economic growth, strongly correlated with media/ad spend.

Moreover, declining crude oil prices (down 40% from peak) should drive gross

margins up at Indian FMCG companies, which are the largest contributor (c.50%

share) to C&S TV ad spend. The structural growth of e-commerce also needs

media support to drive penetration, in turn fuelling market momentum. We

expect a strong c.18% CAGR in Indian media ad spend for FY16E-18E.

Digital transition to drive subscription revenues. The C&S TV distribution

market in India is dominated by Analog Cable. The lack of addressability in

Analog Cable and unorganized last-mile resulted in under-declaration of subs

and weak monetizationfor both broadcasters and the government (taxes). The

government has since pushed mandatory digitization of Cable in India Phase-

I/II was completed with c.31mn Digital Pay-TV subs while Phase-III has thepotential for c.32mn subs by FY17E. Broadcaster subs revenues will reflect a

c.15% CAGR in Digital Pay-TV subs over FY16E-18E.

Robust return, cash-flow generating franchises.Large C&S TV broadcasters

in India derive >30% CROCI returns, adjusted for new investment initiatives.

Although Sun is limited by its regional presence, the company benefits from a

large film library and an attractive FY17E P/E of c.14x. While Zee has a stronger

content franchise and diverse national presence, we believe this is reflected in

its FY17E and FY18E P/Es of c.34x and c.27x.

Sun TV Network Buy INR460

Zee Entertainment Hold INR330


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Contents

Contents ................................................................................................................................. 2

Structure of Indian C&S TV market ......................................................................................... 3

Advertising: Near-term cyclical recovery ..................... ..................... ...................... ................ 9

Subscription: Riding on the digital transition ...................... ..................... ....................... ...... 17

Content, competition and margins ....................................................................................... 24

Valuation: We prefer DCF methodology ...................... ...................... ..................... .............. 33

Sun TV Network(SUTV.NS).................................................................................................. 36

Zee Entertainment(ZEE.NS)................................................................................................. 40


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Structure of Indian C&S TV marketThe value chain of the Indian C&S TV market (outlined in Figure 1) does not differ

all that much from the global C&S TV market. Fiction and non-fiction content is

generated by a large number of producers, and film content is produced in

collaboration with film studios active in the market. Broadcasters, at the centre ofthe value chain, aggregate the content together into a cohesive whole

(channel/platform). Distributors (Cable, DTH) combine many of these channels into

packages and beam them to consumer homes. The primary revenue streams for

the value chain are subscription (consumer pays directly for choice of channels) and

advertising (goods and services companies pay to reach consumers through

advertisements), which are distributed across the stakeholders distributors

(primarily subscription), broadcasters (advertising and subscription) and content

(linked to advertising). However, as with any hyper-local industry, the Indian C&S

TV market has its own intricacies, as discussed below.

Figure 1: Structure of Indian C&S TV value chain

Cable LMOs

(87mn subs)

Cable homes

(129mn subs)Fiction content

Non-fiction content

Film s tudios

C&S broadcasters

Advertisers DTH operators(37mn subs)

Cable MSOs

(92mn subs)

Source: Investec Securities research

Figures 2-3 compare the state of the Indian TV market with the global TV

market surprisingly, the development of the Indian Pay-TV (or C&S TV)

ecosystem is much ahead of the world, despite the emerging Indian economy.

Terrestrial TV, free for the consumer and subsuming public and private free-to-

air (FTA) broadcasters, has a large c.34% share globally. However, its share of

the Indian TV market is a relatively modest c.20%, primarily led by (1) the weak

Indian pubcaster, Prasar Bharati, and (2) inability of private FTA broadcasters

to utilize the large reach of terrestrial infrastructure of Prasar Bharti (not allowed

by law). This provided an automatic fillip to the C&S TV market in India, led by

private broadcasters as well as Cable LMOs (last-mile operators), which had a

much better sense of the infotainment needs of the Indian consumer and

spread Cable TV right across the country.

Figure 2: Global TV subs by technology, CY14 (mn) Figure 3: Indian TV subs by technology, FY14 (mn)

Terrestrial,525

Cable, 559

DTH, 357

IPTV, 112

Terrestrial,32

Cable, 92

DTH, 37

Source: FICCI-KPMG 2015 report, Investec Securities research Source: Investec Securities estimates


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Notwithstanding already high c.80% penetration of C&S TV in India, growth

remains superior to its global counterpart (Figures 4-5). According to KPMG,

global Pay-TV operators will likely deliver c.3% CAGR subs growth over

CY14-20. India is expected to lead the global markets with a robust c.5%

CAGR in Pay-TV subs in this period. The robust growth in TV homes in India

(c.3% CAGR) led by improved prosperity in rural markets, is translating intostrong growth for Pay-TV given the limited variety and lack of compelling

content with the Indian pubcaster. The linguistic diversity of the Indian

population (13 languages in India with >10mn native speakers) has been better

served by the invisible hand of the market. In addition to a weak Indian

pubcaster, low penetration of TV homes in India (c.60% of all homes) and low

ARPUs (US$3-4/month on average) are also supportive of Pay-TV growth.

Thus, Indian C&S broadcasters enjoy a superior long-term growth profile.

Figure 4: Global C&S TV subs by technology, CY14-20E (mn) Figure 5: Indian C&S TV subs by technology, FY14-20E (mn)

559 597

357475

112

191

-

500

1,000

1,500

CY2014 CY2020E

Cable DTH IPTV

92 101

3767

-

50

100

150

200

FY2014 FY2020E

Cable DTH IPTV

Source: FICCI-KPMG 2015 report, Investec Securities research Source: Investec Securities estimates

In Digital TV, the Indian C&S TV ecosystem lags the global market. The share

of Analog Cable in India still remains high at c.54%, which compares

unfavourably with a c.18% share globally. There are historic as well as

economic reasons why: (1) C&S TV started in India in the early 1990s, when

Analog Cable was the dominant technology globally. (2) Analog Cable has both

its disadvantages (poor signal quality, limited capacity) and advantages (low

cost of operation, given low US$3-4/month consumer ARPU in India). Analog

Cable fits well with unorganized, small LMOs in India (given their limited

investment ability). Broadcasters benefitted from barriers to entry in Analog

Cable (limited channel capacity), but the lack of addressability (subs under-

declaration) hurt monetization. Overall, Analog Cable had run its course from a

consumer (limited channel choice), industry and government (tax) perspective,

which pushed the latter towards announcing mandatory digitization of Cable in

India (c.22mn Digital Cable subs currently).

Figure 6: Indian C&S TV subs by technology, FY14 (mn)

AnalogCable, 70

DigitalCable, 22

DTH, 37

Source: Investec Securities estimates


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Indian C&S broadcasting is a very hyper-local market catering to the linguistic

diversity of the Indian population (Figure 7). Indian language channels (Hindi,

regional) dominate with >80% of viewership and >70% of the advertising share.

India has a robust history (c.60 years) of local entertainment led by Bollywood

(Hindi film industry), and C&S broadcasting has followed in its footsteps (since

its inception in the early 1990s). The largest C&S broadcasters in India have afocused presence in Indian languages. Given the emerging state of the Indian

economy and relatively small size of the Indian broadcasting market (compared

with globally), niche broadcasting is limited. Niche channels catering to an

affluent English-speaking audience derive limited viewership, but premium

rates. It is the large/mass broadcasters which have had more success with

niche channels given their distribution advantage.

Figure 7: Genre-wise Indian C&S TV market, CY14 (%)

Share (%) Power

Language Genre Viewership Advertising Ratio (X)

Hindi/National Entertainment 31.2 27.5 0.9

Movies 13.6 6.7 0.5

New s 3.7 8.4 2.3

Music 3.2 3.0 0.9

Regional Entertainment 17.9 15.9 0.9

Movies 3.7 2.8 0.8

New s 3.7 8.3 2.2

Music 1.8 1.4 0.8

Sports Sports 2.4 4.3 1.8

Kids Kids 7.3 3.8 0.5

English Entertainment 0.9 4.6 5.1

New s 0.3 3.0 10.0

Infotainment Infotainment 1.3 2.0 1.5

Others/Niche Others/Niche 9.2 8.4 0.9

Source: FICCI-KPMG 2015 Report, Investec Securities research

As per the 2001 Census of India, Hindi is the countrys de facto national

language with c.422mn native speakers. That still leaves a >600mn population

with a native language other than Hindi. Given the preference of Indian

consumers to be entertained in their native language, the regional C&S

broadcasting opportunity is as large as the Hindi/National market. There are six

large regional broadcasting markets/segments in India. The South regional

broadcasting segment has limited overlap with Hindi, with the Hindi audience

limited to a few large urban centres in the relevant regions. Marathi and Bengali

are dual-language markets, with the population fluent in Hindi and local

language; however, the regional broadcasting markets are yet larger in size in

the respective regions (Maharashtra, West Bengal).Figure 8: Language-wise Regional C&S TV market, CY14 (%)

Share (%)

Language View ership Advertising

Tamil 27.6 28.3

Telugu 24.0 17.9

Marathi 14.1 16.0

Kannada 12.1 11.6

Bengali 11.7 11.1

Malayalam 5.3 9.1

Others 5.3 6.0

Source: FICCI-KPMG 2015 report, Investec Securities research


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Global TV broadcasting markets have a wide spectrum of private broadcasters,

from free-to-air (FTA) to ad-free/niche Pay-TV. The FTA networks have a

strong value proposition, catering to a large volume of middle class population

with popular content, whereas Pay-TV focuses on the affluent population with

niche/premium content. Although the Indian TV market is the third largest

globally by volume, a small middle-class population constrains the economicsof FTA channels. As discussed, FTA channels are not allowed to use the

infrastructure of the Indian pubcaster; they need to pay hefty carriage to get on-

board C&S distribution platforms. The emerging state of the Indian economy

implies that neither the advertising nor subscription market is well developed.

Pay-TV broadcasters dominate in India (Figure 9), but surprisingly derive most

of their revenues from copious levels of advertising on their channels. They

benefit from a positive feedback loop; positive economics imply an ability to

invest in popular/compelling content, further driving viewership.

Figure 9: Top broadcasters in India, FY14 (%) Figure 10: Pay-TV broadcasters economics in India, FY14 (Rs mn)

Star India,21

ZeeNetwork, 16

Sony India,13TV18

network, 10

Sun TVNetwork, 9

Others, 31

Financials Zee Sun *

Total revenues 44,217 22,236

--Advertising 23,801 11,944

--Subscription 18,022 7,695

--Others 2,394 2,598

Total expenses (32,174) (11,922)

--Content (20,688) (6,941)

--Overheads (11,486) (4,981)

EBITDA * 12,043 10,314

Adj. EBITDA (excl. advertising) (11,758) (1,630)

Adj. EBITDA (excl. subscription) (5,979) 2,620

Source: Industry data, Investec Securities research Source: Investec Securities research / Company accounts * EBIT as Sun reportsits film costs as amortization

The relationship between content producers and broadcasters is governed bythe ownership of intellectual property rights (IPR). Unlike global markets, Indian

broadcasters have IPR ownership of fiction content (maximum viewership share

on Indian TV). Broadcasters play the primary role in research, concept, script

and casting for fiction content. The execution is typically outsourced to a

production house for fixed/variable remuneration. The exception is film content

film producers and studios pre-date C&S TV in India and are more mindful of

IPR ownership. Also, films have diversified revenue streams and are not wholly

dependent on C&S platforms. Notwithstanding the creative accounting

practices to go with a creative industry, film studios in India have scaled up

better in both revenue and profitability terms (Figure 11). Non-fiction content is

spread across local formats (IPR owned by broadcasters) to international

formats (licensed for local market). We do not discuss sports content given thelimited exposure to this segment of the large listed C&S broadcasters under our

coverage.

Figure 11: Film versus TV content studio financials, FY14 (Rs mn)

Film content TV content

Financials Eros Balaji

Total revenues 11,396 1,494

Total expenses (8,350) (1,268)

--Direct costs (7,733) (1,006)

--Overheads (617) (262)

EBITDA 3,046 226

EBITDA mar g i n (%) 27 15

Source: Investec Securities research / Company accounts


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Bottom line: Attractive position of Pay-TV broadcasting in IndiaThe large Pay-TV broadcasters are the most attractive link in the Indian C&S TV

value chain. We summarize their strengths and relationship vis--vis other

stakeholders in the value chain below.

The C&S TV broadcasting market in India is fairly consolidated, with the top 5broadcasters capturing c.69% share of the viewership. Pay-TV broadcasters

robust financial position drives a positive feedback loop (ability to invest in

popular/compelling content, which further drives viewership).

The emerging state of the Indian economy and consequent limited

development of advertising and subscription revenue streams implies that pure

FTA and niche/premium Pay-TV channels have weak economics. The

potential for disruption of the existing business model is limited in the Indian

market. The Indian pubcaster remains mired in internal issues and market

complexity.

The broadcasters hold negotiating power over fiction content producers, given

IPR ownership. Film studios are in a relatively better negotiating position, but

broadcasters also have large legacy film libraries. The unorganized, fragmented Cable ecosystem in India implies that Pay-TV

broadcasters are better placed in this regard as well . This segment of the value

chain has started to consolidate with the entry of organized DTH platforms and

mandatory digitization of Cable initiated by the Government of India, but the

somewhat unique two-level structure (Cable MSOs, LMOs) implies any

significant level of concentration is some time away.

Based on the above analysis, we argue that C&S broadcasters are at the centre of

the Indian C&S value chain with significant market power, and we see limited

medium-term risks to their position. Localized competition is possible (likely even)

but the challenge of achieving a c.10% market share in the diverse Indian market

(each of top 5 broadcasters have 20-40 channels) implies high barriers to entry

overall. The only real challenge we foresee to broadcasters dominant position is thepotential consolidation among distributors led by digitization. Distributors can push

back against Pay-TV broadcasters subs revenue demands, but the latter anyway

benefits from improved subs declaration in Digital Cable.

Zee Entertainment: Second-largest broadcaster in IndiaZee Entertainment, part of the Essel group promoted by Subhash Chandra, is the

second largest broadcaster in India with a presence across Hindi/national, regional

and English/niche segments. Zee has >40 channels covering genres, such as

entertainment, movies, music, sports and niche across languages. Zee channels

hold leading positions in non-South regional markets and robust positions in Hindi

markets, but lags competition in South regional markets. Zees sports franchise was

acquired from Middle East-based Taj TV in 2010. Zee was the pioneer in

distributing Indian content and channels in global markets, targeting the NRI (Non-Resident Indian) audience. Lately, Zee has expanded its international offerings to

include Indian content dubbed in local languages.

Sun TV Network: Largest regional (South) broadcaster in IndiaSun TV Network, part of the Sun Group promoted by Kalanidhi Maran, is the

dominant player in the South regional broadcasting market. Sun has >30 channels

covering genres including entertainment, movies, music, kids, news and comedy

spanning the four South Indian markets (Tamil, Telugu, Kannada and Malayalam).

Sun holds a dominant position in the Tamil market and is on a strong footing in the

Telugu, Kannada and Malayalam markets. Sun expanded its broadcasting

operations to cover FM Radio in 2007, with a pan-India presence and strong

position in South markets. Sun entered the Indian Sports market in 2013, buying the

Hyderabad franchise of popular Indian Premier League (IPL, flagship club format

cricket league in India). Sun has the largest film library of all broadcasters in India.


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Figure 12: Channel list of Zee and Sun, our coverage broadcasters

Language Genre Channels

Zee Entertainment

Hindi/National Entertainment Zee TV, &TV, Z Anmol, Zindagi, Z Smile

Mov ies Zee Cinema, &pic tures , Z Classic , Z A ction

Music Zing, Z ETC Bollyw ood

Regional Entertainment

Movies Z Talkies, Z Bangla Cinema

Sports Sports Ten Sports, Ten Action+, Ten Cricket, Ten Golf

Others Others

HD/Niche HD/Niche

Sun TV Netw ork - regional

Entertainment Sun TV, Gemini TV, Udaya TV, Surya TVMovies

Comedy Adithya TV, Gemini Comedy, Udaya Comedy

Music

Kids Chutti TV, Kushi TV, Chintu TV, Kochu TV

Others Sun Life, Gemini Life

New s Sun New s, Gemini New s, Udaya New s

HD/Niche Sun HD, Gemini HD, KTV HD, Sun Music HD

Sun Music, Gemini Music, Udaya Music, Surya

Music

KTV, Gemini Movies, Udaya Movies, Kiran TV,

Sun Action, Gemini Action, Suriyan TV

Z Marathi, Z Bangla, Z Telugu, Z Kannada, Z

Tamizh, Z Salaam

Z Studio, Z Caf, Z Khana Khazana, Z Jagran,

ZeeQ

Zee TV HD, &TV HD, Z Cinema HD, &pictures

HD, Ten HD, Z Studio HD



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Advertising: Near-term cyclical recoveryAdvertising spend in India has been sub-par over the past few years (c.9% CAGR

over FY12-14), as policy paralysis and consequent economic headwinds weighed

on consumer and advertiser sentiment. However, a stable new Central government

with a renewed focus on economic growth has brightened the medium-term outlookfor the Indian ad market. Economic tailwinds, supported by other structural drivers,

will likely lead to a strong c.18% CAGR in Indian media industry ad spend over

FY16E-18E. We highlight the sharp jump in contribution from the E-commerce

category as one structural driver of Indian C&S TV ad revenues (Figure 14). The

robust growth plans of E-comm companies in India (50%+ revenue CAGR) will

need the continued support of media, specifically C&S TV, to drive penetration, in

return supporting ad growth momentum of the Indian C&S TV industry.

Figure 13: India Media industry ad growth, FY12-18E (%) Figure 14: Category-wise spends on Indian C&S TV, CY13-14 (%)

11

7

10

13

16

1820

-

5

10

15

20

FY2012 FY2013 FY2014 FY2015 FY2016EFY2017EFY2018E

Share (%)

Advertiser CY2013 CY2014

FMCG/Consumer 57.0 53.6

Auto 7.5 7.2

Telecom/ISP/DTH 8.7 8.2

E-commerce 1.3 5.4

Durables 5.0 4.1

BFSI 4.0 3.8

Fashion 3.5 3.2

Real Estate 4.0 3.1

Political ads 0.1 2.3

Others 8.9 9.1

Source: GroupM India 2015 report, Investec Securities estimates Source: Pitch-Madison 2015 report, Investec Securities estimates

The strongest support for (discretionary) consumption and Indian media ad

revenues near term is likely to be the sharp decline in global crude oil prices.Moderating inflation, the first effect of declining petrol/diesel prices, has increased

the disposable income of Indian consumers. Moreover, declining crude oil prices

directly impact the financials of the FMCG companies, which are the largest

contributor (c.50%) to Indian C&S TV advertising. Figure 15 presents our analysis of

potential uplift in adpro spend of FMCG companies in FY16E. We assume (i) 5%

growth in revenues (led by volumes, we assume flat pricing), (ii) a 30% decline in

crude-linked RM costs resulting in (iii) 200bps expansion in adpro spend in FY16E.

Our analysis suggests a potential c.24% jump in adpro spend by FMCG companies

in FY16E. Given C&S TVs dependence on FMCG ad spend, this is likely to be the

critical growth driver going ahead.

Figure 15: Brent crude price in Indian Rupees, Apr-10-15 (Rs/bbl) Figure 16: Impact of crude price decline on FMCG financials

-

2,000

4,000

6,000

8,000

Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15

40%decline

FMCG financials

FY15 FY16E Yoy (%)

Revenue 100 105 5

Opex (84) (87) 4

--RM costs (50) (49) (2)

----Crude oil linked (15) (11) (29)

----Non-crude (35) (39) 10

--Adpro spends (11) (14) 24

--Other overheads (23) (24) 5

EBITDA 16 18 12

Op mar g i n (%) 16.0 17.1

Source: Bloomberg, Investec Securities research Source: Investec Securities estimates


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Long-term growth potential of Indian C&S TV ad marketNotwithstanding the strong cyclical recovery in advertising, the long-term potential

of the Indian media ad market is also attractive. We highlight that Indias adex-to-

GDP ratio of c.0.4% remains well below c.0.8% globally (c.1.0% in developed

markets, c.0.5% in China). The sub-par adex-to-GDP ratio directly correlates to the

limited share of discretionary spending in the consumer basket (around 30-40%

versus 60-70% across global markets). As the Indian economy and disposable

incomes of consumers expand, the resulting higher discretionary spending will

sought to be influenced through advertising by marketers. Our conservative

assumptions on long-term GDP growth (6% CAGR), CPI inflation (6% CAGR) and

adex-to-GDP ratio (improving to c.0.5% over FY15-25E) yield a robust c.14.5%

CAGR in Indian media industry ad revenue/market over the decade.

Figure 17: Composition of India Consumer Price Inflation (CPI), (%) Figure 18: Long-term Indian media ad growth forecast, FY15-25E (%)

Staples Group (%)

Food and beverages * 44.7

Fuel and lighting 9.5

Clothing and footw ear 4.7Housing 9.8

Total staples group 68.7

Discretionary group (%)

Prepared meals and intoxicants 5.0

Transport and communication 7.6

Personal care and effects 2.9

Household appliances 4.3

Others 10.0

Total discretionary group 31.3

(%) Comment

Real GDP CAGR (%) 6.0

CPI inf lation CAGR (%) 6.0

Nominal GDP CAGR (%) 12.0

FY2015 adex-to-GDP (X) 0.4

FY2025E adex-to-GDP (X) 0.5 India to catch up to Chin

India adex CAGR (%) 14.5

Source: Central Statistics Office, Investec Securities research * excluding preparedmeals and intoxicants

Source: FICCI-KPMG 2014 report, Investec Securities estimates

The Indian media ad market is currently dominated by C&S TV and print (c.43%

and c.38% share respectively). However, the dominant trend recently has been the

rise and exceptional growth of digital media, mirroring global trends, capturing a

robust c.9% share of the market from c.1% a decade ago. We expect the trend to

accelerate going ahead, led by rising smartphone penetration in India, with digital

media capturing c.24% of the market by FY25E, again mirroring global trends

(current c.25% share of digital in global media ad market). The impact would largely

be on print media, given flattening penetration. We expect C&S TV ad share to

remain relatively insulated due to (1) its status as a flagship media platform in India

(maximum reach); (2) rising reach among rural markets relevant to large advertisers

(for ex. FMCG); and (3) digitization (greater channel variety and thus, viewership).

We model C&S TV ad CAGR of c.14% in the long run (over FY15-25E).

Figure 19: Platform-wise Indian media ad growth, CY14-24E (%) Figure 20: Reach of various media platforms in India (%)

43 41

3823

924

4 66 6

-

25

50

75

100

CY2014 CY2024E

C&S TV Print Digital FM Radio Outdoor

14% CAGR

-

20

40

60

80

C&S TV Print FM Radio Internet MobileInternet

Source: GroupM India 2015 report, Investec Securities estimates Source: Industry data, Investec Securities research


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Market share key determinant of network ad growthAside from Indian Media/TV market ad growth, the network market share (weighted

average viewership of channels) is the major determinant of ad growth for a specific

broadcaster/network. Figures 21-22 show the strong correlation between the Zee

and Sun networks market share and ad growth historically; we highlight that our

market share estimates are based on the respective market presence of the

networksZee is present in a large number of Indian C&S TV segments (national,

regional, niche) while Sun is present in a limited number of segments (regional), but

dominates in its respective markets. Zees robust market share gains over

FY12-15E meant its ad growth was ahead of the market; Suns market share losses

resulted in relatively subdued ad growth over FY12-15E. However, predicting future

network market share is challenging given multiple channels in the network (Zee

>40, Sun >30) as well as changing consumer preferences.

Figure 21: Zee network market share and ad growth, FY10-15E (%) Figure 22: Sun network share and ad growth, FY10-15E (%)

18 17 16 17 18 19

19

(2)

2220

18

(10)

-

10

20

30

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E

Zee market share (%) Zee (ex. Sports) ad growth (%)

30 31 3028

26 2422

(1)

8

0

5

(10)

-

10

20

30

40

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E

Sun market share (%) Sun ad growth (%)

Source: Investec Securities estimates / Company accounts Source: Investec Securities estimates / Company accounts

TRAIs12-min/hour ad cap not a major concern anymoreIndias media regulator TRAI decided to regulate ad time on Indian C&S TV

channels effective from 2QFY14, capping it at 12 mins/hour on a clock-hour basis.

Technically, the ad cap is yet to be implemented given that few small broadcasters

(news, music) have opposed the regulation. However, the three largest C&S TV

networks in India (Star, Zee, Viacom18) are in compliance. The Sony and Sun

networks are also selectively in compliance with marginal 1-2min/hour variance in

network ad volumes. Sun significantly reduced ad volumes in FY14 from

c.16mins/hour in FY13 and thus the impact is largely captured in its financials. As

already highlighted, with a majority (>65%) of the Indian C&S TV viewership

captured by the five large broadcasters, the 12-min/hour ad cap is practically in

force. Additionally, the ad rate/CPM gap between TV and other media platforms in

India implies that industry-wide ad volume reduction will drive higher pricing.

Figure 23: CPM of TV and print advertising in India

Print advertising Comment

Ad rate c ard ( Rs/sqcm) 13,280 Dainik Jagran UP f ront page

Discount on rate card (%) 50 For large advertisers

Ef f ec tiv e ad rate ( Rs /s qc m) 6,640

Ad size (sq cm) 416 Quarter-page

Print ad spend (Rs mn) 2.8

Consumer reach (mn) 9.6 On fr ont page

Print CPM (Rs mn/mn) 0.29 Cost of reaching 1mn consumer s

TV advertising Comment

Ad rate ( Rs mn/slot) 0.25 Star Plus primetime; slot=10s ec

# of ad slots 6 2 ads of 30secs each

TV ad spend (Rs mn) 1.5

Consumer reach (mn) 7.5 In primetime

TV CPM (Rs mn/mn) 0.20 Cost of reaching 1mn consumer s

TV/Print CPM (%) (30) TV at discount to Print

Source: Industry data, Investec Securities estimates


12/46

Page 12 | 20 May 2015

New viewership measurement research in India (BARC)TAM, the current C&S TV viewership measurement research in India, has been

under a cloud. Broadcasters have highlighted its inadequacies, largely due to

limited sampling (of c.10K C&S TV homes as a proxy for c.129mn actual C&S TV

homes in India). The umbrella body of broadcasters in India, Indian Broadcasting

Federation (IBF) undertook the initiative of new viewership measurement research,

BARC. BARC can potentially address the inadequacies of TAM with an expanded

sample (c.20K C&S TV homes to start with, c.50K homes in 4 years). Figure 24

presents our analysis of the TAM viewership sample compared to the actual Indian

C&S TV homes across markets, which BARC should mirror. However, the details

will remain sketchy till the time BARC is officially launched.

Figure 24: C&S TV homes across markets, TAM versus actual (%)

Market TAM Actual

National/Hindi

Uttar Pradesh+ 10 10

Punjab-Haryana 8 8

Gujarat 7 5

Madhya Pradesh+ 7 5

Rajasthan 6 4

Delhi-NCR 8 2

Regional

Tamil Nadu+ 7 16

Andhra Pradesh 8 11

Maharashtra+ (Hindi as well) 18 11

Karnataka 7 7

West Bengal (Hindi as w ell) 7 6

Others 8 14

Source: TAM, BARC, Investec Securities research

Zee: Robust headline growth led by aggressive strategyZee was a relatively sedate participant in the Indian broadcasting market throughout

the last decade (2000s). Having established its Hindi (Zee TV + Zee Cinema)

franchise in the late 1990s, Zee focused on expanding its niche channel franchise in

the 2000s, an effort that remains limited in terms of scalability (and not just for Zee).

Essel Groups (Zees parent) efforts in regional markets (Marathi, Bangla, Telugu

and Kannada) were led by a sister concern; Zee consolidated these channels at

end-FY10, and simultaneously drove a dramatic change in its thinking. Post

continued market share losses throughout FY07-12, lead fragmentation or get

fragmented became the driving philosophy behind Zees increasingly aggressive

go-to-market strategy. This implied higher content investment in existing channels

and more new channel launches to expand the network viewership.Figure 25: Zee list of new initiatives, FY12-15

Initiative Launch Comments

Ditto TV 4QFY12 Internet/OTT TV

Ze e Bangla Cine ma 2QFY13 Bangla movie channe l

Zee Alwan 2QFY13 Arabic GE channel

ZeeQ 3QFY13 Niche kids channel

&pictures 2QFY14 Hindi movie channel

Zee Anmol 2QFY14 Hindi repeat channel

Zee Bioskop 3QFY14 Bahasa movie channel

Ze e Mus ic Company 4QFY14 Hindi mus ic labe l

Zindagi 1QFY15 Niche Hindi GE channel

Zee Nung 1QFY15 Thai movie channel

&TV 4QFY15 Hindi GE channel



13/46

Page 13 | 20 May 2015

The fruits of the strategy were visible in network market share gains as well as

strong, above industry average ad growth in FY13-15. We model a continued strong

c.18% CAGR in Zees LTL (like-to-like) ad revenues over FY16E-18E led by (1) a

c.18% CAGR in Indian C&S TV ad revenues and (2) relative stability in Zee

networks LTL market share during this period. &TV, the Hindi general

entertainment channel launch in late 4QFY15, is by far the most ambitious by Zee ina long time. Including the contribution from &TV (6%/7.5%/9% market share in Hindi

Entertainment genre in FY16E/17E/18E), we estimate Zees networkmarket share

to reach 20%+ by FY18E and correspondingly model a strong c.24% CAGR in

Zees overall ad revenues during FY16E-18E. In our view, LTL gains in market

share and ad revenue growth are as important as company-level performance given

(1) they are margin accretive and (2) new channel launches always contribute to

headline growth, but not necessarily value (high hit-flop ratio).

Figure 26: Zee network and LTL (excl. &TV) share, FY13-18E (%) Figure 27: Zee network and LTL (ex. &TV) ad grwth, FY13-18E (%)

17 18 1920 20 20

17 18 19 19 19 18

-

10

20

30

FY2013 FY2014 FY2015E FY2016E FY2017E FY2018E

Zee network market share (%) Zee LTL market share (%)

2220

18

28

2221

2220

17 18 18 17

-

10

20

30


Zee (ex. Sports) ad growth (%) Zee LTL ad growth (%)

Source: TAM, Investec Securities estimates Source: Investec Securities estimates / Company accounts

The majority of Zees recent channel launches were extensions of the existing

bouquet with the content library already in place (low content cost). We believe

multiple factors were behind Zees approach to &TV launch: (1) the competing Star

and Sony networks already had two Hindi entertainment channels each and (2) Zee

TV was positioned as a family channel (limited content variety); &TV is expected to

expand Zees audience radically. &TV is a contemporary Hindi entertainment

channel, featuring >20 hours of original content at launch. &TV had an average

launch, reporting c.4.5% market share in the first month of operation (Mar-15), given

Zees content and marketing investment. We are not yet factoring in any significant

value accretion from &TV in our estimates. However, &TV can become value

accretive if it can double its market share to c.9% in 2-3 years. Zee will have plenty

of opportunity to experiment, given the 3-6 month content cycle in India.

Figure 28: &TV financial estimates in our Zee model, FY16E-19E (Rs mn)

FY2016E # FY2017E # FY2018E # FY2019E #

&TV market share (%) 6% 7.5% 6% 7.5% 9% 6% 7.5% 9% 7.5% 9%

Hindi enter tainment segment (Rs bn) 60 60 70 70 70 82 82 82 87 87

Adjustment factor (%) * 75 85 75 85 90 75 85 90 85 90

&TV ad revenue 2,714 3,844 3,145 4,456 5,662 3,706 5,251 6,672 5,569 7,076

&TV subs revenue - - - - - - - 385 385 1,099

&TV revenue 2,714 3,844 3,145 4,456 5,662 3,706 5,251 7,057 5,954 8,175

&TV fiction content cos t (2,009) (2,009) (2,218) (2,218) (2,218) (2,915) (2,915) (2,915) (3,207) (3,207)

&TV non-f iction/films cos t (2,184) (2,184) (2,293) (2,293) (2,293) (2,408) (2,408) (2,408) (2,528) (2,528)

&TV marketing cost (750) (750) (750) (750) (750) (600) (600) (600) (600) (600)

&TV distribution cost (500) (500) (500) (500) (500) (400) (400) (400) (320) (320)

&TV other overheads (750) (750) (816) (816) (816) (925) (925) (925) (1,017) (1,017)

&TV opex (6,193) (6,193) (6,577) (6,577) (6,577) (7,248) (7,248) (7,248) (7,672) (7,672)

&TV EBITDA (3,480) (2,349) (3,432) (2,121) (915) (3,541) (1,997) (191) (1,718) 503

Source: Investec Securities estimates * for Tier-II channels in Hindi entertainment segment, # base case highlighted in grey


14/46

Page 14 | 20 May 2015

Zees LTL market share trend is where we differ from streetThe street expects sustained robust LTL market share gains by Zee Network,

essentially based on its strong performance in the recent past. Given the volatility

and changes in consumer preferences, we believe a one-way upward trend in Zees

LTL market share is highly unlikely. On the contrary, we see renewed content

investment by existing competitors and possible new entrants as potential risks. We

use the global standard Herfindahl-Hirschman Index to study the competitive

intensity across Indian C&S TV segments. Among the relevant segments for Zee,

Marathi and Bangla stand out as oligopolistic/concentrated markets, and where Zee

channels have dominant market positions. The potential for competition in the

Indian C&S TV market remains high given attractive growth opportunities (c.18%

CAGR ad growth over FY16E-18E). Rational competition will look for markets with

excess profits and disruption potential.

Figure 29: Herfindahl-Hirschman Index across Indian C&S TVsegments

Figure 30: Market share of key Marathi channels, FY11-15 (%)

FY2010 FY2011 FY2012 FY2013 FY2014

Hindi entertainment 1,681 1,738 1,686 1,613 1,638

Hindi mov ie channels 2,190 1,908 2,027 1,798 1,291

Bangla entertainment 2,497 2,505 2,454 2,608 2,710

Marathi entertainmen 2,497 2,325 2,243 2,509 2,484

Tamil entertainment 3,448 3,695 3,586 3,169 3,100

Telugu enter tainment 2,057 2,246 2,047 1,958 1,860

Kannada entertainment 2,034 2,042 2,121 2,099 2,078

Malayalam entertain 2,700 2,653 2,737 2,479 2,438

36

27 26

3643

1825

35

2618

2227

2319 17

-

10

20

30

40

FY2011 FY2012 FY2013 FY2014 FY2015

Zee Marathi (%) Star Pravah (%) ETV Marathi (%)

Source: TAM, Investec Securities estimates Source: TAM, Investec Securities research

The other overhang on Zees LTL market share is the breakup of MediaPro, Zeeschannel distribution JV with Star (#1 C&S TV broadcaster in India). We believe the

impact of MediaPro on the subscription revenues of Star and Zee is well

understood, the impact on network market share is less appreciated. We discuss

the ongoing cable digitization in India later, but note that the grand digital transition

resulted in a large number of public disputes between C&S TV broadcasters and

distributors (Cable, DTH). The strength of MediaPro (combined distribution of #1

and #2 broadcasters channels in India) helped Star and Zee navigate this transition

smoothly. In comparison, Sony Network had the largest number of disruptions, and

considerable loss in market share. A coincidence? We think not. At any rate, the

breakup of MediaPro led by regulatory action has levelled the playing field, and

Zees public disputes with distributors have increased.

Figure 31: Disputes between major MSOs and aggregators

Pre-MediaPro (FY2014) Post-MediaPro (FY2015)

Distributor Aggregator Time period Distributor Aggregator Time period

Hathw ay-GTPL Indiacast-Viacom18 April-13 Hathway Taj TV/Zee September-14

Airtel Digital TV Star Sports May-13 Fastway Taj TV/Zee January-15

Hathw ay-GTPL Sony Discovery August-13 DigiCable Taj TV/Zee January-15

GTPL Star Sports November-13

SitiCable Star Sports November-13

DEN Netw ork Sony Discovery November-13

Hathw ay Sony Discovery November-13

DigiCable MediaPro December-13

Dish TV Indiacast-Viacom18 December-13

InCable Sony Discovery February-14

Hathw ay Star Sports March-14

Source: Industry data, Investec Securities research


15/46

Page 15 | 20 May 2015

Sun: Market share losses drive weak ad growthThe regional C&S TV market in India developed alongside the national/Hindi

broadcasting market; Zee and Sun were the first broadcasters in Hindi and regional

languages, respectively. However, competition in the form of Star and Sony

emerged earlier in the Hindi C&S TV market. Sun had a clear run consolidating its

first mover advantage in the South regional C&S TV markets. However, the

competitive reality started to catch up with Sun TV in the form of national (Zee) and

local competition (Asianet in Malayalam, Maa TV in Telugu; both lately acquired by

Star network). We model an improving but below industry average c.10% CAGR in

Suns overall ad revenues for FY16E-18E driven by (1) a strong c.18% CAGR in

Indian C&S TV ad revenues but for (2) a c.350bps loss in Suns network market

share during this period. Nonetheless, we also highlight that Sun has managed to

maintain its leadership position in the South regional C&S TV market despite

operational (competition) and other concernsthat counts for something!

Figure 32: Sun network share and ad growth, FY13-18E (%) Figure 33: Market share of key Telugu channels, FY11-15 (%)

2826 24

23 22 21

8

0

57

11 13

-

10

20

30

40


Sun market share (%) Sun ad growth (%)

35 3330

2521

16 1720 21 23

15 15 16 1621

-

10

20

30

40

FY2011 FY2012 FY2013 FY2014 FY2015

Sun Gemini TV (%) Star Maa TV (%) Zee Telugu (%)

Source: Investec Securities estimates / Company accounts Source: TAM, Investec Securities research

FY15 proved a wake-up call for Sun, when its flagship Telugu entertainmentchannel Gemini TV lost its #1 position to Maa TV from a dominant position only as

far back as FY11. Emerging competition, such as Maa TV as well as Zee Telugu,

unsettled Sun and wowed audiences with differentiated fiction as well as non-fiction

content. Sun TV responded with a shake-up of Gemini TV channel management as

well as revamped content. As a result, it has already seen a moderation in the loss

of network market share in the past few quarters. Renewed focus on content, a

large legacy film library (built up over the last 20 years) and traditional distribution

strength (wide reach) lead us to believe the worst of Suns network market share

losses may be over (soon). Relative stability in market share may drive upgrades to

our and consensus estimates of ad growth and earnings (although we are not

counting on it for our investment case).

Figure 34: Sun network market share, 3QFY14-4QFY15 (%)

26.0 25.3 24.9 24.5 24.5 24.0

-

10.0

20.0

30.0

3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15

Source: TAM, Investec Securities research


16/46

Page 16 | 20 May 2015

Few market-specific trends may be supportive for SunSun TV has a more concentrated presence in a few markets whereas Zee is a

national broadcaster with a diversified presence across C&S TV markets in India.

The market-specific risk is higher for Sun. Local market-specific issues in Suns two

key markets, Tamil and Telugu, have impacted consumer and business sentiment.

Local businesses constitute a healthy c.30% share of advertising in South C&S TV

ad revenues. However, the overhangs have been cleared lately and may further

support Suns ad growth. We discuss below.

Tamil Nadu, one of the most industrialized states in India, witnessed severe

power shortages (4-14 hours across the state) over FY13-14. The state

government was forced to raise tariffs to fund new power projects and external

power purchases, which alleviated the situation somewhat in FY15. This may

drive improved business sentiment in the state.

Andhra Pradesh had witnessed a movement for the creation of a separate state

Telangana. The movement gained momentum over FY13-14, with continued

protests and agitations by people both supporting and opposing the division of

Andhra Pradesh and creation of Telangana. The Central government finally

acceded to the creation of Telangana state in FY15, putting the issue to bed.

We expect consumer sentiment to improve as a result.

Figure 35: All-India and South market power deficit, FY12-15 (%)

8.5 8.7

4.2 3.7

8.8

15.5

6.8

4.3

-

5.0

10.0

15.0

20.0

FY2012 FY2013 FY2014 FY2015

All-India (%) South region (%)

Source: Central Electricity Authority, Investec Securities research


17/46

Page 17 | 20 May 2015

Subscription: Riding on the digital transitionThe C&S TV distribution market in India has historically been dominated by Cable.

In an unregulated environment, the Indian Cable distribution segment developed

into an unorganized, fragmented industry structure with multiple stakeholders

(LMOs, distributors, MSOs). The unorganized structure and analog nature of theIndian Cable market resulted in a skewed ecosystem. LMOs, with a local monopoly

over their locality/areas of operation, controlled the key last-mile functions (access,

billing, functions). The analog state of the Indian Cable market implied a lack of

addressability (transparency and control) for the organized players (MSOs,

broadcasters), with LMOs under-declaring their actual subs base and capturing

disproportionate value in the chain (c.75% of all-India consumer ARPU of

c.Rs175/month). The entry of organized DTH distribution only moderately changed

the ground situation, with LMOs passing on their tax/cost advantage to consumers

in the form of low ARPUs (and maintaining their dominant position).

Figure 36: Expected revenue share in analog and DAS (digital, addressable) cable (Rs/month)

Analog Share (%) DAS Share (%)

Consumer ARPU 175 100 250 100Declaration (%) 15 100

Service tax (@ 12.36%) 3 31

E-tax (@ 8%) 2 20

Government revenue (net) 5 3 51 20

LCO revenue (gross) 170 199

LCO share (net, % of ARPU net off Tax) 78 45

LMO revenue (net) 132 76 90 36

MSO revenue (subscription from LMO) 37 110

MSO revenue (carriage from broadcaster) 45 36

MSO share (net, % of subs + carriage) 25 45

MSO revenue (net) 21 12 65 26

Broadcaster revenue (subscription from MSO) 62 80

Broadcaster payment (carriage to MSO) (45) (36)

Broadcaster revenue (net) 17 10 44 18


With LMOs declaring only 15-20% of their actual subscriber base in Analog Cable,

the organized C&S TV market (MSOs, broadcasters) suffered from below-par

monetization (c.20% share of all-India consumer ARPU); this compares with a 30-

35% share of consumer ARPU for broadcasters alone in developed markets. The

Government of India was also losing the majority of its tax revenues due to under-

declaration of subscribers. Concerned by the tax evasion, the government enforced

mandatory DAS (Digital, Addressable System) on the Cable ecosystem in India.

DAS would make under-reporting of the subs base near impossible with STBs (set-

top-boxes) and encrypted signals in subscriber homes, controlled by organized

MSOs. The resulting subs transparency would drive (1) more equitable revenue

sharing across Indian C&S TV stakeholders and (2) higher ARPUs. The

government proposed to drive DAS in 4 phases (metros, Tier-I/II cities, rest of urban

areas and finally, rural areas), as highlighted in Figure 37.

Figure 37: DAS phases (as proposed by the government) and implementation (as estimated)

Government deadline Estimated

Subs (m n) Initial Re vis ion 1 Re vis ion 2 im ple me ntation

Phase-I

(4 metro cities)

Phase-II

(38 cities >1mn population)

Phase-III

(all remaining urban areas)

Phase-IV

(all remaining areas - rural)

12

19

32

66

Mar-12

Mar-13

Sep-14

Dec-14

Oct-12

Mar-13

Dec-14

Dec-14

Dec-15

Dec-16

Dec-12 (delay of 2 months)

Sep-13 (delay of 6 months)

Jun-16 (delay of 6 months)

Mar-20 (delay of 3+ y ears)

Source: MIB, Investec Securities estimates


18/46

Page 18 | 20 May 2015

How did Phase-I/II DAS play out for broadcasters? Very wellPhase-I/II of DAS, covering the lucrative metro and Tier I/II urban markets of India,

has already been completed effective Dec-2012 and Sep-2013 respectively. The

modest delays were largely due to logistical challenges, notably in Phase-II DAS.

Phase-I/II DAS saw c.31mn C&S TV subs (as of FY13) converting to digital (either

Digital Cable or DTH, the latter being a voluntary digital platform). As expected,

large pay/C&S TV broadcasters in India were major beneficiaries of the digital

transition (Figure 38). We highlight that Zee upfronted some of the gains led by its

MediaPro JV with Star in FY12. Nonetheless, Zee reported cumulative 77% growth

in domestic subs revenues over FY12-15E, ahead of 68% growth in paying subs

(Digital Cable, DTH, 20% of Analog Cable subs); the growth was primarily led by

volume. Sun lagged initially, due to a number of specific factors we discuss later in

this report, but can be seen catching up in FY14-15E.

Figure 38: Zee and Sun subs revenue growth, FY11-15E (%) Figure 39: India pay-TV subs by technology, FY10-15E (mn)

19

29 26

139

49

(2)1

26

16

(10)

10

30

50

FY2011 FY2012 FY2013 FY2014 FY2015E

Zee subs growth (%) Sun subs growth (%)

13 2229 33 37

415

22 228888

8886

70 72

-

50

100

150

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E

DTH DAS Analog Cable

Source: Investec Securities estimates / Company accounts Source: Investec Securities estimates

Unlike Cable MSOs, broadcasters did not have to make any significant capital

investments to capitalize on the digitization opportunity. Nonetheless, there weresome implicit discounts on wholesale channel/bouquet rates. This was a form of

subsidy/investment sharing between the Cable MSOs and broadcasters to drive the

digital transition forward. Additionally, broadcasters benefitted from unlocking of

capacity constraints in the transition from analog to digital. Analog Cable has a

theoretical maximum capacity of 106 channels (real-world 70-80 channels),

compared with >600 C&S TV channels active in India currently. The large demand-

supply mismatch resulted in sharp growth in carriage and placement fees (C&P)

historically, paid by broadcasters to distribution companies. Digital Cable has

theoretical capacity of >1,000 channels (currently 400-500 channels). The carriage

charges of broadcasters reduced post Phase-I/II DAS, but large broadcasters (Zee,

Sun) pay nominal C&P fee and thus, gains are modest.

Figure 40: All-India carriage fees for channels, FY11-15 (Rs mn)

586 607

363277 287

731783

434365 377

-

250

500

750

1,000

FY2011 FY2012 FY2013 FY2014 FY2015

Existing channels New channels



19/46

Page 19 | 20 May 2015

However, sub-par distributor returns in Phase-I/II DASThe Indian C&S TV broadcasters have (cumulatively) achieved the gross

subscription ARPU target of c.Rs80/sub/month in DAS. However, Cable MSOs

gross subscription ARPU target (from LMOs) has lagged in most Phase-I/II DAS

markets (Figure 41; expectation of c.Rs110/sub/month). Lower-than-expected

revenues yet an elevated cost structure imply that Cable MSOs returns have been

hit, despite large DAS investments (back-end; STBs at consumer-end). LMOs,

although unorganized, were the key drivers behind the spread of C&S TV (and

Cable dominance) in India, and continue to fight for their rights. LMOs maintain their

hold over key last-mile functions (billing, collections), and continue to derive a >50%

share of consumer ARPU. Our channel checks indicate that TRAI-mandated 35%

revenue share for LMOs is unviable, given it barely covers their operating costs.

Figure 41: MSO gross subscription ARPU across various Phase-I/IIDAS markets (Rs/sub/month)

Figure 42: Sensitivity analysis on MSO returns (%)

110100 95

85

65

-

50

100

150

Delhi Mumbai Kolkata Bangalore Other Phase-II

MSO operating costs (per-sub) Comments

Gross content cost (Rs/month) 80

Carriage income (Rs/month) (45) From broadcas ters

Net content cost (Rs/month) 35Fixed overheads (Rs/month) 30

DAS variable cost (Rs/month) 10

MSO operating cos t (Rs /m onth) 75

Sensitivity analysis Actual Expected

Net subscriber ARPU 199 Net off tax

MSO revenue share (%) 45 50 55

MSO subscriber revenue 90 100 110

MSO operating cost 75 75 75

M SO ope rating pr ofit (Rs /m onth) 14 24 34

M SO ope rating pr ofit (Rs /ye ar ) 173 293 412

Net STB investment 1,000 1,000 1,000

Fixed+WC investment 669 699 729

Total investment (Rs/sub) 1,669 1,699 1,729

Pre-tax CROCI (%) 10 17 24

Source: FICCI-KPMG 2015 report, Investec Securities research Source: FICCI-KPMG 2015 report, Investec Securities research

MSOs continue to push LMOs (through legal and operational means) for a higher

share in consumer ARPUs, but are also starting to push back against broadcasters.

So far, the disputes between C&S TV distributors and broadcasters have been

settled in favour of the latter. Given that the C&S TV broadcasting segment in India

is more concentrated than the distribution segment (Figure 42), the negotiating

power of broadcasters is significantly more than distributors. However, the C&S TV

distribution segment in India is also consolidating, led by DAS (smaller distributors

are finding it difficult to fund the large investments that DAS entails). Also, recent

TRAI regulations governing the conduct of broadcaster JVs (such as MediaPro)

have limited their clout. This has effectively increased the bargaining power of

distributors and provided an avenue to manage payouts to broadcasters.

Figure 43: Market share of top broadcasters, distributors in India (%)

6952

78

-

20

40

60

80

100

Top-5 broadcasters * Top-7 distributors # Top-7 distributors indigital #

Source: Investec Securities estimates * viewership share # subs share


20/46

Page 20 | 20 May 2015

How are broadcasters likely to fare in Phase-III? Quite wellPhase-III DAS, covering the remaining urban markets of India, has been delayed by

12 months as the government recently shifted the deadline from Dec-14 to Dec-15.

Given the logistical challenges seen in Phase-II DAS, we model a further 6 month

delay in completion of Phase-III, beyond the official deadline. Our channel checks

indicate industry reluctance to implement Phase-IV DAS (rural markets) given the

large investment required and limited ARPU potential. Thus, we model Phase-IV

DAS implementation only by FY20E. Nonetheless, Phase-III DAS provides a further

lucrative revenue opportunity for C&S TV broadcasters with c.32mn C&S TV (pay-

TV) homes, equal to Phase-I and II combined. C&S TV broadcasters would be

automatic beneficiaries of complete declaration of the subs base in the shift from

analog to digital (volume gains). We model a 15% CAGR in paying subs (DTH, DAS

and 15% of Analog Cable) for Indian C&S TV over FY16E-18E.

Figure 44: India pay-TV subs by technology, FY13-18E (mn) Figure 45: India effective pay-TV subscriber growth, FY13-18E (%)

33 37 4147 55

61522 22

28

4244

86

70 7266

5048

-

50

100

150


DTH DAS Analog Cable

18

23

6

15

23

7

-

10

20

30


Source: Investec Securities estimates Source: Investec Securities estimates

Consumer ARPUs will certainly witness like-to-like inflation in DAS but (1) a

significant share will be to satisfy the incremental tax demands of the governmentand (2) the rest should accrue to MSOs (improvement in current abysmal returns

from DAS investments). Contrary to consensus estimates, we do not expect any

material ARPU growth for C&S TV broadcasters; in fact, a stable ARPU would be

an achievement given the inclusion of large mass audience (Phase-III DAS) into the

paying subs mix. Figure 46 shows the choice of packages across Cable MSOs and

DTH. The Phase-I/II DAS subs mix was skewed towards mid-level packages, with

robust uptake of premium packages; the Phase-III DAS subs mix is likely to be

skewed towards basic packages but with reasonable uptake of mid-level packages

(demand for infotainment and sports channels). The pressure on C&S broadcaster

ARPUs from the above is likely to be negated by improved uptake of VAS (HD

services; low 3% penetration currently but rising) in Phase-I/II DAS markets.

Figure 46: DTH and Cable MSO packages and pricing (Rs/sub/month)TataSky DTH Hathway Cable

Type Package Price Package Price

Premium Mega HD pack 625 Premium HD 569

Mega pack 525 Premium Plus 419

Grand Sports 470

Mid-Level Metro pack 380 Premium pack 349

Supreme Sports 340 Popular pack 289

Basic Dhamaal Cricket 275 Starter pack 230

Dhamaal Mix 240



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Sun: Catch-up subscription growth led by Phase-III DASThe South Indian C&S TV market is a large one with c.47mn subs/homes, out of a

total c.129mn pay-TV homes in India (FY14 data). Despite the large size of the

opportunity, and Suns superior per-subs realization led by strong share in the key

markets where it operates, Suns subs revenues are substantially under-indexed.

Zees core Hindi broadcasting segment may be larger in size but is also more

fragmented with Star, Colors and Sony competing for a share of the pie. Zee

certainly benefitted from its MediaPro distribution JV, till early-FY15. However, Sun

also faced two key roadblocks in its efforts to translate its strong position into subs

revenues: (1) Sun Direct, Suns sister DTH concern, faced a major operational glitch

in FY11, moderating its subs growth momentum in FY12-13. (2) More importantly,

the share of South India in Phase-I/II DAS was much below the all-India average,

reflected in the gap between pay-TV penetration of Sun versus Zee.

Figure 47: Sun and Zee network market share, FY11-15E (%) Figure 48: Sun and Zee Pay-TV penetration, FY14 (%)

31 30 28 26 24

17 16 17 1819

-

10

20

30

FY2011 FY2012 FY2013 FY2014 FY2015E

Sun network (%) Zee network (%)

Sun Zee

Gross subs

Domestic subs revenue (Rs mn) 6,479 12,417

Per-sub ARPU (Rs/month) 26 20

Pay-TV subs base (mn) 21 52

Potential subs base (mn) 48 81

Pay-TV subs penetration (%) 43 64

Net subs

Carriage/service fee (Rs mn) (336) (1,670)

Net subs revenue (Rs mn) 6,143 10,747

Per-sub ARPU (Rs/month) 26 20

Pay-TV subs base (mn) 20 45

Potential subs base (mn) 48 81

Pay-TV subs penetration (%) 41 55

Source: TAM, Investec Securities estimates Source: Investec Securities estimates / Company accounts

Suns relatively modest c.14% CAGR in subs revenues over FY13-15E reflects the

limited benefits accruing from Phase-I/II DAS, as South Indias share in C&S TV

subs shifting from analog to digital at c.23% was below c.36% at the all-India level

(including Phase-III/IV markets). From the low base in FY15E, we model a strong

c.20% CAGR in Suns subs revenues for FY16E-18E led by (1) leadership position

in three out of four South Indian markets; (2) a larger contribution of South India in

Phase-III DAS; and (3) catch-up revenues from a few markets in Phase-I/II DAS

(Chennai, Hyderabad), which are pending conversion from analog to digital. Suns

9MFY15 subs growth significantly outperformed Zee, led by voluntary digitization

(DTH); DTH platforms have capitalized on consumer demand for digital TV (more

channels) in South India.

Figure 49: Pay/C&S TV homes across DAS markets, FY14 (mn) Figure 50: Sun domestic subs revenue growth, FY13-18E (%)

All-India South India Rest of India

Phase-I - completed 10 - 10

Phase-II - completed 18 4 14

Phase-I/II - completed 28 4 24

Phase-I/II - pending (a) 3 3 -

Phase-I/II - total 31 7 24

Phase-III 32 14 18

Phase-IV 66 27 39

Total C&S TV homes 129 48 81

Notes:

(a) Chennai and Greater Hyderabad.

1

26

16

12

27

21

-

10

20

30


Source: Industry data, Investec Securities estimates Source: Investec Securities estimates


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Arasu Cable potential overhang on Suns subscription gainsFigure 51 presents the breakup of Suns subs revenues across DTH and Cable over

FY10-15E. Suns DTH subs revenues have shown consistent growth throughout,

despite the operational concerns at Sun Direct, as discussed previously. However,

Suns Cable revenues, already a minority share of Suns subs revenues, witnessed

a sharp decline over FY12-13. Sun promoters have well-known links with DMK, a

political party in the state of Tamil Nadu. The loss of DMK in the state assembly

elections in 2011 brought the opposition AIADMK to power. AIADMK launched

Arasu Cable as the government-owned Cable MSO, which services c.7mn out of

total c.15mn subs in the state. Arasu initially switched off Sun TV channels, and

although the dispute was resolved, Sun had to give discounts to Arasu to carry its

channels on the network; Suns cable subs revenue from Tamil Nadu declined to

c.Rs300mn/annum from c.Rs1.2bn/annum previously.

Figure 51: Sun domestic subs revenue breakup, FY10-15E (Rs bn)

1.83.1 3.4 3.7

4.55.21.6

2.1 1.6 1.4

2.0

2.3

-

2.0

4.0

6.0

8.0

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E

DTH subs revenue (Rs bn) Cable subs revenue (Rs bn)

Source: Investec Securities estimates / Company accounts

Later, Arasu Cable was refused a DAS licence as TRAI regulations barred a

government-owned entity from operating as a Digital Cable MSO. The shift fromanalog to digital in Chennai is stuck, pending the legal dispute between Arasu Cable

and MIB/TRAI (currently in front of the Chennai High Court). We find it difficult to

believe that even as the rest of Indian C&S TV will convert to Digital TV (DTH,

Digital Cable) from Analog Cable, Tamil Nadu will remain an exception. Therefore,

DAS is inevitable. Nonetheless, we see two potential sources of risk on account of

Arasu: (1) visibility on the timeline of a resolution to the aforementioned dispute is

low, and thus digitization in Tamil Nadu may be delayed (beyond our expected

Phase-III timelines). (2) Suns per-sub ARPU may be below estimates if Arasu is

allowed a DAS licence, given its strong position in TN and natural opposition to Sun.

The former is a reasonable probability but low impact risk; the latter is a potential

high impact risk given that TN is Suns largest market.

Zee: Over-indexed subs revenues and modest South presenceZee delivered its best-ever domestic subs growth in FY12, the year it formed its

MediaPro distribution JV with Star India. The coming together of the #1 and #2

broadcasters in India was a leg-up for Zee, which derived significant benefits from

the JV: (1) improved transparency and understanding of the Indian Cable landscape

(complex at the time due to Analog Cable); (2) improved negotiating power versus

even large C&S distributors; and (3) the ability to push a maximum number of

Zee/Star channels on the distributor network (70-80 channel capacity on Analog

Cable in the real world). Digitization will drive improved channel capacity as well as

transparency in the Indian Cable system; however, the loss of negotiating power

given the breakup of MediaPro JV was keenly felt. Star did not feel the impact as

strongly given its acquisition of ESPN in India, which gives it the enviable #1

position in entertainment as well as #1 in sports broadcasting in India.


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Figure 52: Leading channels and networks across Indian C&S TV segments

Network Channel

Segment Leader Runners-up Leader Runners-up

Hindi entertainm ent Star netw ork Zee netw ork Star Plus Colors

Hindi movie Zee network Star network Sony MAX Zee Cinema

Bangla entertainment Star netw o rk Zee netw o rk Star Jals ha Zee BanglaMarathi enter tainment Zee netw ork TV18 netw ork Zee Marathi Colors Marathi

Tamil entertainment Sun netw ork Star netw ork Sun TV Star V ijay TV

Telugu enter tainment Sun netw ork Star netw ork Sun Gemini TV Star Maa TV

Kannada entertainment Sun netw ork TV18 netw ork Sun Udaya TV Colors Kannada

Malayalam entertainment Star netw ork Sun netw ork Star Asianet Sun Surya TV

All-India sports Star netw ork Sony netw ork Star Sports Sony Six

Source: TAM, Investec Securities estimates

Zee delivered a strong 20% CAGR in domestic subs revenues over FY13-14, led by

MediaPro JVs strong negotiating position as well as the contribution from complete

subs declaration in Phase-I/II DAS markets. Phase-I/II DAS had >75% contribution

from HSM (Hindi speaking markets), where Zee is strong. Zees subs growthmoderated to sub-10% levels in 9MFY15, with the MediaPro JV also dissolved

effective 1QFY15. From the yet high base in FY15E, we model a moderate c.14%

CAGR in Zees subs revenues over FY16E-18E led by its leading position in HSM,

partially negated by a relatively modest contribution of HSM to Phase-III DAS C&S

TV subs. Zees improved market share led by launch of &TV may not contribute

much to subs revenues in FY16E-17E with a 5-7% market share; however, we

model a 2%/5% incremental contribution in FY18E/19E with a 9% market share.

Stars second Hindi GEC, LifeOK, with c.12% market share contributes to subs

revenues but the carriage fee is also high, as per our channel checks.

Figure 53: Zee domestic subs revenue growth, FY13-18E (%)

26

13

9 9

19

14

-

10

20

30




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Content, competition and marginsMarket share, ad growth do not always equal valueZees film channel business unit provides a great example of how market share

and/or advertising growth alone is not the best proxy for value creation. The marketshare of Zee Cinema, Zees flagship film channel, had been under pressure over

the last yearsthe primary driver was competitor Stars aggression in the segment

including (1) revamping flagship film channel Star Gold and (2) launching ancillary

film channel Movies OK, supported by (3) long-term output deals with popular film

stars in India for satellite rights of their films. Zee responded by launching &pictures,

its ancillary film channel focused on contemporary films and an urban audience, in

FY14. &pictures delivered an 8-ppt market share gain in the first full year of

operation (FY15), and together with Zee Cinema helped drive market share gains in

Zees film channel franchise over FY14-15. Correspondingly, Zees film channels

delivered industry-leading advertising growth.

However, market share gains and strong advertising growth were largely negated

by extraordinary film rights inflation during this period. Film rights inflation during this

period partially reflected (1) recovery from very low pricing levels in FY10-11 but

more importantly, (2) structural change in competition for film content. The sharp

inflation in satellite rights (c.150% over FY11-14) negated any significant value

creation from &pictures; Zees film investment increased structurally to support

multiple channels across the network (including Zee TV, flagship entertainment

channel). This is not a critique of Zees expansion strategythe &pictures launch

helped contain potential value destruction through improved utilization of Zees

legacy film library, market share gains and increased ad inventory. It does show

growth is not the sole criteria of value creation.

Figure 54: Zee Cinema and &pictures market share, FY11-15 (%) Figure 55: Popular film rights prices across Indian C&S TVsegments, FY11-14 (Rs mn)

25 25 2319 18

2326

-

10

20

30

FY2011 FY2012 FY2013 FY2014 FY2015

Zee Cinema (%) Zee Cinema + &pictures (%)

Language FY2011 FY2014

Hindi 150-250 400-600

South dubbed NA 50-70

Tamil NA 110-150

Telugu NA 60-80

Kannada NA 30-50

Source: TAM, Investec Securities estimates Source: TAM, Investec Securities estimates

Structural changes in competition and long-term content cost inflation/investment

are equally critical to potential value creation for C&S broadcasters. Market share

gains and advertising growth led purely by rising content investment (regardless of

the performance and/or sustainability of investments) may not be value-accretive. In

this respect, subscription growth is a better proxy for value creation given (1) its

correlation to market share as well as market position in the long run (overall

performance of the broadcaster, which does not change materially yoy) and (2) a

more stable revenue stream. Suns subscription growth (catch-up revenues in

Phase-III DAS) led by its dominance in South regional broadcasting markets implies

greater value creation (or realization) in the medium term. In the example above,

the dependence of C&S broadcasters on film studios (ownership of film rights)

resulted in bidding wars for film content; as highlighted previously, IPR ownership of

content is also a key value driver for broadcasters.


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Large broadcasters well-placed to manage content dynamicsThe Indian C&S broadcasters under our coverage (Zee, Sun) have a large number

of channels (>30 each) and a comprehensive discussion on content across

channels is challenging. We focus on Entertainment + Movie channels (Hindi +

regional), given their dominant share in Indian C&S broadcasting and our coverage

broadcasters. All forms of content, given the highly creative nature of the industry

and led by viewers changing tastes and preferences, have low hit:flop ratios

(typically 20:80). Correspondingly, the financial returns from content can vary from

negative to extraordinary (Figure 56). Broadcasters, given that they are aggregators

of content into a platform (channel), are well placed to manage the volatility in

performance; a Hindi Entertainment channel typically has >10 programs in any

week. Large broadcasters, given their diversity of channels and IPR ownership of

content, are even better placed to manage the dynamics. Across Hindi networks,

fiction dominates with a c.65% share followed by films (c.25%) and non-fiction

(c.10%). We discuss the key trends in content below.

Figure 56: Volatility in financial returns from fiction content (%) Figure 57: Hindi Entertainment + Movie channels content share (%)

Fiction content Hit Flop

Cos t of produc tion (Rs mn/episode) 1.0 1.0

View ership (mn view ers) 10 1

Ad rates (Rs/mn view ers ) 18,000 15,000

Ad rates (Rs/10 s ec s lot) 180,000 15,000

Ad inventory (mins) 6.0 6.0

Ad volumes (10 sec s lots) 36 36

Adver tising income (Rs mn) 6.5 0.5

Advertising EBITDA (Rs mn) 5.5 (0.5)

Advertising return (%) 548 (46)

Fiction, 65

Non-

Fiction, 10

Films, 25

Source: Industry data, Investec Securities estimates Source: Industry data, Investec Securities estimates

Catering to the core female audience of Entertainment channels, fiction content

(notably dramas) drives appointment viewing during weekdays, valued by

advertisers for its reliability. Along with IPR ownership by broadcasters, which

helps control costs (Figure 58), fiction content is the key profitability driver of

broadcasters, with likely 5-10% fiction cost inflation ahead.

Balancing the female skew of Entertainment channels is non-fiction content,

viewed by family audience during weekends. The high cost of non-fiction

implies a limited share in program mix, but high impact is valued by advertisers

and drives modest profitability for broadcasters. Broadcasters manage with a

mix of 3-4 big format shows per annum and mix of low-cost shows.

Over the last few years, broadcasters have increasingly focused on the under-

served male audience on Entertainment channels. A key trend is the

emergence of finite fiction/non-fiction series with focused script and high

production values, similar to films (male audience skew). However, success has

been limited. Broadcasters will continue to experiment, but there is scope for

both improved performance and productivity in finite series/non-fiction content.

Film content serves multiple purposes in a network: (1) used across

Entertainment and Movie channels; (2) high shelf life; (3) cross-marketing of

new fiction/non-fiction programs on the network; and (4) drive new (family)

audience to the network. Correspondingly, the cost is astronomical, also given

the IPR ownership with film studios. However, post sharp inflation during FY10-

14, film prices started correcting in 2HFY15, and will provide key support to

broadcaster margins from FY16E.


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Figure 58: Operating metrics across content formats igure 59: Indicative list of Hindi finite TV series, CY14

Format Fiction Non-fiction Films #

Time/episode (mins) 30 60-90 100-150

Cost/episode (Rs mn) 0.7-1.5 5-30 100-600

Frequency (per annum) # 8-10 8-10 15-20

Telecast Weekdays Weekends WeekendsAudienc e skew Female Family Male

Shelf Life Moderate Low High

Dubbing potential Moderate Moderate High

Broadcaster IPR Yes Partial No

Expected inf lation (%) 5-10% NA (10-15)%

TV Se rie s Channe l Epis ode s (#) Cos t (Rs mn/e pis ode )

Yudh Sony TV 20 Rs30mn/60mins

24 (India version) Colors 24 Rs20mn/60mins

Mahabharat Star Plus 200 Rs8mn/30minsEverest Star Plus 100 NA

Maharashak Zee TV 26 NA

Airlines Star Plus 26 Rs2.4mn/60mins

Ajeeb Dastan Life OK 108 NA

Pukaar Life OK 24 Rs1.3mn/30mins

Source: Industry data, Investec Securities estimates Source: Industry data, Investec Securities estimates

Figure 60: Top TV series and viewership on Hindi channels across formats, CY14

Fiction Non-fiction Films

TV series Channel Viewers (mn) TV series Channel Viewers (mn) TV series Channel Viewers (mn)

Diya Aur Bati Hum Star Plus 10.7 Comedy Nights w ith Kapil Colors 7.1 R Rajkumar Colors 11.5

Jodha Akbar Zee TV 8.7 India's Got Talent 5 Colors 6.8 Krish 3 Sony TV 10.7

Ye Hai Mohabbatein Star Plus 8.5 Fear Factor India Colors 6.1 Ramleela Sony TV 9.0Sathiya Saath Nibhana Star Plus 8.4 DID Little Masters 3 Zee TV 5.0 Main Tera Hero Zee TV 8.7

Yeh Rishta Star Plus 7.4 Big Boss 8 Colors 4.8 Dhoom 3 Sony TV 8.2

Mahabharat Star Plus 7.1 Jhalak Dikhla Ja Colors 4.5 Jai Ho Star Plus 7.8

Tarak Mehta Sab TV 6.9 Dance India Dance 4 Zee TV 4.1 Singh Saab The Great Colors 7.7

Kumkum Bhagya Zee TV 6.3 Kaun Banega Crorepati Sony TV 3.5 Ramaiya Vastavaiya Zee TV 5.9

Sasural Simar Ka Colors 5.5 Nach Baliye 6 Star Plus 1.5 Gunday Sony TV 5.8

Sapne Suhane Zee TV 4.4 Mad in India Star Plus 1.3 Mary Kom Colors 5.1


Regional markets differ only marginally on contentRegional markets being relatively smaller in size (Tamil, the largest regional market

in India, is around one-fourth the size of Hindi/national market), the cost of content

is also commensurately lower; fiction content in regional markets has budgets ofc. Rs0.1-0.2mn/30mins episode. Otherwise, the content dynamics are similar to the

Hindi market; fiction dominates followed by films and non-fiction. However, the

South Indian regional audience have greater affinity towards films, reflected in a

higher viewership share (c.30%); the number of Movie channels is lower, but films

form the core programming line-up of Entertainment channels. Regional market film

prices havent corrected, but inflation has moderated to 5-10% from 20-30% over

the last few years. A unique feature of regional content markets is dubbed content,

where high-production-value Hindi/national programs are dubbed in the regional

language. The success of such efforts so far (notably Balika Vadhu/Colors), also in

cost optimization, implies the trend is likely to continue.

Figure 61: South regional Entertainment + Movie channels content (%)

Fiction, 60Non-

Fiction, 10

Films, 30



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Competition limited to existing players, but this can changeOur analysis of trends in network shares of the top 5 Indian broadcasters indicates

a consolidated market. The top broadcasters together have held around 65-70%

market share over the last few years. The trends across broadcasters are

somewhat random, led by strong intra-segment competition: (1) Star and Zee have

been structural gainers over the last few years, in no small part due to MediaPro

(their channel distribution JV), (2) Sony and TV18 have exhibited mixed

performanceSonys flagship namesake Hindi Entertainment channel has taken a

knock, offset by the strong performance of ancillary channel SAB TV and Hindi

Movies channel MAX; TV18 needs to work on improving the performance of its

acquired ETV regional channels. (3) Sun has consistently lost market share with

rising competition in South India regional broadcasting. Figure 62 shows the

consolidation among broadcasters in the last few years.

Figure 62: M&A-led consolidation in Indian C&S TV market

Aquirer Target Year Key market/segment

Star India Asianet 2008 Malayalam, Kannada

Turner Asia Imagine TV 2009 Hindi Entertainment

Zee Entertainment Ten Sports 2010 SportsZee Entertainment 9X 2010 Hindi Entertainment

Disney UTV Softw are 2011 Hindi Movies, Youth

Star India ESPN-Star Sports 2012 Sports

TV18 ETV - 50% stake 2013 Marathi, Bengali, Kannada

Viacom ETV - 50% stake 2015 Marathi, Bengali, Kannada

Star India Maa TV 2015 Telugu


We are not aware of any significant new entrants on the horizon for now, which

implies that the Indian C&S TV segment remains in consolidation mode, with

competition limited among existing players. However, we also note that the potential

for new entrants in the market remains. For starters, we note the high growth

potential in the market. As highlighted previously, we model the TV advertisingmarket to expand by an 18% CAGR over FY16E-18E (led by improved economic

momentum) and 14% over the next decade. We model Pay-TV subscription market

to expand by a 15% CAGR over FY16E-18E, led by Phase-III digitization.

Moreover, a creative industry with expansion in underlying market opportunity

provides avenues for new entrants with disruptive content, filling up whitespaces left

over by existing players. We have seen examples of this in the past (Colors/TV18,

launched in FY08, which built a successful franchise on the back of social content).

Figure 63: Indian C&S TV market advertising and subs revenuegrowth, FY13-18E (%)

14

20

12

9

21

16

7

10

13

16

18

20

-

10

20

30


C&S TV subs growth (%) C&S TV ad growth (%)



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[Investec] India C&S TV Broadcasting - SR2PIN_112750

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