Mumbai: Merger of TV18 and NW18 is a serious attempt made to target a larger share in the fragmented M&E market of India, specifically within digital media (search, display, social, e commerce, video, news , audio), which also has a larger set of advertisers spread across SME’s, apart from large verticals. India’s M&E market for TV, print and digital put together is quite large at Rs 1,530bn (CY22); having a bundled offering with a larger target audience/reach will help scalability on revenues and also help a better reach amongst varied set of advertisers. The merger could be a potential win-win for both entities as NW/TV18 have reported a tepid EBITDA margin of a mere 12.3 per cent/13.4 per cent (average of last four years); we believe 1) cost control measures, and 2) synergy benefits will drive efficiencies for the merged business. Further, a bundled offering under the NW18 umbrella, with a subscription plan at discounted price augurs well for a price sensitive market like India, coupled with a large reach of more than 450mn smartphone users by Jio (part of RIL, which is NW18 parent Co.).
India market is all about aggregation of content across various mediums, which will offer better subscription revenue and visibility over content spends across mediums to create a strong pay/subscription-based model via bundling in a price sensitive market like India; higher subscription revenue can offer better visibility over content costs (across mediums). A superior user experience across all offerings coupled with differentiated and good quality content will be the only factor to drive a potential subscription revenue base. We don’t foresee any negative impact of above for listed peers like Z and SUNTV, as they don’t have presence in the news segment; however, in case of NW18 forming a media super app, providing all variety of content could pose a threat for the M&E ecosystem. Listed news players like TVT could see a negative impact of the above merger as they have digital news assets and TV channels.
Implications of the event (Impact analysis):
• Large market opportunity (TAM)for the merged co., as India’s M&E market for print, TV and digital is at Rs 1,530 (CY22) , poised to grow at a CAGR of 8.2 per cent over CY22-25.
• This move will bring all mediums of media by NW18 under one umbrella; Print, TV and other mediums have seen a disruption over the last few years due to consumption moving to digital; this will provide respite to NW18 traditional media assets as it can be bundled with digital offerings
• NW18 will be able to cross sell strengths of all media assets and target better advertising revenue with scale over the medium to long term
• The merger will be an advantage for driving efficiencies with all operations, employee, and all other expenses (marketing, operations) under one umbrella to enhance portfolio strength and operating leverage
• NW18 may be able to offer all services and subscription on a bundled basis – subscription of the print magazines ,premium plan of Jio cinema and Moneycontrol pro
• The merged co. can target a larger variety of advertisers who can provide ad budgets to be split across various mediums
• A media based super app could also be formed offering all types of media content – 1) digital news 2) TV content 3) sports 4) web series/movies 5) ticket booking, which in turn can have a large customer base and can be used potentially for better ad revenue/monetisation of eyeballs. This kind of app with varied offerings could pose a serious threat to other video/broadcaster OTT apps.
• NW18 will also have a big advantage of last mile with Jio having a subs base of more than 450mn smartphone users
Background of the event
Network18 Media & Investments Ltd and TV18 Broadcast Ltd have announced a scheme of arrangement under which TV18 and E18, which owns and operates the Moneycontrol website and app, will merge with Network18. The proposed Scheme will consolidate TV and Digital news businesses of the Network18 group in one company and will help create India’s largest platform-agnostic news media powerhouse with the widest footprint across languages, straddling both TV and Digital. The merged entity will comprise the TV portfolio of TV18 (20 news channels in 16 languages and CNBCTV18.com), Digital assets of Network18 (News18.com platform across 13 languages and Firstpost) as also Moneycontrol website and app. Viacom18 with its portfolio of JioCinema and 40 TV channels will be a direct subsidiary of Network18. The appointed date for the merger is set as 1 April 2023 and the share exchange ratio stipulates that for every 172 shares of TV18, shareholders will receive 100 shares of Network18 and for every share of E18, shareholders will receive 19 shares of Network18. Post the merger, promoter shareholding in Network 18 will decrease to 56.9 per cent from 75 per cent while the public shareholding will move up to 43.1 per cent from 25 per cent.
The credit of this article goes to Elara Capital SVP Karan Taurani.
