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In Pakistan, HUM TV, a channel of Eye Television Network Limited, was the first media company to get listed on the

stock exchange and make its Initial Public Offering in June-July 2005. India on the other hand, had about 50 media houses that offered shares to the public in 2005. A company gives out its prospectus as an invitation to treat for investors to invest. One of the most important sections of a Company s Prospectus is the risk section. An investor would look at these factors and then weigh his decision whether to invest in that particular company, based on the risk factors and the future profit prospects or expected performance of the firm. A company can face risk at two levels; macro-economic risks which exist in the overall business environment and micro-economic, industry specific risks. The risk factors faced by a company in the broadcasting media industry are discussed below with measures that can be taken to mitigate these factors.

Risk Factors and their Mitigation

Economic Risk A television channel largely earns its revenue from the advertising spend they receive from companies wishing to advertise on their channel. Since the major chunk of revenue is dependent upon another company s decision to advertise, this is a big threat to a broadcasting company as the first thing to get cut in times of recession or low profitability is the marketing and advertising spend. Thus, if the overall economy of the country is suffering the trickling effect would risk the profitability of the broadcasting agency as well. According to the survey done by Gallup Pakistan, the Telecommunication and the FMCG sectors advertise heavily on broadcasting media. Hence, risk factors specific to these industries can in turn affect the wellbeing of a broadcasting firm. Mitigation The channel has to make its financial standing strong by keeping its expenses low and making correct use of their profits i.e. finding the correct fit between re-investing and saving. The savings can then be used at times of economic crisis to suggest discounted advertising fee to old clients to maintain a long term profitable relationship.

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Mitigation As this risk is completely out of the hands of any media channel. Foreign Exchange Rate Risk Big media channels like GEO TV operate in a number of places across the globe e. The cost of losing a day s revenue of airing commercials is significant. the uplinking technologies can get damaged and stop a channel from working altogether. it is impossible to mitigate it except perhaps through being neutral or supportive to the current government to get into its good books. 2|P a ge . Natural calamities Some areas of Pakistan are prone to calamities like earthquakes and floods. In case of natural calamities. these institutions are puppets whose strings are in the hands of the government. Dubai.g. 2007. the channel has to make a policy not to air highly critical material against the government or any person/institution of power and be empathetic to them. If GEO TV decides to go public. it will face foreign exchange rate risk as production and operations are mainly done in Pakistan and Dubai. the machines and technologies are bought from abroad while payment is made through converting Pakistani rupees to the foreign currency. Share prices will be affected by fluctuations in different foreign exchange rates. Apart from this.g. For this. Mitigation The company can enter into foreign exchange forward and derivative contracts from time to time to hedge a portion of its foreign exchange exposure. all private media channels disappeared when General Musharraf imposed a state of emergency on November 3rd. Canada and Pakistan. In the South we also have nuclear energy generation plants. Media Channels face a great threat of being shut down at times of political instability e.Political Risk Although broadcasting channels fall under the Ministry of Information and Broadcasting (MOI) and has a regulatory authority named Pakistan Electronic Media Regulatory Authority.

without proper trial and case review. Thus. PEMRA. Competition within these 3|P a ge . the operational risks are imbedded in the workings of a broadcasting channel.g. This can result in high employee turnover which can affect the channel adversely. ARY TV and HUM TV (in the entertainment channels) grab away high GRPs. few major players like Geo TV. Regulations In Pakistan. Media has recently gained freedom but not in the totality. PEMRA shut down GEO Super as per Section 20 of the PEMRA Ordinance 2002 and clause (1) (d) of Code of Conduct of PEMRA Rules 2009. Operational Risk As with any other firm. Competition The structure of the industry is oligopolistic i. Mitigation The company can become a member of Pakistan Broadcasters Association (PBA) to safeguard its interests and to collectively voice its concerns to the regulator. ministry or the government. as a regulator has authority to shut down a channel for long as it likes. Employees also are paid three month s salary together as finances are stuck at the client end.Mitigation The company can have alternative uplinking technologies installed in an area outside Pakistan or it can do all it s broadcasting from abroad e.g. mutual funds or to avail working capital financing from banks. Mitigation The company can combat restricted working capital by investing in such financial instruments that pay monthly income e. GEO TV has it technologies and uplinking equipment in Dubai. The industry norm is that payments are given in late by the clients as a result of which most channels operate on low working capital and often have to forego making small investments in profitable ventures. which deal with disseminating false information.e.

For new entrants. Due to this it quickly gained a lot of viewership so much so that the major players considered it a possible threat. Mitigation A channel can choose its target audience appropriately. An example is of Colors TV.top 3-4 channels are extremely high while new entrants face a massive challenge to grasp viewers. Mitigation The company will invest in R&D and keep an eye on the evolving technologies used by the neighboring countries especially India. is lazy in adopting new technologies so even if a rival company decides to take the first step. you engage audience via two senses. hence the only differentiation is provided by differentiating content. there is no brand loyalty as such in broadcasting channels except perhaps a little in news channels during prime time.e. However. to provide backups in case of link breakdown. competition can be warded off by differentiating programming and choosing target audience wisely. etc. especially the Television networks have to face the challenge of developing and adopting more sophisticated broadcasting technologies for limiting the time between uplink and downlink. A huge investment is needed to upgrade technology if the dynamics of the industry changes and major players switch to more sophisticated technologies.e. Intrinsically. a new entrant that chose its target audience wisely by bringing in StarPlus like programs to cater to the Non-Metros. cities other than Lahore. Pakistan. Viewers are loyal to content not the channel hence the cost of sustaining old viewers is also high alongside the cost of gaining new viewers. the competition will have enough time to keep up with it. The National GRP number (used as an indicator of success) has the highest weight-age for Non-Metros i. Karachi. Thus. Technology Obsolescence Risk In the broadcasting Industry. Major players try to target Karachi and Lahore which collectively constitute a higher percentage than Non-Metros. Satellite channels face a risk of technology obsolescence and face the challenge of implementing evolving industry standards and norms. competition is a major threat which has a great impact on the sustainability of a channel. however. Islamabad. 4|P a ge . the product is the same i.

Due to mounting media ownership consolidation and concentration. a decline in a channel s viewership is can have a crucial effect on its Profit and Loss statement. this risk can be reduced by constantly investing in research to detect the preferences of the target audience and thereby. Channels compete for ratings aggressively especially in prime time because the advertising fee for prime time commercial airing is many times higher than other timings as most viewers are expected to be watching television in the prime time. Viewers are not channel specific rather they are content specific. New entrants can bring diversified. developing content that is as close to their preferences as possible. This has allowed print media tycoons like Jang Group and DAWN. novel content which appeals to their target audience. This has resulted in media domination by these groups and they can afford to pour in resources from their other ventures to sustain their respective TV channels even while the industry is facing losses overall. that existed from the time of Independence and that emerged subsequently after it. Mitigation Again. Also they enable the viewer to control the timings of their favorite 5|P a ge . Mitigation New entrants can target a niche market and position themselves appropriately.Decline in Viewership As highlighted before. Many a times. Cross Media Ownership The government has lifted the ban on cross media ownership through the PEMRA (Amendment) Act. Competition from Emerging Technologies New Media is constantly evolving and as a result people find lesser time to watch television as emerging technologies like mobile TV or streaming programs are more convenient and have a youthful outlook. 2007. Companies wishing to advertise look at the viewership of the channel to negotiate the terms of advertising fee. through conducting focus groups. A successful channel makes a sales pitch by highlighting its viewership based on which it can demand for high rates for advertising spots. new entrants are finding it difficult to compete with big market players. Hence. the broadcasting channels get an idea from their audience only. to own electronic media outlets. TV channels earn their revenue from commercials they air.

aspx?ID=41396&Cat=2&dt=4/7/2011 6|P a ge .stockpk.in/dp/ibn18loffinal.com. Due to this.com/hum-tv-first-media-company-to-enter-capital-market.html http://www.pdf http://www. the overall size of viewership is declining.gov.com.pemra.gallup.pk/News/GallupMediaCyberLetterRevisedJan2010. The channel can charge customers to pay a little amount to stream online programs and share profits with the owners of emerging technologies.pk http://www.audiencescapes.pk/TodaysPrintDetail. thus putting a pressure on companies to yield sustainable profits.thenews.sebi.org/resources/field-blog/beyond-free-media-defining-mediachallenges-pakistan/beyond-free-media-defining http://www.gov. Mitigation By keeping an eye on emerging technologies and collaborating with their owners to make a profitable relationship this risk can be reduced. References http://www.pdf http://www.programs thereby providing greater flexibility.