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Broadcasting Industry: Switching the Channel to FDI

Dinodia Capital Advisors


October 2012

Executive Summary
In its onslaught of big reforms in the country, the UPA-II government has recently passed
the decision to raise the Foreign Direct Investment (FDI) ceiling to 74% from 49% in the
Broadcasting Sector in India to improve the accessibility of broadcasting services and
increase adaptation of international best practices
The current reforms will help the industry in terms of attracting more players in the cable
networks sector and will also facilitate the process of convergence in communication and
entertainment technologies

As per government regulations, the broadcasting industry needs to be digitalized by


December 2014 for which the industry would need a capital expenditure of ~Rs 20,00025,000 crores and by easing the FDI norms the government expects huge capital inflows in
the industry and possible consolidation of players as well
The overall liberalization in broadcasting services will not only bring in new investments to
India but will also build the information highways essential for the Indian economy to grow.
Additionally, the foreign players will bring in world-class technology, expertise and ideas that
will fuel new opportunities in the sector such as Digital Video Recording (DVR), High
Definition (HD) for the masses, bundling of Internet, Phone & Cable (Triple Play) etc.
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Overview of the Broadcasting Sector in India


The Indian Broadcasting sector is the largest in
Asia and is estimated to be Rs 38,500 crores in
2011-12 and is projected to grow at a CAGR of
12% to reach Rs 54,720 crores by 2014-15

Genre wise Viewership Share


1%
3%
2%4%
8%

40%

5%

Major investments are anticipated to come into the


sector given the governments directive of
digitization of broadcasting services by December
2014
India has more than 500 channels of different
genres viz. entertainment, movies, news & current
affairs, sports, music, religious today

38%

Mass Entertainment

Regional Channels

News Channels

Hindi Film Chanels

English Entertainment

Sports Channels

International Kids

Music Channels

Channels in different languages are also available


to cater to the requirements of regional viewers viz.
Tamil, Telugu, Marathi, Punjabi, etc
In the radio segments besides All India Radio
(AIR), city specific licenses have been given for FM
Radio channels e.g. Red FM, Radio Mirchi, Big FM,
Radio City etc

Structure of TV Broadcasting Industry

India is estimated to have 106mm households with cable and satellite TV today. Some
26mm use DTH and 80mm receive feed from cable networks

What is Changing ?
Government Policies
Activity

Cable Networks

Examples

Existing
% of FDI

Existing
Route

Amended
% of FDI

Amended Route

Local mom and


pop cable
providers

49%

Government

No Change

Automatic

Dish TV

49%

Government

74%

Automatic route upto 49% ;


Government route beyond
49% and upto 74%

Setting up of Up
linking HUB
/Teleports

Tata Sky

49%

Government

74%

Automatic route upto 49% ;


Government route beyond
49% and upto 74%

Up-linking a News
& Current Affairs
TV Channel

ABP News

26%

Government

No Change

No Change

Airtel, Vodafone

Not
specified in
existing
policy

Not Specified
in existing
policy

74%

Automatic route upto 49% ;


Government route beyond
49% and upto 74%

Direct-to-Home

Mobile TV

Porters Five Forces Analysis


Threat
of new entrants - High
Big players are able to maintain high
levels of capital expenditure in
purchasing rights of the most
popular content
Difficult for new entrants to secure
the rights to popular programs

Bargaining
power of consumers - Medium

Threat
of Substitutes - Medium
A significant increase in the
popularity of other
entertainment mediums
A rise of downloading programs
through the internet, both
legally and illegally ( iPad
obsessed generation )

Broadcasting
Industry :
Moderately
Attractive

Bargaining
power of Suppliers - Medium

Sensitive to the increasing


concentration and dominance of
Production companies form a
cable and satellite program
major supplier and have clout
distributors
over broadcasters
Rivalry
Distributors are demanding higher Typically depends upon the
quality program productions in the
quality of content
HD digital format, to satisfy
among competitors - High
subscribers' unique interests
Tremendous rivalry between players
broadcasting shows and events of
similar genres
Rivalry is also strong between
broadcasters to purchase the
broadcasting rights for the most
popular programs and events

Opportunities in new wave of Digitization


The Indian government mandated digitization of cable TV in India on 11th November
2011, which will affect more than 88 million households, and forever change the way
revenue is split across the Pay-TV value chain
Given that the entire set up is going to get changed for
the new digitization plan to be implemented an adequate
supply of well priced and upgraded technology will be
required and new players which can provide such
technology will have a good chance to tap into the
market
With the new FDI policies, fresh investments can be
made by foreign players, which will eventually help in
implementing global standards across India
Increasing number of TV households (as the middle class in India grows rapidly in size )
will result in more DTH subscribers in the future years, especially as the cost of DTH
systems will reduce because of technology advancements
Foreign players with industry expertise and deep pockets now have the ability to capture
huge market share quickly as mom-pop cable providers are replaced by modern
technology and DTH / Satellite broadcasting
ABCD = Astrology, Bollywood, Cricket & Devotion all attract huge audiences in
IndiaNew-age broadcasting and digitization will bring these to millions of Indians
from the comfort of their homes, 24/7 in High Definition soonit remains to be seen
who will be the early risers to grab this opportunity

Dinodia Capital Advisors

Dinodia Capital Advisors


Corporate Profile
Dinodia Capital Advisors is a Financial Consulting firm
based in New Delhi, India. It assists clients across all
industries grow, both organically and inorganically. The
firm helps clients Raise Capital. Execute Merger &
Acquisition opportunities. Restructure, Transform and
Turnaround businesses. Resolve challenging problems.
Take advantage of financial and strategic opportunities.
Balance investor expectations. DELIVER VALUE
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Dinodia Capital Advisors


Service Offerings
Dinodia Capital Advisors Advice Clients on :
Mergers and Acquisition

Capital Raising

We help in conducting a robust scan


of the market and selecting the most
suitable buyer or seller

We advice clients on their capital


needs and find them the right
partner who brings more than just
capital

Restructuring
We advise on business
restructurings to help achieve
financial, strategic and operational
efficiency

Organizational
Transformation
We work with companies to put
systems, processes and
people in place to help take
advantage of both organic and
inorganic synergies

India Entry Strategy


We help set up and incubate
businesses in India, acting as a
trusted advisors to facilitate the
India entry strategy

Turnarounds
We work closely with companies to
help devise and implement a
turnaround strategy by plugging the
deficiencies of
management, technology, capital or
partnerships
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Dinodia Capital Advisors Private Limited


C-37, Connaught Place , New-Delhi 110001, Website - www.dinodiacapital.com
Tel No: +91 11 2341 7692, 2341 5272, Fax No: +91 11 4151 3666
Email: dinodiacapital@dinodiacapital.com

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