Entertainment

TV18 Broadcast Ltd : Ruling Media and Entertainment Industry

TV18 acquired the exclusive rights to digitally stream the hugely popular IPL matches in the Indian sub-continent for the seasons from 2023 to 2027.

(A) Introduction

TV18 Broadcast Limited is a prominent player in the Indian media and entertainment landscape, owning and also operating an extensive portfolio of channels encompassing news, business, entertainment, and regional content.

In the year 2011, Raghav Bahl's media group encountered a challenging financial phase. During this period, the company grappled with substantial debt and significant losses. Meanwhile, In pursuit of a solution, Bahl turned to Reliance Industries Ltd in 2012, employing a strategic approach to secure vital capital. Demonstrating resolute determination, he effectively curbed the losses, initiated employee layoffs, and executed strategic measures to either close or streamline properties within the group.

A pivotal turn of events unfolded in 2014 when Reliance assumed control of the Network18 group. It's worth noting that during this transformative period, Bahl made the decision to part ways with the Network18 Group, marking a significant transition.

TV18 Broadcast is a subsidiary of Reliance Industries Limited. TV18's channels include CNN-News18, CNBC TV18, CNBC Awaaz, History TV18, and, also a variety of regional channels. TV18 Broadcast also has a variety of digital properties, including News18.com, CNBCTV18.com, and Firstpost.com and one of the leading OTT Platforms of the country Voot.

It also owns and operates its content creation studios called Viacom18 Studios and operates Forbes India Print Media. Further, It is one of India's prominent media companies and is known for its high-quality content and innovative programming.

(B) Journey of TV18 Broadcast

TV18 Journey PAWealth

(C) Executive Management

(D) Shareholding Pattern of TV18

TV18 Shareholding Pattern PAWealth
Major shareholders >1% of shares(Promoters): June-2023%
Network18 Media & Investments Limited51.17%
Siddhant Commercials Private Limited4.97%
RB Mediasoft Private Limited1.52%
Major shareholders >1% of shares(Others): June-2023%
Government Pension Fund Global3.27%
Quant Mutual Fund - Quant Small Cap Fund2.67%

(E) Business Model

TV18 Business Model PAWealth

The business model of TV18 involves content creation and collaborative projects. In addition, its business model also involves Producing Content, Distributing it to different Platforms, and generating revenue from advertising and subscriptions.

The producer is responsible for creating the content and owning the intellectual property (IP). They have to create the content in-house or outsource it to a third party. Once the content is created, it is distributed to different platforms, including digital, TV, and partner platforms.

The digital platforms include the producer's own website, as well as third-party OTT platforms.

The producer generates revenue from advertising and subscriptions. Advertising revenue is generated when advertisers pay to place their ads on the content. Subscription revenue is generated when users pay to access the content.

Audience provides feedback on the content, which helps the producer to improve the content over time. The audience also shares the content with their friends and family, which helps to promote the content and generate more revenue.

(F) Business Segments

TV18 Business Segments PAWealth
TV18 Broadcast Ltd - Business Segments

News: Broadcasting - This section covers TV18's business news channels like CNBC-TV18 and CNN-News18, along with general news channels including News18 India and News18 Lokmat.

Entertainment: Broadcast and Digital - Here, you'll find TV18's entertainment channels such as Colors and MTV India, as well as digital platforms like Voot and JoCinema.

Content Creation and Production - This section focuses on TV18's in-house production studios, like Viacom18 Studios and Tipping Point. In addition, TV18 creates various content, including original shows, acquired programs, and branded content.

Licensing and Merchandising - TV18's licensing and merchandising businesses are highlighted in this segment. Further, They license their intellectual property to other companies, which create and sell products based on TV18's characters and brands.

Content Asset Monetization - In this area, TV18 monetizes its content through advertising, subscriptions, and merchandise on third-party platforms.

(G) Revenue Segments

TV18 Revenue PAWealth

Revenue segments of TV18 largely encompass,

Subscription income - TV18 charges users a subscription fee to access its content whether it is a fee to watch its channels or for premium content on its OTT platform. This is a common monetization strategy for channels as well as digital OTT platforms.

Advertising revenue - TV18 sells advertising slots on channels or in its content. Furthermore, This is the most common monetization strategy for content creators.

Partnerships - TV18 partners with other companies to promote its content. For Example, A company might co-sponsor a program to promote its products.

Content licensing - TV18 provides its content to platforms for streaming and, also earns a commission on the advertising revenue that those platforms generate.

(H) Peer Comparison

TV18 Peer Comparison PAWealth

TV 18 has a number of popular channels, including CNN-News18, CNBC-TV18, and MTV India. It also has a number of successful digital products, including Voot and Firstpost. Zee Entertainment, on the other hand, has a number of popular channels, including Zee TV, Zee Cinema, and Zee News. It also has a number of successful music and film studios.

The peer comparison FY23 suggests that TV18 is a more profitable company than Zee Entertainment, However, Sun TV is more profitable than both of them. However, Zee Entertainment and Sun TV has a larger market capitalization and a wider range of products.

(I) Cost Structure of TV18

TV18 Cost Structure PAWealth

Cost Structure as % of Net Sales(FY23)

Operational Cost: This includes the cost of running the business, such as the cost of programming, marketing, and distribution. It accounts for 51.54%% of net sales.

Employee Benefits Expense: This is the cost of employee benefits, such as salaries, wages, bonuses, and other benefits. It is also the largest cost segment, accounting for 17.10% of net sales.

Marketing, Distribution and Promotional Expense: This includes the cost of marketing and promoting TV18's channels and content. It accounts for 22.30% of net sales.

Depreciation and Amortisation Expenses: This is the cost of depreciating the value of TV18's assets, such as its buildings and equipment. It accounts for 2.07% of net sales.

Finance Costs: This is the cost of borrowing money, such as interest payments on debt. It accounts for 1.96% of net sales.

Other Expenses: This includes any other expenses that are not covered by the other categories. It accounts for 5.60% of net sales.

(J) Financial Parameters

TV18 Financials PAWealth

The table illustrates that the company's operating income has increased steadily over the past 10 years at a Compound Annual Growth Rate (CAGR) of 13%, rising from Rs. 1968.13 crore in March 2014 to Rs. 5912.09 crore in March 2023. Furthermore, its profit after tax (PAT) has also shown consistent growth during this period, climbing from Rs. 85.6 crore in March 2014 to Rs. 127.77 crore in March 2023.

Exhibiting a robust financial performance over the past decade, further TV18 has effectively achieved noteworthy progress in its operating income, PAT, and free cash flow. Moreover, This consistent growth is a clear testament to the company's adept management and astute strategic decisions.

However, despite the impressive performance, it's crucial to highlight that TV18's PATM and ROE have experienced a significant decline, primarily due to the escalated expenses linked to content creation and rights acquisition. Furthermore, the company's debt-to-equity ratio has displayed a noticeable upward trajectory, rising from 0.1x in March 2014 to 0.9x by March 2023. This transition underscores the company's deliberate choice to leverage additional debt as a means to fuel its expansion initiatives and capitalize on promising growth opportunities.

TV18 ltd - Du Pont Analysis

TV18's net profit margin has been increasing steadily over the past few years. In March 2014, the company's net profit margin was 4.3% while In March 2022, net profit margin was 16.74%.

TV18's ROE has also been increasing steadily over the past few years barring the last fiscal year.

(K) Management Discussion Highlights

  • The company recently completed a strategic partnership with Reliance, Bodhi Tree and Paramount Global, enabling it to make investments in scaling up its digital, sports, and regional entertainment franchises.
  • Viacom 18's acquisition of the exclusive digital rights of IPL for the next 5 seasons is a massive step forward in this journey.
  • Mobile is India's leading platform for digital content consumption, accounting for nearly 90% of the market due to the increasing smartphone and 4G penetration.
  • The Indian advertising industry grew by 19% in CY2022, primarily driven by 30%+ growth in spends on digital advertising.
  • The Indian OTT market is expected to grow at a CAGR of over 20% to reach US$ 11-13 bn by 2030. The number of OTT subscriptions in India is expected to nearly double to 160-165 mn by 2027.
  • Digital advertising now commands nearly 50% share of the total ad revenues, while TV's share declined by 5%.
  • Despite the slowdown in TV revenue, Digital and TV are the most effective mediums for brand building and reach, capturing nearly 80% share of the total ad spends.
  • Digital business models are still some time away from being a positive contributor to the bottom line and need constant investment in content, distribution and technology.
  • Viacom18's digital platform, JioCinema, has become the number one platform in the country in a short timeframe.

(L) SWOT Analysis

Strengths:

With diversified content offerings, a robust presence in business news, and specialized entertainment categories, and a recent expansion into the live sports segment, TV18 also holds a notable position in the market.

Meanwhile, The RIL group, the parent company of TV18, places significant emphasis on the media and entertainment sectors. Furthermore, the media and entertainment industry aligns seamlessly with the company's substantial telecom/digital division, fostering valuable synergies and opportunities.


Weaknesses:

Frequent content offerings require substantial investments, propelling operations in the entertainment industry. Meanwhile, This demand for continuous content necessitates significant working capital. Given the need to maintain an extensive inventory, including streaming rights, motion picture rights, and also diverse content, proper allocation becomes essential.

However, the advertisement revenue landscape remains susceptible to various factors. These include market competition, television viewership trends, content quality and popularity, dynamic shifts in the media sector, regulatory fluctuations, and overall economic activity levels. Notably, advertising spending experienced recent setbacks, particularly towards the year's end. Furthermore, The escalation of inflation, compounded by the Russia-Ukraine conflict, exerted adverse effects on consumer demand, leading to a contraction in ad spending. Moreover, It's essential to acknowledge that any potential recessionary scenario is poised to wield a direct influence on advertisement revenue within this fiercely competitive industry.


Opportunities:

The recent acquisition of IPL’s streaming rights as well as rights for streaming and broadcasting different sports leagues such as NBA, Spanish La Liga, Italian Serie A, Carabao Cup, World Boxing Championship, and ATP Tennis Masters could help it establish a foothold in sports broadcasting and streaming category.

Digital products such as CNBCTV18, Firstpost and MoneyControl for news, and Voot for content and sports help an enormous growth opportunity for tv18 it establishes TV18 as a one-stop for consumption for all genres of content.


Threats:

Increased competition in digital areas may have an impact on TV18's growth and may necessitate more cash injection for content creation.

Motion picture division is dependent on the Variations in value in box office performance. Due to the inherent nature of the motion picture business, the profitability of this division carries the risk of the extent of acceptance of the content by its viewers.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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