Comprehensive Pack

Media and Entertainment

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• Televisions :3

• Radio : 19

• Newspapers : 29

• Films : 36

• Digital : 53

• Music : 66

• Future Outlook : 76
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 Televisions

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Industry structure and characteristics
• The television value chain comprises content providers, broadcasters, distributors and
subscribers.
• Content providers They supply content either on a commissioned or sponsored basis.
• As their importance is associated with content exclusivity and reputation, some of these
providers produce some/all content themselves.

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Industry structure and characteristics
Broadcasters
• Broadcasters uplink content supplied by providers to a satellite for broadcasting into TV
homes.
• There is intense competition amongst them as entry barriers are low and viewers have
plenty of options.
• Their share in the TV subscription revenue is about 15%, expected to increase once the full
benefits of digitisation kick in.

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Distributors
• The distributor links broadcasters with end consumers.
• There are around 5,000 MSOs and 60,000 local cable operators (LCOs) in the Indian
market.
• This is a highly fragmented and unorganised chain. LCOs tend to under-report subscribers
particularly in smaller towns, given the lack of addressable systems. MSOs, in turn,
control a number of LCOs and act as a link between the LCOs and broadcasters.
• DTH operators are also classified as distributors.

Subscribers
• There are over 160 million C&S subscribers in the country who pay charges of Rs 100-400
per month, depending on their location.

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Subscribers
• These subscribers often do not have a choice in terms of subscription, as LCOs enjoy
monopoly in their respective areas.
• However, this situation is gradually changing with an increasing acceptance of digital
viewing platforms (digital cable and DTH) and a shift to digital cable in large cities, with
the digitisation deadline mandated by the information and broadcasting ministry.

Key listed players in the categories are:

• Content providers - Balaji Telefilms Ltd, Endemol, Optimystix, Hats Off Productions,
Cinevistaas etc
• Broadcasters - Network 18 Ltd, New Delhi Television Ltd, Sahara One Media and
Entertainment Ltd, Sun TV Network Ltd, TV Today Network Ltd, Zee Entertainment
Enterprises Ltd and Zee Media Corporation Ltd
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Key listed players in the categories are:
• Multi-service operators (MSOs) - Den Networks, Hathway Cable & Datacom, Siticable
Ltd
• DTH operators - Dish TV India Ltd, Airtel Digital TV, Tata Sky, etc.

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Television value chain

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TV content
• Low entry barriers in general entertainment The television content business, especially
general entertainment programming, is characterised by the presence of a large number of
content houses and low entry barriers.
• Entry barriers are relatively higher in the case of niche content, where exclusivity and
intellectual property rights (IPRs) are involved (for example, sports).

Types of television content

• Commissioned programmes: The broadcaster commissions a TV content provider to
produce a programme in return for a telecast fee. In most cases, the broadcaster retains the
IPRs for the programme. It earns revenue by selling airtime to the advertiser. The content
producer typically works on a cost plus margin basis. Thus, the broadcaster bears the
financial risk, while the content producer bear the execution risk.
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Types of television content
• Sponsored programmes: The content producer buys a slot from the broadcaster for
telecasting a programme by paying a telecast fee. Along with the slot, the producer also
gets some free commercial airtime. Here, the content producer usually retains the IPR for
the programme. The excess/ deficit of revenue earned from selling commercial airtime to
advertisers over the telecast fee, production cost of the programme and any other related
cost represents the profit/loss to the producer. The content producer thus bears the financial
as well as the execution risk in this model.

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TV broadcasting
• Segmentation of broadcasting industry The Indian broadcasting industry can be segmented
into terrestrial and satellite:
• Terrestrial broadcasting: Here, broadcasting is done through transmitters and received
through antennas.
• The government-owned Prasar Bharti Corporation is the only terrestrial TV broadcaster in
India, which operates channels in Hindi, English and several regional languages under the
umbrella brand 'Doordarshan', free of cost.
• Satellite broadcasting: This refers to broadcast through a satellite transponder.
• Equipment required for reception of TV signals include dish antennae, amplifiers,
modulators and decoders.
• C&S channels can be further categorised into: general entertainment (GEC), regional,
movie,
12 news, sports, educational and spiritual.
TV broadcasting
• C&S channels are either free-to-air (FTA) or pay channels.
• Carriage fee payment an accepted practice Most cable TV networks in India, outside of
large cities, transmit channels in the analogue mode through a combination of fibre optic
and coaxial cables.
• Analogue television networks have limitations with respect to the number of channels that
can be carried given the bandwidth available - a maximum of 106 channels can be shown
on an 860 MHz bandwidth.

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Cable network capacity corresponding to bandwidth

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Cable network capacity corresponding to bandwidth
• Digitisation overcomes the bandwidth constraints of analogue networks and offers better
clarity.
• It makes it possible to offer a minimum of six digital channels in a bandwidth occupied by
a single analogue channel.
• Therefore, theoretically speaking, if all analogue channels were converted to digital, an
860 MHz cable network would be able to offer up anywhere from 700-1,100 digital
• channels!
• At present, there is intense competition among broadcasters to carry their channels on
preferred bands, and consequently get better visibility.
• Broadcasters pay a carriage fee to MSOs and cable operators to ensure that their channels
are carried.
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Cable network capacity corresponding to bandwidth
• A placement fee is also paid, to place a channel in an easy-to-catch frequency and
competing channels on hard-to-catch frequencies.
• Payment of a placement fee for cable distribution is akin to paying retailers for shelf space
for prominent display of consumer products.
• However, carriage and placement fees are expected to drop, once the benefits of large-
scale digitisation start to accrue.
• Such a trend is already visible in large cities, where our interactions indicate that carriage
and placement deals are being entered into at discounted rates.

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Programming genres streamed
• The content transmitted into Indian homes belongs to diverse genres. General
entertainment content catering to undifferentiated audiences such as Doordarshan, Star
Plus, Colors, Zee TV and Sony Entertainment Television in Hindi and Sun TV and Asianet
among regional languages attracts the maximum viewership.
• The remaining share of viewership is split across myriad content (ranging from general
news and business news to films, music, kids, education and spiritual) targeted at specific
audiences.
• News and movie channels enjoy higher viewership than other channels; however, niche
channels also draw viewership across specific socio-economic groups.

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Television broadcasting: genres and key players

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 Radio

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Batch 2 of FM Phase III gives a further fillip to radio space
• Radio is the most local and cost-effective means of media entertainment. Post Phase II of
FM radio privatisation, there are over 240 private FM radio stations, which, together with
the state broadcaster, reach majority of the Indian population.
• Growth in radio segment will be driven by increase in ad rates, break-even of newly
launched channels as well as higher inventory utilisation of existing channels.

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Radio to remain popular, cost-effective means of media entertainment
• Depending on several factors such as range, application and budget, modulation is divided
into three types: amplitude modulation (AM), frequency modulation (FM) and phase
modulation (PM).
• Of these three, the former two are widely known as they form a major commercially
applicative part of radio communication.
• Radio is the most local and one of the cheapest modes of media entertainment.
• In radio communication, the message signal wave (low frequency) is combined with a carrier signal
(high frequency).

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Main participants in radio value chain

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Main participants in radio value chain

Radio broadcasting: A brief timeline

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Radio advertising versus other media
Cost-effective medium
• Radio is a cost-effective advertising medium where the audience is considered to be more
focused compared to other mass media.
• Radio is also a useful means of communication with illiterate consumers.
• It can be an excellent complementary medium to television and print.
• Advertisers can make different advertising campaigns to suit different cities, different
times of day and different brand objectives.

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Low content costs compared to television
• Unlike television, radio does not require any original content to be commissioned and
broadcasted.
• Music is the most widely broadcast content on radio.
• To play music on their stations, radio stations pay a royalty to music companies or music
industry associations.
Different primetime slots compared to television
• Primetime for radio listenership differs from that for television viewing. People usually
listen to radio in the mornings, afternoons or late at night, while television viewership
reaches its peak at nights.
Need for robust measurement system
• While the number of operational private FM stations is increasing and share of advertising
spends in radio is slated to increase, there is a growing need for establishing a reliable and
robust radio listenership system.

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Need for robust measurement system
• TAM Media and Indian Listenership Track (ILT) from Media Research Users Council
(MRUC) have their respective audience measurement tools for radio [Radio Audience
Measurement (RAM)].
• TAM uses diary method of recording listenership, while ILT uses 'day after recall' method.
• RAM is prevalent in 13 cities in India.
• However, measurement remains a challenge for the Indian radio industry, with radio
broadcasters claiming their inability to give accurate results.
• This can be attributed to the vast geographical spread of radio and the small chunk of
advertising pie that it commands.

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Need for robust measurement system
• Many radio broadcasters have recently begun to withdraw from participating in such
listenership surveys, owing to purportedly inaccurate data.
• This has restricted radio companies' ability to demonstrate their return on investments to
advertisers.

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Radio's share also expected to increase amid launch of new FM Phase III
channels in 2017-18

Source: Crisil Research

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 Newspapers

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Newspaper industry remains on firm ground despite internet onslaught
• Despite increasing threat from the internet, newspaper circulation in India has grown
steadily, aided primarily by rising literacy levels.
• The industry is characterised by high fragmentation and regional diversity.
• Hindi and vernacular newspapers comprise bulk of the daily newspaper publications.

Over 2,000 newspapers circulated in India

• India is one of the largest newspaper markets in the world. Readership in the country is
rising despite increasing internet penetration primarily because of a rise in literacy levels
and relative under-penetration of newspapers.
• More than 65% of the revenue will be driven by advertisements. Key players in this
industry include Bennett Coleman and Company Ltd, Jagran Prakashan, DB Corp, HT
Media and Amar Ujala.
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Industry structure and characteristics
• Highly fragmented industry The industry is extremely fragmented and enjoys regional
diversity.
• With over 2,000 daily newspapers in the country, no single newspaper dominates national
circulation.
• The industry can be segmented across languages, i.e., English, Hindi and regional
languages or across genres, namely, general and business.
• Further, about 90% of these dailies are published in Hindi and regional languages while
the rest are in English.
• The content and circulation of English language newspapers is focused on large urban
markets.
• Hindi and other language newspapers cater more to the hinterland.

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Newspaper: Publication and region of dominance

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Non-English newspapers have higher readership-to-circulation ratio
• Circulation refers to the number of newspaper copies sold whereas readership consists of
people who have read or looked at a publication.
• Typically, Hindi and regional language newspapers have a readership-to-circulation
multiple of 3-5 times, whereas English language newspapers have a multiple of 2-3 times.

Hindi and regional language newspapers enjoy a higher readership-to-

circulation ratio because:
• The cover price of non-English newspapers is lower than English newspapers.
• Higher literacy rates, increasing demand for region-specific content, and the launch of
editions in new languages and geographies (tier-II and - III cities) further enhances
readership.

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Hindi and regional language newspapers enjoy a higher readership-to-
circulation ratio because:
• The average reader of a non-English newspaper belongs to a lower income group than that
of English newspapers. Hence, the tendency of sharing a newspaper among family
members and other members of the community is higher in the case of non-English
newspaper readers.

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Language-wise circulation (2016-17)

Source: Crisil Research

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 Films

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Growth in multiplexes boosts Indian film industry
• The Indian film industry is the second-largest in the world, in terms of number of films
produced and theatre admission, with theatrical revenue largely driving industry revenue.
• Nevertheless, the industry remains small when compared with other countries in terms of
size due to cheaper admission prices, cautious lending by banks, and rampant piracy.
• Multiplexes are gaining ground owing to entertainment tax exemptions being announced
by various states and every stakeholder benefiting across the value chain.

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Multiple revenue streams safeguard film revenues
• Producers are turning to various other revenue streams to augment and safeguard their
returns from films.
• Revenue streams for a film producer

Source: Industry
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Institutional lending to film industry
• Banks such as EXIM Bank, Yes Bank, and IDBI Bank, among others are a few active film
financiers domestically.
• Some financial institutions also undertake 'slate funding', committing to finance multiple
films of a certain production house.
• As per Reserve Bank of India guidelines, banks can take exposure of up to a maximum of
50% of the production cost of a film.
• A film is expected to be insured before its producer seeks a loan. Hence, producers are
increasingly insuring their films.
• Film insurance generally covers death or injury to actors, damage to sets, costumes, film
equipment, and theft.

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Institutional lending to film industry
• The premium charged for insurance is typically 1-1.5% of the film's budget.
• Taal was the first film to be insured in India in 1999.

Distribution
• Film distributors buy the distribution rights from a producer within a territory or across
several territories.
• In return, they offer a minimum guarantee fee to the producer.
• In some cases, distributors purchase the rights well in advance of the film's release, while
lately, in most cases, the same is on a revenue-share basis (with the producer).
• As there is no set method to determine the amount payable towards distribution rights, this
poses a huge risk in case a film does not perform well at the box office.
•
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Distribution
• Distributors play various roles, including part-financing films, spending on print and
publicity, selection of exhibition halls, and managing the distribution of film prints.
• Distributors in India are rarely involved at the preproduction or production stage and they
get to see a film only after it is completed.

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Film distribution segment highly fragmented
• The distribution segment is highly fragmented with a majority of distributors having only a
limited presence.
• Therefore, for theatrical distribution of a film throughout the country, producers need to
typically tie up with several distributors.
• Some of the largest film distributors in India are Yash Raj Films, Sun Pictures, Eros
Entertainment, Mukta Arts, and Reliance Mediaworks.
• Sharing of revenue between distributors and producers There are three models followed
for sharing revenue between distributors and producers:

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Film distribution segment highly fragmented
• Minimum guarantee plus royalty model: In this model, the distributor shares any
overflow of revenue over the minimum-guarantee fee, print and publicity cost and his
commission with the producer in a pre-determined ratio. However, in case the distributor
does not earn any overflow, i.e., the revenue earned by him is lower than his cost; he has to
bear the entire loss. This model is commonly followed in case of films produced by
established producers and big-banner production houses. The overflow money, if any, is
generally shared in a pre-agreed ratio between the producer and the distributor.

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Film distribution segment highly fragmented
• Commission model: The distributor does not bear any risk in this model. He simply
retains a commission on the total amount collected from the exhibitor and remits the rest to
the producer. With film distributors losing heavily in recent years owing to the poor
performance of films at the box office, the commission model is increasingly gaining
acceptance, especially for small budget films.
• Outright sale model: The distributor purchases the entire rights for a territory or several
territories from the producer. In this model, the distributor bears the entire risk arising from
the outright purchase of rights. Some film production houses, e.g., Yash Raj Films, usually
distribute their films on their own. In such a case, while the risks are higher, the gains are
also higher.

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Revenue streams for a film distributor

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Exhibitors
• Exhibitors are the link between film distributors and the audience, controlling the last mile
in the box office value chain, i.e., the theatre.
• Initially, the theatre-hire model was the most commonly followed model, wherein
distributors had to bear the burden of theatre rentals, irrespective of whether a film
delivered or not.
• In the changing scenario, revenue collected at the box office gets shared between theatre
owners and distributors, especially in the case of multiplexes.
• In some small cities, where revenue recording mechanisms are suspect, distributors enter a
fixed hire or minimum guarantee plus royalty contracts with exhibitors.

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Revenue streams for a film exhibitor

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Segmentation of film exhibition
• The film exhibition sector can be divided into two segments: single, double-screen
cinemas, and multiplex cinemas (a movie theatre complex with multiple screens, typically
three or more).
• About 80-83% of Indian cinema screens are single-screens owned by individual
entrepreneurs, operating in an unorganised environment.
• However, the scenario is fast changing with the setting up of multiplexes. The number of
multiplex screens increased to 2,022 in March 2017, which constitutes 15-17% of total
screens running in the country.

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Multiplex cinemas gaining ground
• Multiplex cinemas are fast changing the manner in which movies are viewed, particularly
in big cities.
• Historically, most movie theatres in India were set up as single screen theatres with large
seating capacities (ranging between 750 and 1,500 seats per screen).
• However, poor maintenance and upgradation (due to lack of investments) at single-screen
theatres resulted their condition being bad, which deterred family audiences.
• In contrast, multiplex cinemas, characterised by limited seating capacity of 250-400 seats
per screen, good ambience, quality viewing with high-end sound systems, comfortable
seating arrangements, excellent service as well as good quality food and beverages, have
succeeded in attracting family audiences back to theatres.

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Multiplex-business model

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Multiplex-business model
• Several state governments have announced policies offering entertainment tax benefits to
multiplexes.
• These exemptions, along with consumer demand for multiplexes, have led to increased
investments in multiplexes and have encouraged single-screen owners to convert to
multiplexes.
• Major players operating/ managing multiplexes include PVR Cinemas, INOX Leisure,
Carnival Cinemas, and Cinepolis.
• Multiplexes, with their superior infrastructure, offer significant economic advantages over
traditional single/ double-screen theatres and also provide an enhanced movie viewing
experience to consumers.

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Multiplex-business model
• An increase in the number of multiplex screens should result in an increase in film-
exhibition revenue, implying a significant growth opportunity for the industry.

Comparison of multiplexes and single/ double screens

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 Digital

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Digital to outpace other media segments
• Digital is expected to grow the fastest over the next five years among all media segments,
with its growing reach (particularly with the spread of smartphones and high-speed
internet services) and effective measurement tools.
• There is growing acceptance of digital media among advertisers, which is expected to
translate into higher share of spends in the medium.

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Major sub-segments under digital advertising

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Display
• This comprises rich media, banners, video and advertisements of a company displayed on
a website or blog.
• Google has 70% market share in this segment (if advertisements on its own websites such
as YouTube and Google Finance, and its network of websites and applications are
considered).
• Other major players include social media sites such as Facebook and news-based sites like
Times Internet Group and Network18.
• Recently, the share of e-commerce websites such as Flipkart, Amazon India and Snapdeal,
and media streaming websites like Youtube and Gaana.
• com has grown significantly. Times Internet has the largest share among Indian players.

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Others
• This segment mainly includes email and messaging, and is allocated a lower advertising
budget as compared to search and display.

Contribution by segments to total digital spend

Source: Crisil Research

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Key factors driving internet subscriber base
Fall in smartphone prices, rollout of 4G services to add more user Prices of
smartphones have dropped sharply over the past few years.
• Improvement in telecom technologies and advent of 4G has boosted average internet
speeds, data traffic, data usage per subscriber and added more wireless data subscribers.
• Wireless technologies have also helped service providers overcome infrastructure
constraints and reach areas that were inaccessible earlier.
• Going ahead, the availability of 4G data services in smaller cities and rural areas will
further drive data usage.

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Digital India move by government to boost wireline internet subscribers
• Wireline internet subscribers are expected to increase from 1,170 million in 2016-17 to
1,200 million in 2017-18, to ~1,240 million in 2018-19.
• Many state governments and telecom companies have been laying fibre optic cables that
can be leased by broadband players to improve subscriber reach.
• Cable operators have also started providing high-speed internet services. For e.g.,
Hathway Cable offers broadband users up to 50 mbps of speed.
• Considering the severe competition in the broadband space (especially after Reliance Jio
Infocomm's entry), tariffs are expected to decline further from current levels in the next
10-12 months.

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Increase in consumer acceptability
• Rapid expansion in e-commerce and easy internet payment options offered by banks is
drawing consumers to digital media.
• Use of social media and messaging services is also increasing rapidly.
• Consumers take cues from reviews published on digital platforms before making purchase
decisions.
• This has driven companies to improve their digital visibility. People in the 15-24 and 25-
34 age groups are major internet users. However, usage in 44+ age category is also
increasing.

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Digital media gains popularity among advertisers
• Digital advertising's share in total advertising spend is rose 37% on-year in 2016-17 on
account of increasing number of wireless subscribers in India and higher adoption of
smartphones, tablets, etc.

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Share of digital media in overall media and entertainment industry (2017-
18E)

Source: Crisil Research

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Players in online videos and music market (2017)

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Payment models used in digital media
• Cost per thousand impression: Advertisers pay for exposure of their message or
impression delivered to a specific audience. However, some impressions may not be
counted, such as a reload (refresh) or internal user action. Publishers typically sell number
of impressions in units of thousands. Advertisers can cap the frequency or number of times
a specific visitor to a website is shown a particular ad.
• Cost per click: Publishers charge advertisers every time a user clicks on an advertisement
or on the listing and is redirected to the advertiser's website. Mostly, advertisers use this
metric to gauge effectiveness of their advertisement. The benchmark click-through rate is
0.5%, which has remained relatively constant over the last three years.

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• Cost per action / Cost per acquisition (CPA): This is a performance-based model, where
the publisher bears the entire risk of running the ad and the advertiser pays only for the
number of users who complete a transaction, such as a purchase or sign-up.
• Cost per engagement (CPE): This model is a form of CPA pricing that was introduced in
2008. A CPE model offers advertising impressions for free and advertisers pay only when
a user engages with their specific ad unit. Engagement refers to a process wherein a user
interacts with an ad in a way defined and agreed to by both parties, such as playing a game
or taking a product tour.

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 Music

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Hindi film music drives the music industry
• A dramatic structural change is occurring in the global music industry with music
distribution worldwide going digital and mobile.
• Licensed digital distribution of music and mobile music are buzzwords in the global music
industry, and dominate music distribution, which in the physical form, may barely exist in
a few years.

Domination of the latest Hindi film music

• India's music industry has a unique structure in the global markets.
• The new Hindi film segment, accounting for more than half of the industry's revenue, is
extremely risky for music companies, as it may not be able to recover the upfront cost paid
towards the acquisition of music rights (also called minimum guarantee) in case an album
does not do well.
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Domination of the latest Hindi film music
• The acquisition cost of music rights for films has declined significantly from the heights
touched towards the end of 1990s.
• Film producers are now willing to enter into revenue-sharing agreements with music
companies, ensuring more equitable sharing of risks and rewards.
• Other genres of the music industry are old Hindi film music, English music, ghazals,
classical music, regional music and devotional music.
• With the advent of satellite television and increased consumer exposure to non-film music,
other music genres are also gaining popularity.

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Issues associated with piracy
• The music industry, both in India and globally, is plagued by piracy. According to
estimates by the International Federation of Phonographic Industry (IFPI), more than 80%
of music tracks are downloaded without payment to artists or companies that produced
them.
• In India, piracy accounts for a substantial part of the total market.
• Due to digital format of music and pirated sites on the internet, piracy is strengthening as a
contributor to revenue leakage.
• Until around 2001, physical piracy of music cassettes, i.e., unauthorised copying and
selling of music on cassettes was prevalent.
• With the progress of technology, digital piracy has increased.

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Issues associated with piracy
• P2P (peer-to-peer sharing), FTP (file transfer protocol) sharing and local sharing on local-
area networks is rampant; it is only lately that software or companies enabling activity
such as Kazaa and Napster have been penalised.
• IFPI estimates that for every one legal download, there are 15-20 illegal downloads.

Music distribution
• Structural change in the global music industry A dramatic structural change is occurring in
the global music industry with music distribution going digital and mobile worldwide .
• Licensed digital distribution of music and mobile music are buzzwords in the global music
industry, and dominate music distribution in the physical form, which may barely exist in a
few years.

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Music distribution
• Sharp transition of music from physical to digital platforms has forced music companies to
redevelop business strategies and come up with innovative methodologies to package and
distribute music content.

Driving forces behind structural changes

• Five fundamental forces are driving structural changes in music distribution:
• Increasing penetration of high-speed broadband internet connections and mobile networks,
and uptake of high-speed services by telecom operators, with the rising wireless subscriber
base.

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Driving forces behind structural changes
• Increased availability and adoption of mobile handsets, with higher download, storage and
playback capacities (mobile handset companies have made available music-enabled
phones specifically targeted at music buffs, who wish to have their choice of music on the
go)
• Digitisation of entire music catalogues by players
• Continuous improvements in technical specifications and capabilities of digital players
• Social networking sites (a promotional tool for the Indian music fraternity)

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Traditional physical format versus digital and mobile music

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Global digital revenue increasing
• Global music majors and technology companies are actively investing in licensed digital
delivery of music through the internet, which serves to underscore the shift taking place in
music distribution. In India, Indiatimes, Gaana and Saavan offer legal music downloads.
Consumer acceptance of paid-for music downloads is also rising.
• Sensing this potential, Apple launched its iTunes store (music shop on the internet) in
India in December 201
• This permits users to buy local and international music and also movies from the store.

Digital technology driving the revenues of Indian music fraternity

• Digital distribution of music gained edge over music distribution in physical form in 2010.
• The year saw companies entering into agreements with social networking sites to promote
music content as well as reach out to audiences through various interactive platforms.
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Digital technology driving the revenues of Indian music fraternity
• Revenue from streaming music is estimated to have contributed about 70% to total
industry revenue in 2016-17, from 12% in 2013-14, marking a significant shift in
consumer preferences to digital formats.
• Revenue increased, because of the rise in mobile and broadband penetration, rollout of
high-speed data services and technological advances.
• On the other hand, proliferation of digital music has sharply cut down physical sales, i.e.,
sales of music cassettes and compact discs (CD). It is on the verge of extinction and
currently contributes to ~3% of overall revenue of music distribution companies.

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 Future Outlook

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Exponential growth in digital segments; competition and regulatory changes

abound TV segment
• Election year supported growth in print and TV segment in fiscal 2019, but slowdown
post-election expected due to shift to digital and entry of Reliance Jio in TV segment.
• Growth in film segment to slow down due to high-base effect and average content
pipeline.
• Launch of new channels, higher inventory utilisation and hike in ad rates to aid radio
segment growth.

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Advertising revenues to outpace subscription revenues in the next five
fiscals
• Media and Entertainment (M&E) industry to grow ~14-15% on-year in fiscal 2019 on
account of improving macroeconomic factors coupled with the near-completion of
digitisation in Phase IV, hike in the cover prices of newspapers, rising ad rates,
increase in opening of new screens, break-even of newly launched radio channels in
smaller cities, and increasing digital ad spending by advertisers.
• Overall, the sector is expected to grow at ~8-9% CAGR between fiscals 2018 and
2023 and reach ~Rs 2 trillion by fiscal 2023.

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Entry of Jio to impact revenues and margins of TV industry in fiscal 2020
• In fiscal 2019, the segment is expected to clock 12-13% growth on-year due to
improvement in realisations led by higher average revenue per user (ARPU) in phase
III and IV areas and better reporting driven by digitsation leading to higher collection
efficiency.
• In fiscal 2019, advertisement revenues to continue to support overall TV revenues
driven by growth in TV penetration, hike in ad rates and better audience
measurement.
• The entry of Reliance Jio via the acquisition of majority stakes in two large cable
operators - Hathway and Den - is set to change the competitive landscape and product
offerings in the TV distribution industry.

79
Entry of Jio to impact revenues and margins of TV industry in fiscal 2020
• Also, the implementation of the new tariff order will impact realisation and business
models across the TV value chain.
• Based on our scenario analysis of the impact of entry of the new player the revenue a
nd margins of distributors as well as broadcasters in fiscal 2020 will be impacted if
ARPUs are pressured due to entry of Jio.
• The contribution of subscription revenue to overall TV segmentis estimated to decline
from ~60-65% in fiscal 2018 to ~50-55% in fiscal 2023.

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Digital advertisement to show exponential growth in fiscal 2019
• The digital advertisement in India is expected to grow by ~48% on-year in fiscal 2019
led by surge in internet subscriber base and smartphone sales.
• This, along with the availability of cheaper data packs and regional content on over-the-
top (OTT) platforms has led to increase in video consumption, which will also drive
growth.
• In the search segment, Google continues to be the largest player in search advertising
with a market share of ~97% in fiscal 2018. It occupies ~70% of the display advertising
as of now, but release of new formats and mediums may lead to a marginal decline in its
market share.
• The segment to clock ~28% CAGR from fiscals 2018 to 2023.

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New channels, higher inventory utilisation and hike in ad rates to aid
growth
• The radio segment is expected to exhibit ~15% on-year growth in fiscal 2019 as the
effects of GST implementation fade out and the newly launched channels achieve
breakeven.
• Moreover, pickup in political advertising, led by the forthcoming Lok Sabha
elections, and launch of new channels post batch 2 auctions of phase 3 will drive
growth.

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Music distribution growth to be driven by music streaming segment
• Industry revenue clocked ~10% compound annual growth rate (CAGR) over fiscals
2013 to 2018.
• The segment is currently estimated at ~Rs 13.5 billion, with digital music to
contributing to ~79% of total revenue.
• The share of digital music in this segment’s overall revenue is expected to be to 85-
90% in fiscal 2019.

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Music distribution growth to be driven by music streaming segment
• Its contribution will continue to increase and to contribute to 90-95% of total revenue
in fiscal 2023.
• Going forward, the segment is expected to clock a healthy ~16% CAGR over the next
five years to reach ~Rs 28.5 billion by fiscal 2023.
• This growth will come on the back of increasing mobile data penetration (projected to
reach 832 million by fiscal 2023)
• and increase in revenue for the industry on account of new players entering the
industry.

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Long term OOH ad spend to surge ahead at 13% CAGR
• OOH ad spends registered a compounded annual growth rate (CAGR) of ~10.5% in
the past 5 years, to reach a market size of ~Rs 34 billion in fiscal 2018.
• This growth was largely driven by increased spends by sectors such as FMCGs,
media and entertainment, automotive, and telecom.
• OOH ad spend is set to witness steady growth going forward, given estimates of
~7.5% growth in India's gross domestic product (GDP) in fiscal 2019, the
forthcoming general and state assembly elections, promotion of 4G services, auction
of unconventional locations by government for OOH advertising, launch of new
payment banks, and other services to promote social welfare.

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Print and radio segment to see a margin dip in 2019,TV segment
margins to be impacted in 2020
TV Distributors:
• The operating margin of MSOs and DTH players are expected to improve by ~125-
150 bps and ~175-225 bps, respectively, in fiscal 2019 due to cost control measures
and synergy benefits due to consolidation in the TV distribution space.
• In 2020 however, with the entry of Reliance Jio margins are expected be pressured.
The implementation of the new Tariff order should aid margin stability for distributors
in the long run.

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TV Broadcasters:
• The margins of general entertainment channels (GEC) and news channels are
expected to improve by 50-100 bps and 100-150 bps, respectively, in fiscal 2019 as
programming and content costs.
• employee costs and other expenses, as a percentage of revenue, are expected to
decline marginally amid higher viewership and revenue base driven by elections and
increasing TV penetration.
• However, a 20-24% drop in subscription revenues due to entry of Jio would result in
~150-250 drop in EBITDA margins in fiscal 2020 for GEC players.
• News channels are majorly FTA channels included in basic packs and driven by
advertisement revenues;
• hence, would have minimal impact due to drop of ARPU by Jio's entry.
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TV Broadcasters:
• The implementation of TRAI's tariff order remains monitorable, While large
broadcasters should be able to push bouquets including all their channels, smaller
broadcasters might find it difficult to grow/maintain subscription revenues of their
channels and thus might also take a hit on advertisement revenues.

Print:
• The operating margin of print players is likely to decline ~300-325 bps on-year in
fiscal 2019 led by considerable increase in newsprint prices (accounting for ~30-35%
of the total operating cost of the print players).
• The ability of players to pass on this hike to the customer is very limited due to peer
competition and special prices offered in new geographies.

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Print:
• However, the margins are expected to stabilise in fiscal 2020 as newsprint costs soften
and other costs, as a percent of revenue, declines marginally.
Multiplexes:
• EBITDA margin of multiplexes to widen by ~200-225 bps in fiscal 2019, as increase
in screen additions and stable occupancy levels will result in higher footfalls driving
food and beverage (F&B) revenues and growth in advertisement revenues.
• The expected increase in margins is because of the multiplexes' focus on promoting
the food and beverage (F&B) segment, given the segment's higher margins (~75%)
and growth in ad revenues.

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Multiplexes:
• In fiscal 2020, the margins are expected to be stable due to moderate growth in high-
margin F&B revenue and ad revenue.
Radio:
• In fiscal 2019, margins of radio broadcasters are expected to decline by ~250-300 bps
on account of higher marketing expenses dedicated to launch of new channels in
fiscal 2019 but expected to stabilize in fiscal 2020 as the newlylaunched channels
breakeven within 18-20 months of launch.
Music:
• The margins for music companies have remained in the range of 8-12% in the past
fiscals.

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Music:
• Over the next two to three years, the margins for these players will expand by 1-3%
driven by digital music platforms
Out of home media:
• In fiscals 2017 and 2018, the industry growth was erratic owing to uncertainties
regarding RERA and GST, which led to a decline in demand and margins.
• Going forward, industry margin is expected to be driven by volume which will come
on the back of general election 2019.
• Thus the margins to be in the range of 11-12% in fiscal 2019.
• In addition, the revival in ad spending by key sectors will also pull up margins.

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