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Tag: Karan Taurani

  • SAT allowing Punit as CEO of Zee/Sony merged co. – a potential overhang if Sony does not agree on the same

    SAT allowing Punit as CEO of Zee/Sony merged co. – a potential overhang if Sony does not agree on the same

    Mumbai: As per media reports (link – https://tinyurl.com/4sfbhbn4

    ), Sony does not want Punit Goenka to head Zee/Sony merged co, amidst the ongoing SEBI investigation which will continue despite interim relief from SAT. We believe this is as per our two scenarios pointed out earlier (scenario 1 – merger process expedited with clarity over Punit and scenario 2 – Sony not in favour of appointing Punit as CEO amidst the ongoing investigation), which clearly mentioned that Sony may not be in favour of having a CEO who is undergoing an investigation.

    Legally, we don’t foresee any challenge in appointing Punit as CEO, post the relief by SAT- as indicated by primary checks with legal experts too. However, as Sony is the majority in this merger – they may decide to appoint someone else due to this investigation; there is a high likelihood of Sony appointing someone internally to head the merged co.

    There is minimal impact of the above move (change in CEO) eventually, as the appointment of a new CEO will require a mere shareholder and Board approval; as mentioned earlier, we don’t foresee big delays beyond a point for the merger and the process could end over next 8-12 weeks, as Sony may not wait longer than that. Hence, we don’t even expect a big delay as such on the merger due to this move. Expect a larger transition time in business synergies case of Sony acquiring Zee without Punit, due to a potential new management for Zee

    Albeit above, 1) the business synergies, 2) superior CG (corporate governance) practice, 3) scale in OTT remain to be the drivers for the merged co and this could drive superior valuation multiples.

    Various scenarios that could emerge basis above – if Punit Geonka changes his stance and wants to remain CEO of the merged co, post SAT approval or keeps his stance (not wanting to become CEO)

    1) Scenario one – Sony may back out – merged called off  (Probability -20 per cent)

    In case of Punit Goenka wanting to be the CEO of the merged co. and Sony not agreeing upon the same,  it may lead to Sony backing out of the merger. We believe the probability of this event seems to very low, as the merger is very important for Z shareholders and the Goenka family; also, Sony may struggle to scale up in a market like India in case Disney is acquired by Reliance. We believe Sony too is equally eager for the merger as Z is, as the linear TV and OTT market has turned disruptive.

    2) Scenario two – Punit remains CEO of the merged co (Probability -10 per cent)

    In this scenario, Sony may allow Punit Goenka to remain as CEO and have their own finance, operations team for day to day affairs, with a majority on Board by Sony. However, given Sony’s MNC culture, this may seem to be a low likelihood event, unless they legally need to do it (As per term sheet of the merger) and cannot back out of the merger; Sony may not want to have a CEO on Board, who is under a SEBI investigation

    3) Scenario three – Punit may be offered a board seat, but not a CEO role (Probability -30 per cent)

    In this scenario, Punit may be offered a Board seat in the merged co, but not a CEO designation, until the outcome of investigation is known. This in turn may lead to superior CG practices in Z, with change in finance and operations team post the merger by Sony. This could potentially be a win-win for both parties, if mutually agreed upon. Further, Punit may also ask Sony for a higher non-compete fee in case he plans to step aside of Zee and not become CEO. We believe the probability of this event is on the higher side, as Punit may eventually agree to be on Board in the interim, until the outcome of investigation is known with a higher non compete fee

    4) Scenario four – Merger goes ahead without Punit (Probability – 40 per cent)

    In this scenario, Punit Goenka agrees to step aside as CEO if Sony decides to call off the merger; Sony may continue to run its India operations in India if the merger is called off, but Zee may struggle as valuations may come off atleast 50 per cent if the merger does not go through, which in turn could hamper shareholder and promoter stake valuation in Z today. We thus believe that at the end of the day, bargaining power is limited from Z promoter side, and they may have to agree upon the same. Sony can also seek shareholder approval (consortium) and go ahead with the merger without Punit Goenka. We believe probability of this event is the highest as shareholders own the company, with promoters having a mere 4 per cent stake.

    In terms of merger process, Z has already filed with ROC (Registrar of Companies); the merger process has reached advance stages and hence it may be tough for Sony too to back out of this merger. We thus believe that the likelihood of this merger going through remains high (80 per cent probability) with or without Punit Geonka; however, the recent approval by SAT allowing Punit as CEO and Sony not agreeing upon the same is a potential risk for the merger, as probability of the merger not going through moves up to 20 per cent now. As per our checks with legal experts, SEBI will file a stay in Supreme Court against the SAT order by end of this month. We await updates from Sony and Zee management, which will provide us more colour on where this merger could be headed.

    The credit for this article goes to Elara Capital Sr VP – research analyst (media, consumer discretionary & internet) Karan Taurani.

  • MNC media juggernaut arrives

    MNC media juggernaut arrives

    Mumbai: The National Company Law Tribunal’s (NCLT) approval for the Zee Entertainment -Sony merger without conditions offers further respite for Z valuation, which has been muted for the past two years (the stock has not given any absolute returns). The company will now move to Registrar of Companies to file for the merged entity once the final NCLT order is released; in the interim, we await the outcome of the SEBI and SAT cases against the Goenka family, the promoter, which may not have any adverse impact on the merger, as Punit Goenka has already stepped down from the Board; in a worst case scenario, the Board and shareholders will appoint a new CEO in case SAT order is against Punit Goenka. Post the regulatory approvals, Z will be delisted, and the merged company will be relisted as Sony-Zee wherein 100 shares of Z will enable shareholders to get 85 shares of the merged entity (~2-3 months process). We do not expect any change in the deal contours despite the long delay, as NCLT has approved the scheme. Further, Sony will get a majority shareholding of 50.8 per cent in the merged entity whereas the Goenka family’s stake will move up to 3.99 per cent, which includes the non-compete fee. We do not expect any impact from creditors filing a case against the NCLAT order.

    Moat remains for the merged company

    Z-Sony commands an ad market share of 24 per cent as on CY22, below the other large peer, Star-Disney, which is at 33 per cent; formation of a large entity on the broadcasting side would lead to cost and revenue synergy, which would offset the negative impact of lower growth rates (India TV ad revenue CAGR has been flat over FY20-23).

    Valuation: reiterate Buy with a higher TP of Rs 340

    We expect better execution in terms of strategic initiatives, due to global expertise and better CG (corporate governance) initiatives , which should propel higher cashflow. We do not expect Z-Sony valuation moving to 32- 33x fwd. P/E (peak valuation multiple in FY18). This is because India’s media landscape has changed with 1) TV broadcasting growth rates converging, and 2) digital business offering limited opportunity for monetization & scale due to disruption; however, we expect the negative impact to be offset by: 1) the merged company, and 2) an MNC-backed firm, which would lead to P/E at a 40 per cent discount vs peak (32x one-year forward). We introduce FY26E for the merged entity and value the core broadcasting business at 20x (from 17x) one-year forward P/E (potential exit of Disney from linear TV may enable Z-Sony to gain market share). We rollover to 24 Sept (since synergies will take some time to kick in) SOTPbased TP of Rs 340 from Rs 300 (after factoring in higher sports losses), with a cash infusion from Sony, synergy and valuing the OTT business 4x one yr. fwd. EV/Sales; our PAT estimate incorporates potential OTT losses.

    The credit of this article goes to Elara Capital SVP Karan Taurani.

  • Disney India to scale down it’s linear TV business

    Disney India to scale down it’s linear TV business

    Mumbai: Reportedly, Disney India may scale down its linear TV business or seek strategic options. It reported an EBITDA margin (with OTT losses) of four per cent (average of FY19-22), due to hefty investments/losses in high-cost cricket content. Zee’s (Z IN) average EBITDA margin (with OTT) was 24 per cent in FY19-22. As per our assessment, unit economics of the TV business is strong, led by healthy profitability margin (~30-32 per cent EBITDA for larger broadcasters core Tv business, ex OTT losses).

    Digital has gained sharp traction since the launch of affordable 4G data, as the India OTT market has posted a CAGR of 19 per cent in FY19-23 to USD 2.1bn. Also, TV industry CAGR declined one per cent in FY19-23, on: 1) regulatory concerns on ARPU, 2) tepid ad environment in linear TV and 3) consistent drop in viewership and consumption patterns. Despite this, TV is still the largest medium after digital, with an ad market share of 34 per cent in FY23 (dip of 330bp from FY20).

    We continue to believe that despite converging growth rate, linear TV medium is a key mode of mass campaigning for larger advertisers (FMCG contributes 45 per cent to TV ad revenue), given the reach/scale it has. Digital has the potential to grow, but unit economics are not yet proven. No larger OTT platforms in India have turned profitable despite: 1) launch

    since 2017 (post 4G data becoming cheaper), and 2) strong adoption/during Covid, which increased time spent/consumption. Also, India OTT has many concerns such as: 1) price sensitive market (lower APRUs), 2) higher distribution costs (heavy dependence on telcos/OEM, 3) higher content costs, 4) lower wired broadband penetration and 5) fragmented nature of the OTT market (multiple languages). This further makes break-even or profitability is difficult for any OTT platform, in the near- or medium-term. We, thus, prefer the linear TV business from a profitability standpoint and believe it will be a win-win for India despite tepid growth rates, as digital is an expensive medium. This may be a challenge to scale at mass – Digital ARPU for a consumer with major OTT platforms subscriptions and data costs is Rs 1,500, 4x higher than that of TV ARPU (Rs 350).

    We believe an exit or a strategic change by Disney in India may augur well for peers such as Zee, Sony, Viacom18, SUNTV, enabling a strategic shift in the ‘go to market’ strategy, in turn benefitting other players to gain market share. Subject to regulatory approvals (NCLT), Zee-Sony merger may be the biggest beneficiary of any changes in Disney management or market strategy, as Zee-Sony commanded an ad market share of 25 per centin FY22, slightly below Disney’s 32 per cent. The merged entity (subject to approval) may thus see a big valuation re-rating , on likelihood of market share loss by market leader, Disney India. Disney India enjoys strong recall across genres such as urban GEC, Tamil, Telugu, Marathi, and sports, which together contribute 65 per cent to India’s TV revenues. TV may become further consolidated post Z-Sony merger with top two players (Z-Sony and Disney India) commanding ~60 per cent ad market share, leaving little or no potential for peers to gain (or spike) market share. We believe there is also a likelihood of Viacom 18 (73 per cent owned by RIL/TV18, 11 per cent TV ad market share)- the third largest broadcaster after Zee/Sony and Disney, becoming a strategic partner with Disney India as the former is aggressively seeking to make inroads in the media segment (TV via TV18/NW18; digital via Jio Cinema).

    This scenario too may not be very disruptive for the Z-Sony merged entity as it leaves with two players having an even larger share in the TV ad market. India OTT market is a long haul – Expect early signs of consolidation in the medium term, but broadcaster-based OTTs (Zee, Sony, Disney), Jio Cinema (largest telecom player) and global giants such as

    Amazon and Netflix may eventually command a lion’s share in this market. We expect smaller OTT platforms to tie up with these larger platforms for distribution/scale. Consolidation is the only way OTT platforms in India may move closer to break-even or profitability helped by 1) lower content cost 2) tech cost efficiency and 3) bargaining power with distributors. OTT is a business of scale/depth as platforms with a large customer base and strong content library may be the first ones to attain profitability due to efficiency on technology and distribution costs.

    The credit of this article goes to Elara Capital SVP Karan Taurani. 

  • Axis Finance moves to NCLAT – more noise, no impact

    Axis Finance moves to NCLAT – more noise, no impact

    Mumbai: Axis Finance has approached the National Company Law Appellate Tribunal (NCLAT), Delhi against the National Company Law Tribunal (NCLT) order approving the merger of Zee and Sony. The NCLAT has served notice to Zee in response to Axis Finance’s plea.

    We believe the above issue of Axis Finance approaching the National Company Law Appellate Tribunal (NCLAT) will not have any impact on the merger between Zee and Sony because the claims being pursued by Axis Finance, which amount to Rs 1,000 mn, are not directed at Zee but rather at its parent company, Essel Group. As mentioned in the NCLT merger order (Zee/Sony), Axis Finance has previously approached various legal bodies, including the Debt Recovery Tribunal (DRT) and high courts, for above claims; however, judgements on the same have not been in their favour (Axis Finance). Therefore, we believe these claims lack merit and will not impact the merger. Also, appeals with NCLAT may continue for months even after the merged company is formed, just like in the case of PVR-Inox merger (Consumer Unity & Trust Society appealed in NCLAT against the merger and the case got dismissed in August 2023 – six months after the merged company of PVRINOX was formed).

    As for the current status of the merger, the merged company is progressing with the Registrar of Companies (ROC) filing process, post receipt of the NCLT merger order. They are also engaged in discussions regarding Closing Precedents (CP) (the merged company may want to include July/August financials as well), which may result in a delay of two to three weeks in the merger timeline. We believe the record date is usually given one week prior to delisting. Considering the marginal delay in CP, the record date for the merger could be towards the last week of October 2023. Subsequently, relisting is expected to take place in the first or second week of December 2023 vs our earlier expectation of the second week of November 2023. Additionally, the company will need to submit details of the merged co. Board of Directors to the Ministry of Information & Broadcasting (MIB), before the record date is finalised.

    Further, the SEBI/SAT issue (with promoters) too may not impact the merger timelines as the NCLT merger approval is without any condition.

    We have a BUY recommendation on Zee with a 24 Sept TP of Rs 340 – we maintain our positive stance on the company; PFA our latest company update post the NCLT merger approval.

    The credit of this article goes to Elara Capital SVP Karan Taurani.

     

  • BCCI bilateral rights – Hefty premium on a low base; marginally below our estimates

    BCCI bilateral rights – Hefty premium on a low base; marginally below our estimates

    Mumbai: BCCI bilateral rights for 88 matches have been sold of INR 59.6 bn (8 per cent below our estimated range of INR 65bn-INR 75bn, link – https://tinyurl.com/2u8v8xrm) which is 13 per cent higher on a per match basis vs the earlier cycle (43 per cent lower vs IPL on a per match basis).

    * Whilst comparing this with IPL, premiums vs base price for TV/digital in IPL per match were at 17 per cent /72 per cent on an already high base price, whereas in the case of these bilateral matches, premiums vs base price for TV/digital per match basis is 63 per cent /41 per cent vs base price (base price was set much lower than earlier cycle’s final price per match). In our view, TV premium compared to base price could been higher than digital, due to Viacom 18 bidding aggressively for her same as one platform having both (TV and digital rights) lead to better advantage on bundling and higher negotiating leverage with advertisers  

    * Overall premiums (vs earlier cycle) for these rights been much lower vs IPL due to 1) lower number of T20 matches, 2) less interest in bilateral matches with a large tournament like IPL garnering interest on home grounds already, 3) lesser number of platforms bidding for the same and 4) a poor ad environment over the last one year; IPL had attracted a premium of 117 per cent on a per match basis vs it’s last cycle price, whereas these rights have come at a premium of mere 13 per cent on a per match basis  vs it’s last cycle’s price.

    Further, in this case, the cost of per match on digital has surpassed cost of per match on TV , as digital is 8% higher on a per match basis; in the case of IPL – TV and digital were largely on par on a per match basis

    Earlier cycle of the bilateral rights was not unbundled hence there isn’t a comparison on TV/digital rights basis per match  

    We believe that a single entity securing both TV and digital rights is mutually advantageous, as it enhances the negotiating leverage of the platform. This allows them to offer bundled options to advertisers. In contrast, when two separate players acquire TV and digital rights, it fuels competitive rivalry between platforms, resulting in a dampening effect on overall revenues (IPL revenues were down YoY in CY23); we believe bundling prevents advertisers holding a stronger bargaining position as compared to the platforms.

    Acquisition of BCCI bilateral rights will also enable Jio cinema to become even bigger in the Indian OTT ecosystem; the platform has an AVOD market share of ~22-24% already in CY23, after factoring IPL revenue and other content; revenues can scale up further due to these bilateral rights; this in turn will intensify competition in the OTT segment and work negatively for other broadcast-based OTT players like Sony, Zee, Disney+Hotstar. It will also continue to negatively impact SVOD revenue growth for Indian OTT, as Jio Cinema may continue to offer content free  

    On the TV side, this is Viacom’s first large scale cricket acquisition, as IPL and WC rights on cricket for TV are with Star/Zee respectively.

    The credit of this article goes to Elara Capital SVP Karan Taurani 

  • India’s DPDP Bill – a win-win for consumer tech platforms

    India’s DPDP Bill – a win-win for consumer tech platforms

    Mumbai: India’s Digital Personal Data Protection (DPDP) Bill, is expected to be implemented over the next six to eight months in a phased manner; hefty penalties have been imposed for breach of data. This Bill will have a positive impact on companies/platforms that use first party data, whereas players using or sharing third party data (Google cookies, publisher platforms) could see a negative impact; this could potentially mean that sourcing data may become an expensive proposition for programmatic companies like Affle, as they may need to invest in enhancing their own database (first party). This Bill mirrors UK’s GDPR (General Data Protection Regulation) in terms of the major norms mentioned therein. Internet platforms like Zomato, Nykaa, Paytm etc may have relatively lesser monthly active users (MAU’s) as compared to social/search giants like YouTube, Meta, however the former has a detailed understanding of their limited customer base, with more intelligence around their purchasing/consumption patterns; e-commerce giants like Amazon, Flipkart too will have a big edge due to data protection, as they can earn ad. revenue with the help of their first party data, which will help provide better monetisation and profitability over the medium term.

    Long haul for implementation of the DPDP Bill (six to eight months)

    The DPDP (Digital Personal Data Protection) act, which has been highly anticipated, has been in the works for the past four to five years. Numerous drafts have been exchanged and extensive input has been gathered from the industry stakeholders. Although the Bill is set to take effect on 11 August 2023, its actual implementation has not yet occurred. Currently, the sections have not been enforced, but there are plans to assign specific dates for the phased implementation of these sections.

    The scope of its applicability extends to all forms of digitised or digital personal data. Notably, the act also holds extraterritorial jurisdiction. This means that all entities, including those located outside of India, that process data to offer data services within the country, will be obligated to adhere to the provisions of the act. The Bill is anticipated to bring about a positive impact. India is undergoing rapid digital transformation, and with such swift digitization, there’s a substantial amount at risk. Considering the challenges posed by data leaks, the implementation of this law is crucial. It will establish a regulatory framework that offers a cleaner environment for the transmission and processing of personal data.

    Substantial penalties for non compliance/data privacy breach

    The entirety of the act’s liability is placed upon the data fiduciary. The responsibility for implementing safeguards to ensure data protection also falls solely on the data fiduciary. Implementing the requirements should not pose a significant challenge for data fiduciaries, provided they approach it with seriousness and a willingness to comply. The Bill makes it obligatory to report breaches of the principles, regardless of whether the breach is categorized as a high-security breach or not. Entities will undoubtedly feel apprehensive about the substantial penalties, given their magnitude. Data fiduciaries have a responsibility to uphold reasonable security measures for personal data when processing such information. Failure to inform both the board and the principle in case of a data breach can lead to significant fines being imposed. Rather than waiting for the possibility of never being reported and taking on the associated risks, companies could proactively reach out to a wider customer base about the data leak. This approach would involve enhancing compliance efforts and demonstrating a commitment to addressing the issue.

    Contents of the DPDP Act have been drawn heavily from EU’s GDPR

    The Indian legislation has drawn significant inspiration from the EU’s General Data Protection Regulation (GDPR) and is built upon its framework. The authorities have analysed the real-world challenges that arose with GDPR and incorporated those insights into the crafting of this Bill. The primary objective is to ensure the responsible processing of personal data and establish robust data privacy rights for individuals. Both regulations emphasize the handling of personal data through consent, although there are specific scenarios where consent might not be obligatory. The Government has skilfully navigated the task by avoiding excessive amendments and appropriately identifying areas of overlap with other laws.

    Ad-tech players could face challenges in accessing third-party data

    It is believed that targeted advertising technology companies operating in this domain and relying on third-party data for tailored advertisements will encounter additional challenges. Since they don’t directly gather the data, using third-party data will demand heightened attention. Employing third-party data should make you more cautious, vigilant, and well-informed about the methods of data collection. Ensuring the integrity of the data used for crafting targeted advertisements becomes imperative to prevent any form of contamination. Well-established players involved in collecting, distributing, or selling data would undoubtedly need to swiftly adapt to the provisions of this new act. These programmatic ads. tech players could resort to either 1) Investing into their own database or 2) Recover the higher the costs from clients via higher pricing.

    Broad based implementation – across small and large enterprises

    Small businesses, lacking substantial resources to engage established players, are focusing on diligently ensuring proper compliance. They recognize that firsthand data collection is significantly preferable to relying on third-party data access. Bigger technology companies might be required to establish compliance requirements slightly ahead of smaller players and startups. The law takes a somewhat more lenient stance toward startups. It’s anticipated that there will be a window of around six to ten months before full implementation is expected.

    Safety of consumers/children an added benefit apart from privacy

    Companies operating multiple businesses might find common ground internally, where data exchange occurs among their various segments or units by following proper compliance. This aspect should be regarded as a protective measure for sharing information securely. In the case of large tech giants, they will have to adhere to the supplementary data requirements. These companies heavily rely on technology, so many of the obligations are likely already integrated into their operations. The introduction of this regulation could bring about a positive impact, leading to an enhanced safety net. Regarding children’s data, obtaining verifiable parental consent is a requisite. The act has established a mechanism for addressing grievances within its provisions. The composition of the board is explicitly outlined in the act.

    The credit of this article goes to Elara Capital senior vice president- research analyst Karan Taurani.

  • Rise in inflation likely to hurt advertising revenue growth of TV broadcasters, says market analyst

    Rise in inflation likely to hurt advertising revenue growth of TV broadcasters, says market analyst

    Mumbai: The rising inflation is playing a spoilsport for the television segment currently, impacting its revenue as advertisers are cutting down the marketing spends. The impact of soaring inflation is observed in one of the most significant categories of the TV industry-FMCG sector. The new age internet companies are also reducing their ad spend. Currently, the advertisers are feeling apprehensive due to the macro weakness and inflationary headwinds.

    Inflation heat to hurt profitability

    As per financial analysts at Elara Securities, television was the first traditional medium to recover to pre-COVID levels in the financial year 2022. The company estimated the operating profitability of all broadcasters to be muted due to content investments and lower advertising revenue.

    Earlier, experts stated that the advertising revenue for television broadcasters is recovering and will reach the pre-covid levels. They predicted that the TV ad revenue will grow 12 per cent in the next financial year. However, the rising inflation has created bottlenecks as companies curtailed their advertising campaigns and adopted a wait-and-watch approach. The FMCG companies also have reported a slowdown in consumer spending. Moreover, the rising input costs also have forced price hikes, which is impacting the overall consumer sentiments and behaviour.

    According to data released by the National Statistical Office (NSO), retail inflation touched 7.04 per cent in May 2022. The Reserve Bank of India (RBI) has updated its inflation projection for the current fiscal (FY23) to 6.7 per cent. 

    According to EY-FICCI’s media & entertainment 2022 report, the television revenue is expected to reach Rs 826 billion by 2024 and will grow at a CARG of 4-5 per cent. In such a case, if the advertisers squeeze their ad spends, it will be difficult for the TV industry to recover and reach the target as estimated, the experts believe. 

    In 2021, television advertising revenue grew 25 per cent to reach Rs 313 billion, recovering from a 21.5 per cent drop in 2020. Due to Covid pandemic pressure, TV advertising revenue declined. Moreover, the ad revenue stood at Rs 320 billion in 2019 during the pre-Covid times. 

    Industry’s observations despite challenges

    Elara Securities also estimated that overall revenue of the major players like Zee, Sun TV and TV Today is slated to grow by 4.7 per cent, 23.2 per cent and 23 per cent year-on-year (YoY), respectively. Zee’s revenue growth is negatively impacted by lower operating income (“Dhaakad film”), while its net profit is expected to witness a growth of 26.4 per cent driven by the redemption of preferential shares (paid off in Q4 FY22).

    Zee’s overall revenue was up by 14.1 per cent YoY in FY22 at Rs 8189.3 crore. Its profit after tax (PAT) was up by 32 per cent at Rs 955.7 crore. Sun TV’s standalone revenues were up by 12.46 per cent YoY in FY22 at Rs 3504.88 crore. TV Today’s overall revenue was up by 18.76 per cent in FY22 at Rs 973.99 crore.

    The company also estimates that advertising revenue for Zee, Sun TV and TV Today will grow 12.7 per cent, 36 per cent and 28 per cent YoY, respectively, on a low base, as they remain between two per cent to ten per cent lower than pre-Covid levels. Subscription revenues for Zee and Sun TV are expected to remain flat YoY.

    Zee’s advertising revenue in FY22 stood at Rs 4396.5 crore up by 18 per cent YoY. Its subscription revenue stood at Rs 3246.6 crore. Sun TV’s advertising revenues in FY22 stood at Rs 1300.60 crore up by 30.84 per cent and subscription revenues stood at Rs 1657.13 crore. TV Today’s revenue from television and other media operations stood at Rs 912.03 crore, up by 17.8 per cent in FY22. 

  • IFTPC proposes Bio-Bubble plan before Maharashtra Govt

    IFTPC proposes Bio-Bubble plan before Maharashtra Govt

    MUMBAI: Film and TV land juddered to a halt on Wednesday after the Maharashtra government imposed a ban on filming for a period of two weeks owing to the skyrocketing cases of Covid2019 in the state.

    The new order is part of the Break The Chain guidelines, that states all shoots of films, television and advertisement will be put on hold from 14 April to 1 May. Until this order, production had been taking place with restrictions like avoiding filming scenes with large crowds or background dancers and no shoots during the weekend lockdown.

    As the television and film industry gears up to brace the impact of the two-week-long restrictions in Maharashtra, several entertainment bodies and broadcasters met on Wednesday and decided to appeal to state chief minister Uddhav Thackeray to allow certain production-related activity by following Covid2019 safety protocols.

    Television producer and Indian Films & TV Producers Council (IFTPC) chairman TV wing & web JD Majethia has said that while the entire fraternity supports the government in its fight to curb the spread of Covid2019, they have decided to approach Thackeray to allow shoots to go on with stricter measures.

    “We are writing to the CM for a few exemptions during the next two weeks. People look forward to entertainment and fresh content while being confined to their homes during such a trying time,” said Majethia.

    He also mentioned that the production houses who have created a bank of upcoming episodes will sustain and those who do not have fresh episodes in the pipeline will have to air repeat telecasts.

    “Some film and television producers are also mulling over plans to shift productions to locations outside Maharashtra like Goa or nearby places to commence the shooting,” said Swastik Productions MD Rahul Kumar Tewary, who is currently shooting in Gujarat. “They are also changing the track of the shows to current times. The whole industry is facing a very challenging time despite following all the Covid2019 protocols the situation is uncontrollable and unpredictable. Broadcasters are also planning whether they want to air original content or repeat telecasts.”

    The new restrictions could impact the shooting of around 90 TV shows, 50 Hindi movies, and 40 Marathi films. Apart from these, the production of a large number of web series will also be impacted.

    While echoing the sentiment, Majethia mentioned that rather than changing locations, it would be easier for a fiction show to alter its storyline. However, it can be extremely difficult for a non-fiction property to create a whole new infrastructure, he highlighted. “Moving the entire cast and crew to a new location is a possibility but what will we do if the situation gets worse over there as well? A lot of shootings were happening in Madhya Pradesh but the government soon announced a lockdown, due to which ongoing shootings were immediately halted. These kinds of situations can happen anytime,” the producer said.  

    With the double-edged sword of rising caseloads and production shutdown at any time hovering over their heads, representatives of several producers’ bodies have decided to propose creation of bio-bubbles to the state government.

    “This week, along with other stakeholders of the industry, we will present our plan on bio-bubble to the government. Through this move we are trying to build a confidence among government officials that if shooting gets resumed, we have a protected environment where we can shoot,” Majethia explained. 

    He also expressed fears that if the lockdown continues and fresh content dries up, it could be difficult to retain existing viewers, who may migrate to online streaming platforms for good.

    Elara Capital research analyst Karan Taurani said TV shows will be most impacted by the shutdown, specifically Marathi and Hindi fiction and non-fiction shows.

    Meanwhile, broadcasters and producers are working in tandem to tackle the situation. There is no penalty on late delivery of content and discussions are underway on extending the budget in case of outdoor shoots.

    “TV broadcasters generally have a buffer of 10-15 days before a fresh episode is shown, hence the impact will be minimal if this restriction stays for 15 days, however in case of any extension, it will have a negative impact for broadcasters," pronounced Balaji Telefilms CEO Karan Taurani.

    Bollywood is also feeling the heat. Films like Shah Rukh Khan-starrer Pathan, Salman Khan-led Tiger 3 and Amitabh Bachchan’s Goodbye that were filming under these restrictions are now in limbo. Moreover, the industry is bearing losses as spot boys and other daily wagers have returned to their hometown due to no work.

    “We support lockdown, but there has to be a way for us. The government talks about others but not daily wagers in our industry,” said the president of the All Indian Cine Workers Association.

  • Is it all gloomy for independent OTT players?

    Is it all gloomy for independent OTT players?

    MUMBAI: Though everyone is ravenous to take a bite out of India's rich streaming phenomenon, it's not all hunky dory for independent players. Consumer acquisition, retention and chalking out a sustainable monetisation plan are tougher than they seem. While deep-pocketed giants may survive, the road is rocky for independent platforms. 

    The downfall of two ambitious players

    Towards the end of 2019, Hong Kong-based over-the-top (OTT) platform Viu shut down its India business. The company cited highly competitive nature and the requirement of heavy investment without a path to sustained monetisation. Viu’s downfall was followed by Singapore-based telecom company, Singtel-backed, Singapore-based HOOQ. The service, available across Singapore, the Philippines, Thailand, Indonesia and India, which was also backed by Warner and Sony, filed for liquidation last month in Singapore. HOOQ said in a statement that it had been unable to grow fast enough to keep up with global and regional rivals and also noted “significant structural changes” in the OTT video market in the five years since its launch.

    The statements of both Viu and HOOQ show the inability to grow a viable business model amid stiff competition. While the wave of online content started with small independent creators in the country, it's time for them to either join hands with bigger players or exit. Especially, when players like Netflix and Disney+Hotstar are earmarking billions for this market. Homegrown players are also investing highly. The sheer amount of content library, production quality along with smart UIs speak in their favour. 

    What lies ahead for independent players?

    “There is a global recession right now and these OTTs are vouching on a lot of these global fundings, private equity fundings. COVID-19 has a big impact and there will be a recession in many countries and lot of the funding activities will slow down. Because of the current crisis, if their mtrics like success rate, viewership, time spent etc., are not good, many OTTs will also shut down in near to medium term despite being well-funded. India is an extremely fragmented market. We have 35 plus OTTs causing all the more chances of many more shutting down,” Elara Capital VP – research analyst (Media) Karan Taurani says.

    SBICap Securities institutional equity research head Rajiv Sharma brings up three aspects. He talks about customer acquisition which is becoming an expensive exercise for independent OTT platforms with more serious players coming into the picture. He also adds that Netflix can amortise content produced in India in 130 markets. Broadcasters have catch-up TV content, the movies which they had acquired for the broadcasting business as a source of basic traffic for engagement.

    “Independent platforms have a small library, no access to other content or market and moreover, they are working on a small budget. Their mortality rate is high because users will watch something and delete it. So low stickiness means higher customer acquisition cost and whatever they are producing, they are not able to amortise it over a higher set of users. So per unit content cost or production cost is higher. These are the reasons we are seeing independent platforms struggling,” Sharma explains.

    Is it all gloomy for smaller and independent players?

    Platforms like ALTBalaji, Hoichoi are thriving without funding from any big network, broadcaster or tech giant. These two platforms have witnessed good uptake in users with an attractive content slate. Moreover, they have collaborated with existing rivals also to increase their reach and find an alternative source of revenue. While we tried to find what are the factors that help them to survive, both of the platforms cited the parent company’s long-term experience of producing content, hence understanding of consumer preference.

    “I think understanding of the customers is very important and having control over content is very important. Twenty five years of understanding consumers is very important because as we make a show or acquire a  movie, we exactly know what a consumer might want. We have been in the business long. It's not a question of money only. Another thing what works well for SVF is that we  have made 150 plus movies till now. We have relationships with all the producers of the business. So, when we wanted to license a movie, we could do it from every person in the industry. We had production experience, key understanding of content, relation with the industry and talents,” Hoichoi co-founder Vishnu Mohta says.

    “Being from the house of Balaji Telefilms, who have been catering to the audiences ever-changing preferences for over 25 years now, ALTBalaji has an advantage unlike no other of having a deep understanding and familiarity with the viewer’s consumption preferences. With content being our biggest differentiator, we have been catering to all kinds of audiences through our diverse content offerings spanning multiple languages. Moreover, Indian originals have picked up pace in the past few days as audiences are on the lookout for local relatable content and are spending more time online. With content being king, there is a growing acceptance amongst consumers to pay for unique narratives and good story telling which keeps them hooked to their screens,” Balaji Telefilms group COO and ALTBalaji CEO Nachiket Pantvaidya states.

    Yupp TV, another OTT platform which is tuning its business towards ed-tech direction in India, thinks that being an early mover, consolidation has helped it.YuppTV and YuppMaster founder and CEO Uday Reddy acknowledges, “ All the players who are in space are big broadcasters. They are already in the content space. They are just evolving from linear to digital. I don’t think many independent players are left now. If they don’t invest in capital, they won’t be able to sustain.”

    With the COVID-19 crisis, things are bound to change once the situation normalise.

  • Convergence, consolidation & collaboration to fuel growth of cable, broadcast & OTT sectors

    Convergence, consolidation & collaboration to fuel growth of cable, broadcast & OTT sectors

    MUMBAI: In 2019, the Indian cable, broadcast and OTT industry witnessed many fundamental changes from digital dynamics to behavioural change of broadcasters moving from B2B to B2C model to industry stakeholders adjusting to the new tariff order (NTO). Indiantelevision.com’s VBS 2019 provided a platform to the industry experts to discuss and address the key issues faced them. Industry doyens revealed that convergence, consolidation and collaboration are the three 'C's to fuel the growth of the industry.

    VBS 2019’s panel discussions on ‘Transforming the sector to fuel growth’ included Elara Capital VP-research analyst Karan Taurani, Shemaroo Entertainment chief operating officer Kranti Gada, BBC Global News South Asia distribution head Sunil Joshi, PwC India partner and leader- media, entertainment Raman Kalra along with moderator SBICAP Securities equity research head Rajiv Sharma.

    Sharma set the tone of the discussion by briefing the audience on the major issues faced by the industry's stakeholders like cable, DTH, broadcasters, OTT, consumers and regulators in 2019.

    Kalra said, “We have been talking about convergence for a very long time and consolidation will keep on happening if we are willing to provide relevancy to the consumer. In the entertainment media space it is important to find a model which is relevant at scale. But how do you make relevant at scale? The relevancy for scale will trigger the consolidation because it leverages number on the financial statements and on the balance sheets of the company. It brings about so many synergies to the business models to run profitable, long term and sustainable business.”

    Taurani shared his view on consolidation in the cable space. He said, “Firstly it is important to highlight that business dynamics are changing completely. Broadcasters have been used to the B2B model since inception but now we are moving to B2C kind of a model. Basically everyone is well aware that if we really want to move to next level on digital, scalability is a very big factor and OTT platforms just offering about 10, 15, 20 movies will not help. So, to achieve that scale we need to invest in content. Apart from driving the partnership with other DTH cos or MSOs, achieving the scale on the digital part is needed. So I think it would take some more for them to understand the market and move to the next level.”

    Gada believes it is a great time for the media industry. With the emergence of OTT, the industry has added one and a half hours of screen time on digital front along with the television screen. Therefore the engagement of the end consumer with the content or with media or films has increased multifold.

    Gada says, “With deep-pocketed players cost goes haywire because short-term profitability is not their outlook, maybe their content is not their mainstay investment. It is sometimes just for consumer stickiness."

    Joshi said that convergence is the mantra of the day. “We have broadcasters, DTH, cable, OTT, consumers and a regulator who are the stakeholders of the value chain. If we look at post NTO and market dynamics, OTT is being discussed so widely because of its crispness and on-point approach to the consumers. Most of the broadcasters have direct consumer reach on their OTT to take care of and keep the stickiness on the linear also both compliments.”

    “Going forward, television needs to learn from OTT on what is been offered. So that on a quality level, both competes and at the operational level both collaborate. We have seen the collaboration of distribution platform and OTT because of their synergy and potential to exploit the potential consumers. Though they are competing at some level they are collaborating as well,” added Joshi.

    The panellists also elaborated on the digital monetisation model. They believe that there are three ways to monetise on digital platforms. The first is the business model, second is consumer centricity and third is the experience. Consumer centricity focuses on investing in knowing consumers. The second point of experience focuses on delivering the right experience. With respect to the business model, one has to experiment with multiple business models.

    The panellists also dwelled on the importance of the subscription model as AVOD does not lead to profitability because of the delivery cost, customer acquisition cost etc.  

    Stating an example of TataSky's binge initiative, Gada urged MSOs to become digital distributors and come up with aggregated and discounted offering for the consumer and make it convenient for those who are struggling with five to eight OTT apps. Gada asked MSOs to apply similar principles they used to offer TV channels to come up with bouquets of digital channels.

    The panel also highlighted the surge in term of telcos spending towards OTT. The new emerging game-changers today are e-commerce, smart TV and VMC.

    Sixty per cent of the money on digital advertising spent between Facebook and Google network. But now that is changing and the share is moving more towards OTT. The panel discussion ended on a positive note expecting that share of digital advertising will be 20-30 per cent whereas video advertising will be 40 per cent plus.