MUMBAI: The 30-stock Bombay Stock Exchange (BSE) sensex registered a 6.74-point drop on Friday, 23 May 2003 to settle at 3,049.84 (3,056.58 last week). The sensex was still above the key resistance level. The NSE Nifty was up 4.7 points to end at 968 (as compared to 973.10). Most of the media stocks dropped marginally.
On 23 May, Zee Telefilms opened the day on the BSE at Rs 79.05; dropped 1.2 per cent to end the day at Rs 77.45 (as compared to Rs 77.45 on 16 May). The volume of shares traded was around 1.47 million shares on 23 May.
On the National Stock Exchange (NSE), the Zee Telefilm scrip started the day at Rs 80.50; dropped 1.14 per cent to end the day at Rs 78.05 (as compared to Rs 77.90 on 16 May). The volume of shares traded was around 3.2 million.
A report titled “Conditional Access or Catch 22 – Who Will Blink First?” compiled by the Citigroup Smith Barney (CSB) report (dated 15 May 2003) says that the intermittent phase (during the implementation of CAS), high news flow risk would make Zee’s stock price movements extremely volatile. However, it adds that any postponement of CAS, would be positive for Zee’s share price in the sense that it would remove the overhang of
‘uncertainty of CAS implementation.
This, says the CSB report, would also postpone the long-term benefits of conditional access – ie, giving Tier 1 broadcasters a fair share of the subscription pie. If CAS is postponed, initiatives of Star/Zee’s group companies, which are engaged in roll-out of DTH services, will need to be closely monitored, cautions the CSB report. The report also notes that Zee’s head in the sky model for implementation of conditional access can be easily tailored for DTH implementation.
The CSB report retained its In-Line (2H) rating on Zee Telefilms valuation with a price target set at Rs 96. At this price, Zee would trade at 13.5x forward EPS, at the bottom end of its historical trading range, which given the approaching uncertainty as regards earnings dislocation during implementation of conditional access looks fair, says the report.
The Balaji Telefilms scrip ended the day (23 May 2003) at Rs 52.30 (down 4.10 per cent) – as compared to Rs 58.75 on 16 May. The volume traded was 552,832 shares and the counter registered more trades due to the results which were announced on 22 May.
On the NSE, the scrip ended the day at Rs 52.45 (down 4.10 per cent) as compared to Rs 53.80 on 16 May. The volume of shares traded was 1.43 million. Balaji Telefilms annual results will be announced on 22 May.
Several analysts believe that the scrip fell because the 4QFY03 sales/income was lower than that of the previous quarter (3QFY03) despite the fact it was higher than the corresponding one for 4QFY02. Analysts feel that the company will have to make an extra effort to maintain its increase in income and sales.
The Television Eighteen India scrip opened at Rs 85 on 23 May; dropped 3.41 per cent to end the day at Rs 82.10 (as compared to Rs 80.90 on 16 May) on the BSE. On the NSE, it opened at Rs 85.10; dropped 3.70 per cent and ended the day at Rs 81.95 (as compared to Rs 80.75 on 16 May).
Sri Adhikari Brothers Television Network (SABTNL) gained 1.91 per cent to end the day (23 May) Rs 61.30 (as compared to Rs 63.50 on 16 May). On the NSE, the scrip ended the day at Rs 61.70 (up 1.61 per cent) as compared to Rs 63.75 on 16 May.
Cinevistaas opened the day (23 May) at Rs 26.25; dropped 2.23 per cent to end the day at Rs 26.35 (as compared to Rs 28 on 16 May) on the BSE. On the NSE, the scrip opened at Rs 27.5; dropped 0.93 per cent to end the day at Rs 26.55 (as compared to Rs 29.40 on 16 May).
Creative Eye opened the day (23 May) at Rs 15.5; dropped 5.48 per cent to end the day at Rs 14.65 (as compared to Rs 14.25 on 16 May) on the BSE. On the NSE, the scrip dropped 4.55 per cent to end the day at Rs 14.70 (as compared to Rs 14.20 on 16 May).
The ETC Networks scrip ended the day at Rs 42.60 as compared to Rs 48.40 on 16 May on the BSE.
Tag: CSB report
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Media stocks drop marginally on the bourses
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One out of 6 cable households will get pay channels: CSB report
MUMBAI: A report titled “Conditional Access or Catch 22 – Who Will Blink First?” compiled by the Citigroup Smith Barney (CSB) report (dated 15 May 2003) says that very little progress has been made on the CAS front which the firm maintains is “noble in spirit”. It also adds that only one out of six cable households in the metros will receive their favorite pay channels if the government is firm on its 14 July deadline
The report foresees a period of significant uncertainty ahead in the Indian media and entertainment sector. Implementation of conditional access (CAS), besides having an impact on the media and entertainment industry, will also have significant ramifications for all sectors of Indian society including advertisers, FMCG companies, white goods manufacturers amongst others – adds the report.
The CSB report which attempts to conduct an impact analysis of various implementation scenarios on the Indian media and entertainment sector, states that a lot of work need to be done on the “ground” in terms of implementation and seeding of set-top boxes.
The report says that the maximum number of boxes which will be seeded (total metro C&S at 6.5 million) would be around 1.5 million. It adds that this scenario could have negative political implications.
Set-top boxes:
On the issue of set-top boxes, the report says that there is little evidence of a move towards installation of set-top boxes in consumers’ homes. While certain pay channels continue to advertise the necessity of acquiring set-top boxes (to continue receiving them post-July 14), local cable operators (the consumer interface) remain clueless about pricing and availability of the same, it states.
Consumer’s point of view:
From the consumer’s point of view, the CSB report states that CAS is not a step in the right direction in terms of affordability.
Based on the income demographics of the consumers in the four metros, the report makes the following observations:
* Cable currently enjoys ~80 per cent penetration among the addressable households in the metro cities.
* Approximately 45 per cent+ of households in the metros (in the monthly income bracket of Rs 9,000+) could acquire set-top boxes (priced in the region of Rs 1,500 – Rs 3,000).
* However, the balance of 55 per cent would struggle to afford a Rs 1,500 set-top box coupled with monthly charges in excess of Rs 200 (+5 per cent of income)
*This division between the ‘haves and have nots’ will be more apparent in the rest of India where only 10 per cent of the population will really be able to afford conditional access through set-top boxes.
* The swing factor for approximately 25 per cent of the metro population (Income – Rs 6,000 – Rs 9,000) will be the price of the set-top box.
Consequently, besides the issues of availability of set-top boxes, affordability will also be an issue, the report adds.
The report adds that this issue will gain in significance as the conditional access rollout moves on to Phase 2 – implementation in the rest of India.
The report makes an assumption that if CAS is rolled out over the next two years across India, this would be possibly the largest incremental cost item for most Indian consumers. At an average STB price of Rs 1,500,500 (low-end analog box produced on a large scale) and assuming a 50 per cent conversion rate of the existing 42 million India C&S household base, there would be a huge outgo from the Indian consumer’s wallet.
Over the past few years television viewing in Indian homes has become a necessity with viewers accustomed to receiving premium content (movies/premium sports/entertainment) at the cost of Rs150-300 per month.
Hence the propensity to purchase a set-top box (to continue with the existing viewing experience) will take precedence over all purchases. In the transition period, impact on sales of other consumer durable items could be significant.
More specifically, implementation of CAS will also have an impact on the sales of the second TV set in most urban households given that post-CAS each television set would require its own set-top box.
Also read:Tier 1 channels going ‘pay’ will have a negative impact: CSB report
Cable ops real gainers of pay channels turning FTA: CSB report -
Tier 1 channels going ‘pay’ will have a negative impact: CSB report
MUMBAI: A report titled “Conditional Access or Catch 22 – Who Will Blink First?” compiled by the Citigroup Smith Barney (CSB) report (dated 15 May 2003) states that if pay TV broadcasters refuse to play into the government’s hands (and turn free to air) then it will have negative ramifications. The report says that the government is likely to blink first and postpone rollout (a la VAT implementation and telecom tariff roll-backs).
The CSB report says that if pay channels remain pay channels post-implementation of conditional access on 14 July, 80 per cent plus of the viewers in the metros will stop receiving most of the popular Hindi general entertainment channels.
The report says that this would have the following significant negative ramifications:
* Pay channels will see a significant dip in metro viewership – most advertisers are already holding back media spends until clarity emerges on the dynamics of implementation of CAS.
* Given that most advertising spend for the country is controlled out of metros, especially Mumbai and Delhi, the argument that the viewership dislocation impacts only the metros may not hold water with advertisers. Consequently advertising revenues for most pay channels would be at risk
The report cautions that the government would have to deal with a situation of effective cable blackouts across the metros, which would have significant negative political ramifications and lead to a possible postponement of the implementation deadline.
The report also notes that the government has not hesitated to roll-back telecom tariff hikes or implementation of VAT when they became politically sensitive issues, given that 2004 is an election year.
The CSB report adds that if the government is firm on its 14 July deadline or over a longer term stays firm on the issue of implementation of CAS, a number of pay-channels will need to evaluate the possibility of turning free-to-air to guard against possible loss in viewership.
The report states that this would play into the hands of the government and the cable fraternity (MSOs and LCOs) and hence tier 1 broadcasters like Star, Sony and Zee would not be likely to follow the route.
If, however, a number of pay TV channels turn free to air it would be extremely positive from the government’s perspective as it could return to the Indian public in an election year and stake claim to having brought down cable charges (from the current Rs 150-300) by over 60 per cent.
Possible solutions don’t enthuse
The report adds that a number of possible solutions to ensure smooth implementation of CAS have been proffered. However a consensus among the various parties, ie, broadcasters, local cable operators, multi-system operators, the consumer organizations and the government does not seem to be on the horizon.
In the absence of consensus – a smooth roll-out is unlikely. Strategies of a single city roll-out, longer transition period, allowing certain popular pay channels to be part of the free-to-air tier have been discussed. The report envisages the following scenarios:
Solution No 1: Chennai single city roll-out
One of the solutions to guard against the short-term implementation-related dislocations has been to roll-out CAS in only one metro – possibly Chennai. The experience of a CAS rollout in Chennai may not be representative of the experience that is likely in the rest of the metros, states the report.
Chennai has certain unique demographics/viewership preferences with a majority of the 1.5m cable households controlled by mostly one multi-system operator, Sumangli, and viewership preferences skewed towards free-to air-channels.
As apparent from the data, 87 per cent of the weekly viewing time in Chennai is spent on watching Tamil language channels, which are all free-to-air. The pay channels (which are generally popular in the rest of India) enjoy only a six per cent share of the viewing time.
This is in complete contrast to the experience in Mumbai and Delhi where pay channels, primarily the Hindi general entertainment channels, enjoy a much high viewership share. Consequently a successful test roll-out in Chennai may not be representative of the outcome of a CAS roll-out in the other metros.
Solution No. 2: Longer transition periods / dual mode transmission
The CSB report also states that certain segments have suggested a six-to-eight month transition period for seeding set-top boxes in consumer homes. Further the government could also allow pay channels to function in a dual-mode (provide a free-to-air feed during the transition period) in the metros.
In a best case scenario with the cooperation of MSOs/LCOs, set-top boxes could be seeded locality by locality in consumer homes over a three- to six-month period with the broadcasters switching off their free-to-air feed per locality as a minimum penetration level is achieved.
The CSB report contends that lack of availability of pay channels will be the most important lubricant towards take-up of set-top boxes. If pay channels are available in free-to-air mode (albeit temporarily due to the dual feed) the incentive to consumers to invest in a STB will be limited.
The report notes that consumers need to be ‘pushed’ into buying set-top boxes with the only effective push being in the form of a blackout of popular pay channels post 14 July. It is unlikely that the government will risk these jolts on a mass scale and look to demarcate the cable population into the ‘haves and have-nots’ in a politically sensitive election year.Also read:
One out of 6 cable households will get pay channels: CSB reportCable ops real gainers of pay channels turning FTA: CSB report
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Cable ops real gainers of pay channels turning FTA: CSB report
MUMBAI: A report titled “Conditional Access or Catch 22 – Who Will Blink First?” compiled by the Citigroup Smith Barney (CSB) report (dated 15 May 2003) states the real gainers of pay channels turning free to air would be the cable operators.
The CSB report states that as per current CAS regulation, the cable operators are mandated to carry only 30 free-to-air (FTA) channels (of which about six to seven channels would be channels of the government-owned Doordarshan, which they have to carry per regulation).
The government has also mandated Rs 72 as the maximum price for the basic tier, leaving cable operators with little incentive to carry additional channels.
Consequently, the free-to-air channels will likely have to pay a ‘carriage fee’ to the cable operators to form part of the basic tier, according to the report. Hence, turning free-to-air may not be the panacea to all problems for the pay channels.
Finally, pay channels turning free-to-air would have negative implications for both advertisers and content providers. With a drop in subscription revenues it is likely that pay channels would seek to raise their advertising rates and cut back on content development costs.
Pay channels – forming part of the free-to-air tier
The report says that the definition of a pay channel reads in conjunction with the definition of basic tier suggests that there is nothing in regulations that prevents a pay channel to be part of the FTA basic tier. Technically speaking, in certain areas, a pay channel may tie-up with the MSO/LCO and be part of the free-to-air basic tier.
However, this solution can only work if the government does not regulate the basic tier price at Rs 72. If the free-to-air price remains at Rs 72, the LCO/MSO will have little to share with the broadcasters after recovering their basic costs.
If cable charges remain at the current levels of Rs 150-300, then of course this could be a possible solution; says the CSB report. But then that is status-quo – effectively today most pay broadcasters are in any case ‘negotiating’ for a share of this Rs 150-300 – issues of non-disclosure, consistent hikes by broadcasters, etc were the cause of the entire regulation in the first place.
The report adds that the only possible long-term solution to rectify this convoluted industry structure would be either a Direct To Home (DTH) implementation (associates of both Zee and Star have obtained licenses) or roll-out of cable services through telephone lines (Reliance Infocomm, BSNL have announced plans) – in both cases bypassing the local cable operator.
While both these solutions have implementation hurdles, they would be appropriate for addressing the Tier 1 high income household brackets ,which in any case is the
core population which all parties are fighting to address.
Attempting to stratify a 42 million strong cable household population across affordability and demographics as CAS seeks to do is a process with many pit-falls and too many short-term dislocations.
Also read:
One out of 6 cable households will get pay channels: CSB reportTier 1 channels going ‘pay’ will have a negative impact: CSB report