MSM – Industry Update and the Road ahead Man Jit Singh
10 June 2013
- Confidential - 0 Agenda
Multi-Screen Media – 5 year outlook 2
― Advertising Market Overview 4
― Update on Distribution & Digitization 9
Market developments
― Impact of New Media 16
― Market landscape and Competition Update 19
― Regulatory Update 29
The Road Ahead 33
Strategic New Initiatives 39
Recap – Putting it all together 95
- Confidential - 1 Multi-Screen Media – 5 year outlook
- Confidential - 2 FY13 has been a good year…
Total Revenues* and EBIT (USD M)
23% 25% 600 CAGR 26% 20% 22%
16% 18%
593 14% % EBIT 553 250 USD M USD 363 396 10% 266 6%
5% 2% FY09 FY10 FY11 FY12 FY13 -100 -2% -1% Revenue EBIT %
EBIT (3.5) 16.4 65.2 138.0 140.0
MSM is well poised to progress in the next 5 years
*Net of Payouts - Confidential - 3 Advertising Market Overview
- Confidential - 4 Advertising spend is expected to hit a tipping point in the next 5 years
Despite the increase in ad revenue in recent years, the advertising to GDP ratio in India is still at a low of 0.53% versus developed economies like the U.S, U.K. and China, indicating significant potential for future growth
Television ad market has grown steadily over the last several years; from USD 1.3 Billion (INR 71 Billion) in advertising revenues in 2007 to an estimated USD 2.5 Billion (INR 139 Billion) in 2013 and a projected USD 4.4 Billion (INR 240 Billion) in 2017
Projected increase in total advertising spend, coupled with strong growth in television viewership, makes India a very lucrative television market
Size of Media spend as a % of GDP Projected Ad Revenue Growth of TV Industry
US 1.08 CAGR 4,364 4,500 14% 3,764 Japan 0.90 3,273 2,855 3,000 2,527 UK 0.78 2,273
China 0.75 1,500 USD Million USD
India 0.53 0 0.0 0.3 0.6 0.9 1.2 2012 2013 2014 2015 2016 2017
Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2013; PWC Report – Indian entertainment and media outlook 2011, - Confidential - 5 HSM markets constitute more than half of India’s GDP, growing at 9% with approx 50% of C&S HH
63% of the total population of # HSM Language India 1 UP and UK Hindi
PHCHP – Punjab, Haryana, 2 Chandigarh and Himachal Hindi/Punjabi Pradesh
3 Bihar and Jharkhand Hindi/Bhojpuri 55% of the total GDP of India 4 Gujarat Hindi/Gujarati 5 Delhi and NCR Hindi
MP, Chhattisgarh and 52% of the total 6 Hindi TV HH in India Rajasthan
49% of the total 7 Maharashtra Marathi/Hindi C&S HH in India
“Between 2007 and 2010, the average economic growth rate for the southern states decelerated from 7% to 6.5%, while that of the northern states accelerated from 4.5% to 6.8%” – Ruchir Sharma, Author BreakOut Nations Source: FICCI-KPMG; Jefferies 2012 and estimates - Confidential - 6 Growth in GDP and Ad/GDP ratio will result in Ad expenditure growth in India
12,000 2,869 Adex 2012 Adex 2015 9973 1,627 8,000 7104 730 5596 900 749 INR Crs INR 445 3969 4,000 3,342 3083 2,612 258 2,688 2,154 2334 1,709 1,788 468 726 0 UP and UK PHCHP Bihar and Gujarat Delhi NCR MP, Chhattisgarh Maharashtra Jharkhand and Rajasthan
# HSM Ad/GDP 2012 Ad/GDP 2015 With the projected growth in the GDP 1 UP and UK 0.30% 0.32% across states and the increasing 2 PHCHP 0.19% 0.20% consumption, it is expected that the 3 Bihar and Jharkhand 0.11% 0.13% marketers will increase the Adex 4 Gujarat 0.25% 0.29% spends in these markets 5 Delhi and NCR 1.10% 1.20% MP, Chhattisgarh and 6 0.25% 0.27% The Ad expenditure growth would be Rajasthan 35% and GDP by 24% over the next 3 7 Maharashtra 0.52% 0.56% 8 Other Indian States 0.30% 0.33% years
Source: TAM estimates - Confidential - 7 Advertising – the MSM Network has the highest power ratio amongst the large Networks
Revenues % Revenues Channel Share Power Network # Channels (INR Crs) Share % Ratio STAR Network 17 3,300 27% 19.5% 137
MSM Network 8 2,251 18% 12% 153
Zee Network 28 2,200 18% 13% 134
Viacom 7 1,100 9% 7% 129
TV industry 12,400 100% 100%
MSM network including IPL garnered 18% share in the TV ad revenue pie against owning 12% of the viewership share in FY13 with a revenue share index of 153
*Star network does not include Sports TG: CS 4+; All India including IPL - Confidential - 8 Update on Distribution & Digitization
- Confidential - 9 Digitisation along with expansion by DTH operators will drive subscription revenue growth Subscription fees have become an important and predictable revenue foundation for the television industry Rural households present the next growth opportunity, with only 53% of households owning a TV compared to 89% amongst urban households Subscription revenue is projected to grow at a higher CAGR of 20% over 2012-17 compared to 11% over 2007-11 which will be driven by digitalization The share of broadcasters in the total subscription pie will go up from 29% in 2012 to 37% in 2017; share of subscription to total broadcaster revenue will go up from 36% in 2012 to 48% in 2017
Projected Sub Revenue Growth of TV Industry 2013 TV Households: Large town vs. Small town
11,036 11,400 CAGR 160 154 20% 9,418 7,764 120 7,600 6,273 82 5,109 80 74 4,455 80 71 66
3,800 USD Million USD
Millions of HH 34 40 25
0 0 2012 2013 2014 2015 2016 2017 Large Town Households (Mn) Small Town Households (Mn) Total HH TV owning HH C&S HH Digital Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2013; TAM Universe Update 2013 - Confidential - 10 Digitisation will increase share of the broadcaster Subscription revenues from the audiences
Share of Subscription fees to Broadcasters (USD M) Subscription revenues share of broadcasters is expected to be higher 4500 In 2 way split (with DTH players) the 3600 broadcasters will get approx 35-40% of the total Subscription revenues 2700 4,073 In 3 way split of Subscription revenues 3,473 2,836
USD USD million 1800 2,109 the broadcasters will get approx 20-25% 1,582 of the revenues 900
727 618 525 446 379 0 2013 2014 2015 2016 2017
Carriage Broadcasters share
Carriage will come down in the outer years
Source: FICCI-KPMG Indian M&E Industry Report 2013 and Industry estimates - Confidential - 11 Digital Addressable System (DAS) - Current On Ground Reality
There are still a few gaps for seeding boxes -
― Phase 1 - 90-92% of Delhi/Mumbai and Kolkata are covered, while only 25-30% of Chennai has been covered
― Phase 2 - 60-65% of the 38 cities have been seeded
Unencrypted Analog signals are still accessible – Addressability of subscribers continues to be a concern area, hence actual numbers are not yet reported and leading to piracy
Only 35% of the Customer Relationship Forms (CRF) received from the end households, hence complete clarity on actual subscriber numbers is still pending
MSOs are still not ready with packages / backend infrastructure
ARPUs have not increased – lack of packages, CRFs. The on ground customer not willing to pay extra
Unavailability of institutional finance to MSOs
Court stay orders have hindered the roll out in certain states AP, MP where the order has now been lifted
MIB / TRAI pressure tactics to force operator deals - under threat of 6 months status quo
- Confidential - 12 Digital Addressable System (DAS) – the Ideal Scenario for LC1 and FTA Channels
No more constraint of Bandwidth with the MSO
FTA and Niche channels will be greatest benefactor
MSOs can offer higher number of channels at no extra cost
MSO entering these markets will improve the quality and variety in the customer offering
With LC1 falling in Phase 4 of digitization, the MSO focus has already started shifting towards these towns in terms of acquisition
- Confidential - 13 What is Competition doing in LC1 markets?
Competition (Star) entered the LC1 markets 2-3 years ago for first mover advantage
Have on ground presence – 300-400 resources (on rolls/contract) in these market to monitor competition and crack new deals
Star is willing to spend on carriage. Focus on channel placement within the EPG
Star Utsav presence on DD Direct ensured reach within the LC1 market. Currently delivers more reach than Star Plus in LC1
- Confidential - 14 The upcoming 5 years are positive…
EBIT (USD M)
200
150
100 200
USD M USD 185 170 150 150
50
0 FY14 FY15 FY16 FY17 FY18
Network is likely to show sustained growth till FY17 reaching a peak of USD 200M
Standalone without any investments in the Network we should be able to sustain our growth path
MSM will be profitable- Confidential -in the medium term 15 Impact of New Media
- Confidential - 16 Impact of New Media – 174m Internet users, 25% of TV viewers
India – Internet Connections India Internet vs. TV Penetration
386 873 400 900 848 820 CAGR 791 333 55 762 25% 731
300 272 47 600 208 40 496 426 200 168 34 351 331 Millions 124 29 276 286 300 226 Million connections 25 232 100 174 174 139 99
0 0 2012 2013P 2014P 2015P 2016P 2017P 2012 2013P 2014P 2015P 2016P 2017P
Wireless Connections Wireline Connections Internet Users TV Viewers
The mobile story has begun to play out in India, with the user base expanding significantly over last year
The number of internet users reached 174m in 2012, about 25% of the size of the total TV viewers in the country and is expected to reach over 60% of total TV viewers by 2017
Source: FICCI-KPMG Indian M&E Industry Report 2013 - Confidential - 17 Digital Advertising market is growing at over 30%
Advertising Revenues (USD M)
CAGR 11,458 11,500 9,855 1,585 32% 496 8% 8,558 1,184 9,200 498 17% 455 7,440 889 413 6,585 418 6,900 675 340 5,953 384 4,509 11% 515 280 395 351 4,036 331 255
USD M USD 231 3,636 4,600 3,255 2,945 2,727
2,300 4,369 14% 3,767 2,847 3,275 2,269 2,520
0 2012 2013P 2014P 2015P 2016P 2017P TV Print Radio OOH Digital Advertising
Brands have grown their digital Advertising budgets; niche channels may be at risk
Sony LIV is positioned to cater to digital Marketing budgets
Source: FICCI-KPMG Indian M&E Industry Report 2013 - Confidential - 18 Market landscape and Competition Update
- Confidential - 19 The MSM Network with 14.2% channel share is the 3 rd largest network in the country
Network Channel Shares
24
20.1 20.6 Last 8 Wk (Wk 14 to 21) Current (Wk 21)
18 16.4 13.9 14.3 14.2
12
8.0 8.3 7.3 6.5 6 4.34.9 4.3 4.4
0 Star Network Zee Network Sony Network Sun Network Viacom TV18 UTV+Disney Turner
Star Zee Sony Sun Viacom UTV+Disney Turner # of Channels 27 37 8 25 14 9 6
Source: TAM analysis - Confidential - 20 Hindi GEC genre remains stable at ~1000 GRPs per week
Market size of each channel genres – Average Weekly GRP
1,200 1,081 1,051 Last 8 Wk (Wk 14 to 21) Current (Wk 21)
800 731 637 532 494
400
168 161 109 114 68 91 94 81 35 36 14 18 4 5 0 Hindi GEC Hindi Movies Hindi Music Eng Movies Infotainment Eng Ent & Kids Hindi News Eng News Sports Lifestyle
Hindi GEC and Hindi movies dominate the TV viewership and ratings
Source: TAM analysis - Confidential - 21 MSM, Star and Zee are operating at EBIT margin of 25%
FY13 Revenues and EBIT (USD M)
550 517 MSM Zee Star
440 361 357 EBIT Margin: 330 299 25% 25% 26% 238 240 USD M USD 220 200 168 140
110
0 Net Ad revneues Subscription revenues EBIT
Zee’s Advertising revenues are almost at par with MSM despite having a bigger bouquet; overall EBIT is 20% higher than MSM driven by higher Subscription revenues
Source: Zee Q4 FY13 Earnings release and estimates - Confidential - 22 Updates from General Entertainment (GEC) Genre (1 of 2) Star Plus Colors
Programming: Programming:
Only GEC to start primetime as early as 6:30pm Has launched a number of fiction shows with limited success Offering a key non-fiction property ‘Master Chef India’ on weekdays (8pm) Channel’s viewership dependant on old shows like ‘Balika Vadhu’ and ‘Uttaran’ Hasn’t seen much success with weekend properties Has invested heavily in big ticket non-fiction properties Upcoming mythological ‘Mahabharat’ as well as ‘Junior Master Chef’ Large number of events and blockbuster movie premieres, which the channel regularly airs Marketing: Upcoming highlights include a new comedy reality Road shows using TV stars across 4-5 key states once show ‘Comedy Nights with Kapil’ as well as a new the LC1 markets opened fiction ‘Mrs Pammi Pyarelal’ Associate on-ground sponsorship on IPL this season Marketing: with extensive branding in the stadiums Aggressive player in promoting their properties, Continue to use Bollywood stars on their channel in the especially their non-fiction ones form of movie integrations and/or award events Targets a similar audience profile to Sony and typically Big ticket fiction launches like Mahabharat will probably uses its celebrities to push for recall like Madhuri Dixit, see huge spends in promotion Salman Khan etc
- Confidential - 23 Updates from General Entertainment (GEC) Genre (2 of 2) Zee Life OK Programming: Programming: Continues to keep weekday fiction programming as its Largely dependent on a single show ‘Mahadev’ for its backbone growth. Periodic special episodes of the show on Sundays have helped the channel add to ratings spurts Weekend non-fiction properties have been well established over many seasons including ‘Saregama’, Number of fiction launches at frequent intervals but ‘Dance India Dance’ with only a few being successful Launched new non-fiction format this year - ‘India’s Has launched a number of alternative genre shows Best Dramebaaz’ similar to Sony’s popular space of crime and detective series; ‘Savdhan India’ and ‘Shapath’ have added to Has experimented with other alternative fiction additional sampling of the channel properties like ‘Fear Files’ and recently launched ‘Connected Hum Tum’ Non-fiction shows has seen limited success, but still experimenting with format shows including ‘Welcome’ Upcoming highlights for the channel include a epic (based on the format ‘Come Dine with Me’) show ‘Jodha Akbar’ Upcoming Shows: Another International format show Marketing: ‘Bachelorette India’ and ‘Police Dial 100’ Loyal base among lower SEC audiences and smaller Marketing: towns in North India Marginal promotions centred around new show Communicates effectively with its audiences using low launches or on Mahadev (flagship show) cost media outreach vehicles Planning to use Bollywood star Mallika Sherawat to Extensive promotion for movie premieres across propel new show “The Bachelorette” and the channel platforms
- Confidential - 24 Update on Hindi Movies genre
Digitisation is building a level playing field for all Movie channels, increasing dependency on compelling content for GRPs
The bulk of viewership comes from Non-Metros and smaller towns
Marquee titles are being distributed across Networks
Competition is spending large budgets to lock big stars in long-term deals
- Confidential - 25 Update on English Entertainment genre
Launch of Genre focussed channels
― Star has launched a Genre focused channel – Star Movies Action. Strategy is to defray content costs across 2 channels
Launch of Premium services
― HBO is evaluating a Subscription based channel, after launching HBO Defined and HBO Hits
Times has output deal with Fox and could launch a channel
There are talks of another Eng GEC/Movie channel entering the space
PIX is evaluating a SVOD platform, with increasing competition from VOD
- Confidential - 26 Update on Music genre
Genre stands to gain both reach and time spent (TS) from complete digitization roll out, similar to DAS 1 wherein Music genre’s quantum viewership growth was the highest among all genres
While TRAI’s mandate of phasing out all commercial inventory in excess of 12 minutes from October does challenge Advertising revenue, the genre’s viewership stands to benefit considering present FCT levels are anywhere between 19 to 28 minutes in a clock-hour
The proposed copyright law may challenge MIX’s proposition of offering the widest spectrum of music as retro songs in particular face uncertainty over content ownership
Considering the amendments in the new copyright law, wherein content authors stand to benefit from revenue share, music labels offering contemporary music are expecting increase in valuation of libraries
- Confidential - 27 Star’s Sports business is making an estimated USD 120m loss annually
Revenues & EBIT (USD M) Break-up of License fees
Net Ad Sub Other License revenues revenues income Total fees EBIT USD M Rights fees 400 18 350 ICC Cricket Rights 157 300 138 Champions League 93 250 BCCI Cricket Rights 100 200 380 150 ECB / CA / EPL +++ 100 223 USD M USD 100 Other Costs 50 50 Total Rights fees 500 0
-50 (120) -100
-150 (500)
Despite having some of the biggest sports properties in its portfolio, Star is not able to break even in its Sports business - Confidential - 28 Regulatory Update
- Confidential - 29 Emerging Regulatory Landscape (1 of 3)
TRAI: New Regulator and an “aggressive” position on Broadcasting. Proposals by TRAI include: ― Containing “monopolies” in Cable Distribution ― Establishing a national level “independent” rating agency across platforms: digital and terrestrial ― Restricting ad-sales to 12 minutes per “clock” hour across all genres ― Making “Must carry” mandatory for all digital headends/MSO’s Competition Commission of India (CCI) ― Becoming more active ― Investigates “restrictive” trade practices ― An investigation by CCI has found no cartelization in the case related to MediaPro, a 50:50 content distribution JV between Star Den Media Services Pvt. Ltd and Zee Turner Ltd ― CCI has also given green signal to Reliance Industries' acquisition of stake in the Raghav Bahl promoted media firms Network 18 and TV18 Broadcast Order against BCCI ― BCCI held to be “dominant” in cricket ― Fined for monopolistic practice. Tenor of licences for Media Rights not > 5 years - Confidential - 30 Emerging Regulatory Landscape (2 of 3)
Content Regulation
― “Self Regulation” for GEC working well – points of friction remain
― New Certification process proposed for Films – could impact satellite rights exploitation
New Media
― New copyrights law introduced, making content costs remain high for film/song based content
― Liability of intermediaries limited
― Safe harbour provisions strengthened
― Enforcing anti-piracy law remains a big issue
Implementation of Companies Bill
― Constitute a CSR committee and make a CSR policy. Spend 2% of average Net Profits of preceding three years on CSR activities
― Develop and implement a risk management policy including identification of elements of risks that threaten existence of the company
― Ensure a resident Director is appointed while reconstituting the Board
- Confidential - 31 Emerging Regulatory Landscape (3 of 3)
FDI in Broadcasting
― Sectoral limit in distribution excluding analogue raised to 74% (up to 49% “automatic”)
― Majority control for foreigners in Cable Distribution now permissible as part of Digitalisation
― Upto 49% in analogue (“automatic”); 100% in Uplinking/Downlinking (non-news)
- Confidential - 32 The Road ahead…
- Confidential - 33 Where are we today as a Network…
TAM’s introduction of LC1 Markets in the panel, has resulted in the ratings of the flagship channels to fall, along with reach and TSV
The MSM bouquet doesn't have any presence in the Regional space (except Sony Aath)
Key competition – Star, Zee and Colors have a well established presence in the regional space and Star and Zee’s flagship channels are performing better in the GEC genre
Absence of regional channels in the bouquet is a clear gap in the network's genre reach
Key competition, has a far more “Pan-India” offering both in terms of genre spread and ratings
Competition has a strategic advantage with presence in carriage. Both Star & Zee have presence in ground distribution (Star DEN, Tata Sky & Dish)
MSM currently doesn’t have a “complete package” offering for advertisers and
distributors- Confidential - 34 The Network’s programming (SET & SAB) does not cater to the audiences in the SEC C/D/E and LC1 markets
SEC A SEC B SEC C SEC D/E
3 Metros
1mn+
0.1mn to 1mn
LCI
TG: CS4+; Wk 1 to 13 2013 - Confidential - 35 The Potential implications…
With programming not targeted to female audiences in small towns, the introduction of TAM meters and further expansion, in Rural markets may result in further drop in ratings
We also run the risk of being dropped by operators due to gaps in our bouquet offering and also for strategic reasons, which may further fuel a decline in reach and ratings
Flagship channel’s falling Reach and TSV, may result in Advertisers reducing the premium on the channel
The Network is over reliant on SET for driving revenues and EBIT. Falling ratings of the channel is a risk to Network profitability
The network should aim to target all SECs, markets, across both genres to reduce the risk of being ignored by media planners and also potentially losing presence
-on Confidential ground - 36 With Business-as-Usual, there is a potential loss of USD 1,045m (INR 5,670 Crs) to USD 1,353m (INR 7,344 Crs) between Years 5 and 10
The MSO/DTH operator drops our channel from the base tier due to a gap in the portfolio:
― If 30% of operators drop SET and SAB from their bouquet then the loss can be USD 524m (INR 2,842 Crs) in Subscription revenues and USD 830m (INR 4,502 Crs) in Ad revenues due to subsequent impact on ratings
― There is a potential risk since 35% of our Distribution revenues comes from Competition controlled MSO/DTH (DEN – 6%, Dish TV – 11%, Tata Sky – 14%, WWIL – 4%)
TRAI Regulation of 10 minutes (currently our GEC channels are running 14 minutes average per hour)
― Reduction will be approx 29% in Ad revenues i.e. USD 1,045m (INR 5,670 Crs)
Drop in ratings due to Programming and LC1 market changes
― If drop in revenue is pro-rata to reduction in ratings then reduction in Ad revenues will be approx. USD 859m (INR 4,664 Crs) and Subscription revenues will be USD 189m (INR 1,023 Crs)
FX rate: USD 1= INR 54.265 - Confidential - 37 We may not have a profitable business 5 years from now
EBIT (USD M)
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 200
100 185 200 150 170 150 50 0 -50
USD M USD -150 -100 -250 -300
-200
-300
Driven by lower ratings on the flagship channel EBIT likely to turn negative from the 5th year
If we continue to stay in our current state and do nothing, MSM will not be able to sustain its growth path
It is imperative for us to- Confidential invest - and build the Network 38 Strategic New Initiatives
- Confidential - 39 Opportunity 1 – Female-skewed, lower SEC GEC Plan
Strategic New Initiatives
- Confidential - 40 LC1 Markets – An Introduction
LC1 corresponds to towns with less than 100k population in Urban India
In 2013, TAM released data for five new LC1 markets: Gujarat, Madhya Pradesh, Uttar Pradesh, PHCHP and Rajasthan. With this release, TAM now covers 92% of the HSM Urban market, up from 74% earlier
These 5 new LC1 Markets comprise 17% of the universe (20% of the HSM universe). With the existing Maharashtra LC1, it will be 25% of HSM Universe
Family system plays a more important role in the key decisions among the viewer’s here
75% of LC1 households are SEC CDE, higher 35+ age group and more women viewers
LC1 markets, at a broad level, consume less television than their HSM counter parts driven by infrastructure limitations
Market Groups Univ (M) Univ % View % Market Groups Univ (M) Univ % View % HSM LC1 50 25% 23% UP LC1 9 8% 6% HSM 0.1-1 M 59 29% 29% Mah LC1 8 4% 2% HSM 1M + 45 22% 22% MP LC1 5 4% 4% 3 Metro 49 24% 26% PHCHP LC1 6 3% 3% HSM w/o LC1 152 75% 77% Raj LC1 7 3% 3% HSM+ LC1 202 100% 100% GUJ LC1 16 2% 4% Total 50 25% 23% TG: CS4+; Wk 1 to 13 2013 - Confidential - 41 Inclusion of new markets resulted in increased TV penetration among TAM reported universe
TV Population and Penetration – 2013 TV Population and Penetration – 2013 (including 5 new LC1 markets)
Non TV Non TV Population Population 12% 11%
TV TV Population Population 88% 89%
Total Population: Total Population: 264m 312m
- Confidential - 42 LC1 markets, at a broad level, consume less television than their HSM counter parts
Any Channel Reach % TSV (weekly hour) GRP City AVG AVG AVG HSM LC1 88 16.0 2834 HSM w/o LC1 90 17.9 3233 HSM+ LC1 90 17.4 3133 3 METRO 89 19.3 3426 HSM 1-10 LAKH 91 17.1 3105 HSM 10 LAKH+ 91 17.5 3190 MAHA LC1 88 18.2 3190 GUJ LC1 88 17.4 3057 MP LC1 91 16.5 2995 PHCHP LC1 86 17.7 3051 RAJ LC1 85 15.7 2663 UP LC1 90 13.8 2474
Reach is marginally lesser, while time spent is significantly lesser in LCI markets
Power cuts were rampant in most LC1 towns, having a direct bearing on the viewing
In LC1 markets on an average, while 95 channels are available, consumption is limited to 26 channels due to legacy/heritage, brand loyalty
TG: CS4+; Wk 1 to 13 2013 - Confidential - 43 HSM (with new LC1 markets) has a higher skew from SEC D/E and 35+ age group
Audience profile of Television Viewers
Age SEC Gender
100% 100% 100%
35 36 36 37 33 35 36 37 75% 75% 75% 46 48 46 48
18 19 18 19 22 23 22 50% 50% 22 50%
22 22 22 22 25 24 25 24 25% 25% 25% 54 52 54 52
24 23 23 23 19 18 17 17 0% 0% 0% Universe Viewership Universe Viewership Universe Viewership Universe Viewership Universe Viewership Universe Viewership
'4-14 15-24 25-34 35+ A B C D/E Male Female HSM (w/o new HSM (with new HSM (w/o new HSM (with new HSM (w/o new HSM (with new LC1 markets) LC1 markets) LC1 markets) LC1 markets) LC1 markets) LC1 markets)
Source: Ormax Media Report - Confidential - 44 Advertisers are interested in HSM regional towns due to its increasing middle class growth and rising consumption
Middle class spending on discretionary % growth in ownership of products (2008-10) items (% of income)
75% 75 Metros Tier 1 Tier 2+3 towns 65
55 50% 50
70% 30 30 61% 25 25 25% 50% 25 22 18 15 12 9 11
0% 0 2005 2015 2025 Consumer IT & Automobile FMCG Durable Communication
The HSM regional cities are witnessing increasing retail growth and consumption over the past few years
Source: McKinsey report, Jefferies 2012 report, Nielson website - Confidential - 45 Time Spent on Television is dependent on infrastructure in the LC1 market
Average Hours per day – LC1 markets
Overall 2.4
Maharashtra 2.4
UP 1.8
Gujarat 2.8
PHCHP 2.1
MP 2.8
Rajasthan 1.9
0 1 2 3
Electricity had a major -impact Confidential - on the TV viewing levels 46 Impact of LC1 panel expansion – Zee TV has gained, Star Plus has maintained, while Sony and Colors have lost viewership
Impact of LC1 on GECs – Average weekly GRPs
275 256 258 227 213 213 220 220 187 174 165 147 142 121 116
GRPs 110 53 55 38
0 SET SAB STAR Plus Colors Zee TV Life OK Star Utsav
W/o LC1 With LC1
Driver Content for LC1: Serials, Movies, Mythological
Zee TV’s heritage advantage gave it a clear edge over others
Star Utsav and Zee Smile make strong gains in the LC1 markets. However these gains are basis FTA status and NOT basis their content
TG: CS4+; Wk 1 to 13 2013 - Confidential - 47 Only 1 Weekday soap (Taarak..) appears in the Top 20 shows, while all 3 SET shows are broadcast on weekends… Top 20 Programs in Hindi GEC (with LC1) Slot-wise comparison Programme Channel Slot TVR SET Show TVR SAB Show TVR Diya aur baati hum Star Plus M-F 9pm 4.8 Chhanchhan 1.4 Chidiya Ghar 2.2 Balika vadhu Colors M-F 8pm 4.1 Anamika 1.0 Baalveer 1.5 Yeh rishta kya kehlata hai Star Plus M-F 9:30pm 3.9 Parvarish 1.0 Jeanie Aur Juju 1.3 Taarak mehta ka ooltah SAB M-F 8:30pm 3.9 Amita Ka Amit 0.7 - Sapne suhane ladakpan ke Zee TV M-F 7:30pm 3.6 Khoobsurat 0.6 Jeanie Aur Juju Repeat 0.6 Saathiya saath nibhana Star Plus M-F 7pm 3.6 Crime Patrol Repeat 0.7 Taarak Mehta Rpt 0.6 Pyaar ka dard hai Star Plus M-F 10pm 3.6 Kya Hua Tera Vaada 1.0 Hum Aapke Hain In-laws 0.8 Madhubala ek ishq ek junoon Colors M-F 8:30pm 3.5 Amita Ka Amit 0.7 Taarak Mehta 3.9 Sasural simar ka Colors M-F 7:30pm 3.3 Khoobsurat 0.6 Jeanie Aur Juju Repeat 0.6 Indias best dramebaaz Zee TV Sat-Sun 9pm 3.2 Comedy Circus/CID 2.7 Hff/Fiction Repeat 0.9 Qubool hai Zee TV M-F 9:30pm 3.1 Parvarish 1.0 Jeanie Aur Juju 1.3 Pavitra rishta Zee TV M-F 9pm 3.0 Chhanchhan 1.4 Chidiya Ghar 2.2 Kaun banega crorepati SET Fri-Sun 8:30pm 2.8 - Hff/Taarak Rpt/Gutur Gu 2 1.4 Veera Star Plus M-F 10:30pm 2.7 Bade Achhe Lagte Hain 1.9 FIR 0.9 Wah Wah/Hum Aapke C.I.D. SET Fri-Sun 10pm 2.6 - Hain In-laws/FIR 0.9 Chhanchhan/Comedy Chidiya Ghar/Hff/Fiction Bigg boss season 6 Colors Sun-Sat 9pm 2.6 Circus/Chhote Heroes 1.5 Rpt 1.5 Uttaran Colors M-F 10pm 2.6 Kya Hua Tera Vaada 1.0 Hum Aapke Hain In-laws 0.8 Hitler didi Zee TV M-F 8:30pm 2.5 Amita Ka Amit 0.7 Taarak Mehta 3.9 Rab se sohna isshq Zee TV M-F 8pm 2.4 Anamika 1.0 Baalveer 1.5 Hff/Taarak/Chidiya/Jeanie/ Comedy circus ke ajoobe SET Sat-Sun 8:30pm 2.2 - Gutur 0.9 Star, Zee and Colors dominate with their weekday programming mix TG: CS4+; Wk 1 to 13 2013 - Confidential - 48 Movies and GEC shows have a higher share in LC1 markets
HSM w/o MAHA PHCHP Genre LC1 HSM LC1 LC1 MP LC1 GUJ LC1 RAJ LC1 LC1 UP LC1 Hindi GEC 39% 44% 34% 49% 43% 46% 46% 47% Hindi Movies 17% 23% 20% 26% 21% 27% 17% 25% Kids 8% 6% 7% 5% 8% 6% 7% 6% All Regional 14% 7% 22% 0% 3% 0% 9% 2% Music 5% 5% 5% 4% 5% 5% 3% 6% Hindi News 4% 4% 3% 5% 4% 5% 4% 4% Cable (Regional) 3% 4% 2% 2% 9% 3% 8% 4% Sports 3% 3% 3% 2% 4% 2% 2% 2% Others 6% 5% 3% 6% 3% 6% 4% 5% Grand Total 100% 100% 100% 100% 100% 100% 100% 100%
All LC1 markets have strong viewership skew towards Movies channels
Gujarat and Punjab LCI’s have more viewership in cable regional channels whereas Rajasthan, UP and PHCHP show no such trend
LC1 markets across states do not seem to be similar in nature. They mirror the viewership trend for their mother market much more than they do with LC1
*CS4+. Wk 1 to 13 2013 - Confidentialmarkets - 49 LC1 – Prime-time is 7pm to 10pm
Viewership pattern across the day – TVR
28
HSM w/o LC1 HSM with LC1 HSM LCI
21
14 TVR
7
0 02:00 03:30 05:00 06:30 08:00 09:30 11:00 12:30 14:00 15:30 17:00 18:30 20:00 21:30 23:00
In LC1 markets, peak time is 8-8.30pm and it dips at 9.30pm, top shows in this markets tend to be before 10pm TG: CS4+; Wk 1 to 13 2013 - Confidential - 50 Key insights from on-ground research in LC1 markets (1 of 2)
Channel Imagery Inertia in brand preference ― Heritage brands that are being watched over time, continued to enjoy high equity in these markets e.g. Zee TV Less Variety Seeking Behavior ― While about 50 channels were available, the daily routine included only 4-5 channels at best Besides Star Plus and SAB, most other channels were seen as an aggregation of programs or movies Given the high weight-age these markets carry, it is prudent to shift the language of all on-air and off- air communication to Hindi Viewership Behavior and Lifestyle In single TV households, television is watched along with the family so the programme ought to cater to entire family at a time, also “Parivaarik” movies will be watched rather than romantic movies Besides television, only three other touch points emerge for these markets: ― Print (primary off-air medium) ― Mobiles ― Local grocery shops (visited regularly by 60%+)
- Confidential - 51 Key insights from on-ground research in LC1 markets (2 of 2)
There were three key influencers of viewing behaviour:
― Viewing companion (whom are they watching TV with?)
― Control over the remote
― Power cuts
Even at a claimed level, only 1 out of 3 were comfortable with English
Source: Ormax Media Report - Confidential - 52 Programming will be high on drama, emotions and social issues…
First 6 months Off % of Prime Prime Prime Total C&D/E Time Monday Tuesday Wednesday Thursday Friday Saturday Sunday Apr-14 48 32 80 11% 07:00 PM Fiction Show 1 costing INR 7 Lac per Episode May-14 48 32 80 11% 07:30 PM Fiction Show 2 costing INR 7 Lac per Episode Jun-14 51 34 85 12% 08:00 PM Mythological Show costing INR 15 Lac per episode Movie, Jul-14 52 38 90 13% 08:30 PM Fiction Show 3 costing INR 7 Lac per Episode Events & Aug-14 51 39 90 13% 09:00 PM Fiction Show 4 costing INR 7 Lac per Episode Repeat Sep-14 52 43 95 14% 09:30 PM Fiction Show 5 costing INR 7 Lac per Episode Oct-14 58 47 105 15% 10:00 PM Repeat Nov-14 58 47 105 15% Dec-14 63 52 115 16% 7th month onwards Jan-15 63 52 115 16% Prime Feb-15 69 56 125 18% Time Monday Tuesday Wednesday Thursday Friday Saturday Sunday Mar-15 66 59 125 18% 07:00 PM Fiction Show 1 costing INR 7 Lac per Episode 07:30 PM Fiction Show 2 costing INR 7 Lac per Episode 08:00 PM Mythological Show costing 15 Lac per episode Movie, 08:30 PM Fiction Show 3 costing INR 7 Lac per Episode Non Fiction costing Events & INR 15 Lac per hour Repeat 09:00 PM Fiction Show 4 costing INR 7 Lac per Episode 09:30 PM Fiction Show 5 costing INR 7 Lac per Episode 10:00 PM Repeat
Channel will be launched on the back of a mythological show followed by a low cost
non-fiction weekend- Confidential -show after 6 months 53 Channel ratings will be generated from SEC C/D/E and SEC A,B in LC1 towns GRP market sizing Average share of major players in SEC CDE
Market Groups SEC A SEC B SEC C SEC D/E 3 Metros 5% 5% 5% 7% 30% HSM 1mn+ 5% 6% 6% 8% 23% (excl 3 Metros) 19% HSM .1 to 1 only 4% 8% 7% 10% 20% 17% HSM LC1 only 3% 6% 6% 10% 13% HSM total 17% 24% 23% 35% 11% 10% 58% 10% SEC CDE GRP (Avg Wkly GRP (wk1-13 2013) 702 SEC A/B of LC1 GRP 97 Total Size 799 0% SET SAB Star Plus ZEE Colors Life OK We aim to replicate Zee's performance from SEC C/D/E and LC1 towns (SEC A/B) 265 275 220 209 220 84 169 65 165 141 21 75 22 125 69 15 110 52 98 11 83 46 10 68 9 52 55 45 41 62 37 33 50 51 30 0 SET SAB Star Plus ZEE Colors Life OK
TG: CS4+; Wk 1 to 15 2013 SEC C SEC D/E - Confidential SEC- A,B LC1 SEC A,B others 54 The new lower SEC GEC channel should target to reach 125-135 GRPs
Average weekly GRPs
505 510 460
New LC1, 135 SEC CDE, SEC AB of LC1 markets, female skew 408 New LC1, 125
306 All SECs but Targeting Male SAB, 150 SAB, 135 Skewed Comedy Channel GRPs
204
SEC A&B in Urban Area and 102 SET, 220 SET, 200 female viewers in 1Mn+ towns
0 Minimum Maximum
With this new GEC catered to LC1 markets, MSM would control nearly 50% of the
Hindi GEC- Confidential market - ratings 55 New GEC channel will become positive in Year 4 Total Revenues (USD M) Key Assumptions: Ad revenue – CPRP of USD 220 (INR 12k) for 146 150 first 2 years, USD 240 (INR 13k) in Year 3 and 127 CAGR 110 4, USD 275 (INR 15k) thereafter growing at 28% 59 95 15% at FCT of 12 Min 51 100 84 73 44 Subscription revenue – In first year it will be 61 38 33
USD M USD NIL, second year Ad/sub ratio will be 80/20 46 29 50 25 31 88 growing to 70/30 in year 2 and 60/40 14 76 66 16 6 50 57 thereafter 37 44 25 32 16 0 Programming cost – USD 13k (INR 7 lacs) for Year Year Year Year Year Year Year Year Year Year half hour fiction, USD 28k (INR 15 lacs) for 1 2 3 4 5 6 7 8 9 10 half hour Mytho and USD 28k (INR 15 lacs) Net Ad Revenues Subscription Revenues for one hour non fiction, growing at 10%
EBIT (29) (18) (7) 5 12 18 24 32 41 53 Marketing – USD 5M (INR 25 Crs) for launch,, New show launch in year 2 – USD 460k (INR DWM (USD M) (65.4) 2.5 Crs) for each show growing at 10% NPV (USD M) 0.9 IRR 12.3% Carriage – USD 9M (INR 49 Crs) in year 1, reducing at 10% till year 6
- Confidential - 56 Hindi GEC Channel P&L
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total CAGR Revenues Gross Ad Revenues 18.4 29.5 37.9 43.3 51.6 59.0 67.3 77.4 89.4 103.2 577.0 21% Less: Agency Commission (2.8) (4.4) (5.7) (6.5) (7.7) (8.8) (10.1) (11.6) (13.4) (15.5) (86.5) 21% Net Advertising Revenues 15.7 25.1 32.2 36.8 43.9 50.1 57.2 65.8 76.0 87.7 490.4 21% Subscription Revenue (Domestic) - 6.3 13.8 24.5 29.2 33.4 38.1 43.9 50.7 58.5 298.4 32% Other Income 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 1.5 10% Bad Debts, Discounts & Rebates (0.0) (0.1) (0.2) (0.3) (0.4) (0.5) (0.5) (0.6) (0.7) (0.8) (4.2) 40% Total Revenues 15.7 31.3 45.9 61.1 72.8 83.2 95.0 109.3 126.1 145.6 786.2 28%
Expenses Carriage 9.1 7.8 6.6 5.6 4.8 4.1 3.5 2.9 2.5 2.1 49.0 -15% Programming Cost 25.3 35.2 38.7 42.5 46.8 51.5 56.7 62.2 68.5 75.4 502.9 13% Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 -1% Marketing Cost 7.4 2.8 3.0 3.3 3.7 4.0 4.4 4.9 5.4 5.9 44.8 -2% Dealer Incentives 0.3 0.4 0.6 0.6 0.8 0.9 1.0 1.2 1.3 1.5 8.7 21% G&A 0.5 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.9 1.0 7.2 7% Manpower 1.7 1.9 2.3 2.6 3.0 3.4 3.9 4.5 5.2 6.0 34.5 15% Total Expenses 44.8 48.9 52.1 55.7 60.1 65.0 70.7 77.0 84.3 92.4 651.0 8%
EBITDA (29.1) (17.7) (6.2) 5.5 12.8 18.2 24.3 32.3 41.8 53.3 135.1 7% Depreciation 0.4 0.4 0.4 0.5 0.4 0.4 0.4 0.4 0.4 0.4 4.0 2% EBIT (29.5) (18.1) (6.7) 5.0 12.4 17.8 23.9 31.9 41.4 52.8 131.1 7%
Higher growth in Ad revenues combined with Subscription revenues will turn the
channel- Confidentialpositive - in Year 4 57 Hindi GEC Channel Cashflow
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Inflows Net Advertising Revenues 11.7 22.0 29.3 34.2 40.4 46.6 53.2 61.1 70.5 81.4 450.3 Subscription Revenue (Domestic) 0.0 5.2 12.2 22.0 27.2 31.2 35.6 40.9 47.2 54.5 276.1 Other Income 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 1.4 Total Revenues 11.8 27.3 41.6 56.3 67.7 77.9 89.0 102.2 117.9 136.1 727.8
Outflows Carriage Payout 9.1 7.8 6.6 5.6 4.8 4.1 3.5 2.9 2.5 2.1 49.0 Programming Cost 24.7 35.1 38.6 42.4 46.9 51.4 56.4 62.1 68.6 75.2 501.4 Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 Marketing Cost 5.6 3.9 3.0 3.3 3.6 3.9 4.3 4.8 5.3 5.8 43.4 Dealer Incentives 0.3 0.4 0.6 0.6 0.8 0.9 1.0 1.2 1.3 1.5 8.7 G&A 0.5 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.9 1.0 7.2 Manpower 1.7 1.9 2.3 2.6 3.0 3.4 3.9 4.5 5.2 6.0 34.5 Capex 1.5 0.2 0.2 0.2 0.9 0.2 0.2 0.2 1.1 0.2 4.8 Total Outflow 43.8 50.2 52.0 55.7 61.0 65.0 70.6 77.0 85.3 92.3 652.8
Net Cashflow (32.0) (22.9) (10.5) 0.6 6.8 12.9 18.4 25.2 32.6 43.8 75.0
DWM (USD M) (65.4) NPV (USD M) 0.9 IRR 12.3%
- Confidential - 58 Opportunity 2 – Free to Air GEC Plan
Strategic New Initiatives
- Confidential - 59 Introduction to Free to Air channels (FTA)
There are over 300 Free-to-Air Channels in India, ranging from News to GECs
FTA Channels are carried by a majority of cable operators in the Base Pack and by the DTH operators
DD Direct Plus – FTA platform
DD Direct Plus from Doordarshan reaches out to 7m subscribers, at a one time cost of USD 28 (INR 1,500). All channels are FTA on the platform
Offers 23 DD channels, 30 private channels, 20 All India Radio stations and 3 private FM stations
Broadcasters were charged a minimum reserve price for e-auction of USD 276k (INR 1.5 Crs), increased to USD 399k (INR 2.17 Crs) in 2012. The highest price offered was approx USD 645k (INR 3.5 Crs)
Star Utsav, Sahara One and Zee Smile are the only major GEC channels available on DD Direct
Dish TV is targeting the DD Subscribers by launching product “Dish Freedom Card” that allows users of DD Direct to enjoy all DD Direct Plus channels and an additional 16 Dish Channels by paying USD 18 (INR 990) for card and free connection for year
― Further annual renewals are for USD 8 (INR 450) for 12 months
FX rate: USD 1= INR 54.265 - Confidential - 60 TAM currently only covers Urban areas; with the LC1 expansion, rural markets will be next
Population (Millions) As per the Amit Mitra Committee, constituted by the MIB to review the 1250 1,211 Rural Urban existing Television Rating system in 1,029 India, sample size should be 1000 377 846 increased by almost 4 times from 286 8000HH to 30,000HH in the next 5 688 750 216 years 548 158
Millions 439 A majority of these additional boxes 500 109 834 will be in rural India (2/3 rd of TAM 79 743 631 boxes) 526 250 439 360 Majority of rural population may opt
0 for DD Direct Plus since it is free for 1961 1971 1981 1991 2001 2011 life time, after the one-time payment
If the recommendations are implemented, 2/3rd of the TAM boxes will be installed in Rural areas. This could be a game changer for channel ratings. SET could stand to lose further ground
Source: Census 2011, TRAI Consultation Paper on Guideline/Accreditation Mechanism for Television Rating Agencies in India - Confidential - 61 Star’s FTA channel – Star Utsav has grown its rating by 83% over 3 years, by re-using library content from the flagship channel Star Utsav – GRPs and Reach Star Utsav – Top Shows
20% 55 22% Episode Episode No. Time Programme Name No. on Star Plus 44 7/5/2013 7/5/2013 15% 15% 07:30 PM Ek Hazaaron Mein Meri Behnaa Hai 121 424 08:00 PM Mann Kee Awaaz Pratigya 717 Old show 33
R e a ch 08:30 PM Yeh Rishta Kya Kehlata Hai 670 1152 11% 09:00 PM Ek Doosre Se Karte Hai Pyaar Hum 100 Old show
GRPs 53 22 37 09:30 PM Saath Nibhaana Saathiya 594 807 10:00 PM Diya Aur Bati Hum 297 452 29 10:30 PM Ruk Jaana Nahi 55 Old show 11 11:00 PM Saath Nibhaana Saathiya 594 807 11:30 PM Diya Aur Bati Hum 297 452 0 0% 2011 2012 2013
Ratings Reach % TSV 58 72 79 (mins) Star Utsav has shown a good growth over the past years both in terms of Ratings and Reach. Time Spent is also increased from 58 mins in CY10 to 79 mins in CY2013 *Episode numbers from whatsonindia.com - Confidential - 62 Availability of un-mixed masters of quality shows is not a concern Name Episode Duration Hours weight Aahat-5 28 60 24,660 19.9% Star Utsav is currently running 14 Aahat-4 21 60 17,460 14.1% Boogie Woogie 2 33 60 12,900 10.4% different shows in a day with 26 fresh Entertainment Ke Liye Kuch Bhi Karega (S3) 34 60 12,300 10.0% episodes, that means a requirement of Hum Ladkiyan 73 30 5,070 4.1% Aahat-2 205 30 4,965 4.0% approx. 4,745 hours of content in a year Aathvaan Vachan 215 30 2,595 2.1% Babul Ka Aangann Chootey Na 116 30 2,355 1.9% Aahat-3 338 30 2,085 1.7% We also have events like Filmfare, Entertainment Ke Liye Kuch Bhi Karega (S4) - Eps 40411 & 41 - 2 hrs 60 each 2,040 1.7% Boogie Woogie 3(… Kids Championship 2010) 89 60 1,980 1.6% Stardust that can be aired on this Shubh Vivah 291 30 1,740 1.4% Entertainment Ke Liye Kuch Bhi Karega 26 60 1,680 1.4% channel Kulvaddhu 30 30 1,500 1.2% Kaisa Ye Pyar Hai 41 30 1,335 1.1% The MSM library also has 215k hours of Entertainment Ke Liye Aur Bhi Kuch Karega 41 60 1,260 1.0% Dekha Ek Khwab 15 60 1,230 1.0% quality content, with mixed masters and Saas Bina Sasural 139 30 1,095 0.9% Krishanben Khakharawala 173 30 780 0.6% can be reused post some changes Godh Bharai 157 30 615 0.5% Devi 100 30 450 0.4% Thodi Khushi Thode Gham 331 30 390 0.3% The FTA channel will have 4.5 hours of Durgesh Nandinii 52 30 225 0.2% tele-shopping SAB Shows Sajaan Re Jhoot Mat Bolo 148 30 7,170 5.8% Left Right Left 353 30 6,600 5.3% R.K Laxman Ki Duniya 478 30 5,295 4.3% Mr. and Mrs. Sharma Allahadbadwale 440 30 2,220 1.8% Yeh Chanda Kanoon Hai 108 30 1,620 1.3% Total 4,486 1,110 123,615 100% Number of Shows available 28 - Confidential - 63 MSM needs to launch a FTA channel, re-using our vast library and breakeven in Year 4 Channel can be placed in the FTA pack of MSOs, Revenues and EBIT (USD M) along with DD Direct and other DTH operators Will have the best of the archival SET and SAB 15 shows, may have classic Hindi Movies CAGR Opportunity for MSM’s FTA channel to build brand 17% 10 presence and reach through this and also opens up the possibility of these subscribers migrating to the 15 other network channels USD M USD 13 11 5 10 9 7 Key Assumptions: 6 6 4 5 Ad revenues – FCT available is 12 min with fill rate 0 of 50%, 60%, 70% for year 1, 2, 3 and 4 and 75% Year Year Year Year Year Year Year Year Year Year thereafter 1 2 3 4 5 6 7 8 9 10
Net Ad Revenues Programming cost includes music rights of USD 280k (INR 1.5 Crs) growing at 20% and rest is EBIT (3.3) (1.2) (0.4) 0.4 1.1 1.9 2.8 3.8 4.6 5.7 growing at 10% Marketing – USD 920k (INR 5 Crs) for launch DWM (USD M) (6.6) NPV (USD M) 0.5 Carriage – USD 740k (INR 4 Crs) for DD Direct IRR 13.4% growing at 10% and USD 2.4M (INR 13 Crs) in year 1 for others, reducing at 15% - Confidential - 64 Carriage is the only major cost for this channel followed by Marketing
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total CAGR Revenues Gross Ad Revenues 4.2 5.3 6.5 7.6 8.7 10.1 11.6 13.4 15.3 17.5 100.3 17% Less: Agency Commission (0.6) (0.8) (1.0) (1.1) (1.3) (1.5) (1.7) (2.0) (2.3) (2.6) (15.0) 17% Net Advertising Revenues 3.6 4.5 5.5 6.5 7.4 8.6 9.9 11.4 13.0 14.9 85.3 16% Subscription Revenue (Domestic) ------Other Income ------Bad Debts, Discounts & Rebates (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.2) 17% Total Revenues 3.6 4.5 5.5 6.4 7.4 8.6 9.9 11.4 13.0 14.9 85.1 17%
Expenses Carriage 3.1 2.9 2.6 2.5 2.3 2.3 2.2 2.2 2.2 2.3 24.6 -3% Programming Cost 0.5 0.6 0.6 0.6 0.8 1.0 1.1 1.2 1.6 1.8 9.8 16% Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 -1% Marketing Cost 1.8 0.9 1.0 1.1 1.2 1.4 1.5 1.7 1.8 2.0 14.5 1% Dealer Incentives 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 1.5 17% G&A 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.5 0.5 3.5 10% Manpower 0.5 0.5 0.6 0.7 0.8 0.9 1.1 1.2 1.4 1.6 9.2 15% Total Expenses 6.6 5.5 5.6 5.7 6.0 6.4 6.9 7.3 8.1 8.9 67.1 3%
EBITDA (3.0) (1.0) (0.1) 0.8 1.3 2.1 3.0 4.0 4.9 5.9 17.9 8% Depreciation 0.2 0.3 0.3 0.4 0.2 0.2 0.2 0.2 0.2 0.3 2.6 1% EBIT (3.3) (1.2) (0.4) 0.4 1.1 1.9 2.8 3.8 4.6 5.7 15.4 6%
Ad revenues even with low ERs- Confidential are - sufficient to cover up costs 65 FTA – Cashflow
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Inflows Net Advertising Revenues 2.7 4.1 5.1 6.0 6.9 7.9 9.2 10.6 12.1 13.8 78.4 Subscription Revenue (Domestic) ------Other Income ------Total Revenues 2.7 4.1 5.1 6.0 6.9 7.9 9.2 10.6 12.1 13.8 78.4
Outflows Carriage Payout 3.1 2.9 2.6 2.5 2.3 2.3 2.2 2.2 2.2 2.3 24.6 Programming Cost 0.5 0.5 0.5 0.6 0.9 0.9 1.0 1.2 1.6 1.7 9.5 Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 Marketing Cost 1.3 1.1 1.0 1.1 1.2 1.3 1.5 1.6 1.8 2.0 14.0 Dealer Incentives 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 1.5 G&A 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.5 0.5 3.5 Manpower 0.5 0.5 0.6 0.7 0.8 0.9 1.1 1.2 1.4 1.6 9.2 Capex 0.9 0.2 0.2 0.2 0.3 0.2 0.2 0.2 0.4 0.2 3.0 Total Outflow 7.1 5.8 5.6 5.8 6.4 6.5 6.9 7.5 8.6 9.0 69.3
Net Cashflow (4.4) (1.7) (0.6) 0.2 0.4 1.4 2.3 3.1 3.5 4.8 9.1
DWM (USD M) (6.6) NPV (USD M) 0.5 IRR 13.4%
- Confidential - 66 Opportunity 3 – Male focused Hindi Entertainment Channel
Strategic New Initiatives
- Confidential - 67 Universe size and Viewership Demographics
CS 4+ Male 4+ TG Female 4+ TG TAM Universe size 157 million 85.3 million 71.2 million (HSM in 2012) (54%) (46%)
Any Channel GRP CS 4+ Male 4+ TG Female 4+ TG (Average Weekly) 3291 3105 3513
Index of ratings 100 94 107
GRP/Weighted by Univ. 3291 1686 (51%) 1605 (49%) (Average Weekly)
As per TAM universe, there were 157m viewers in 2012 of which 54% were male and 46% were female On an average in CY2012, 3291 weekly GRP were generated in CS 4+ TG every week across all channels ― Males contributed 51% to the ratings, while Females contributed 49% to the overall TV ratings On indexing the percentage contribution of ratings to that of the CS universe, Males show a ratings index of 94 while Females are at 107
Lower consumption of Television by males, despite a higher audience base could be possibly due to an absence of compelling programming TG: CS 4+; HSM; Jan to Dec‘12 - Confidential - 68 The Male TV advertising market size, outside of News and Sports is approx USD 240-280m (INR 1,300-1,500 Crs)
Male Skewed Categories (% of Ad Pie) 2008 2009 2010 2011 2012 CAGR Telecom/Internet/DTH 13.9% 11.8% 11.1% 11.5% 9.4% -9% HH Durable 5.3% 4.7% 5.4% 5.5% 6.3% 4% Auto 5.6% 6.7% 6.7% 7.6% 6.0% 2% BFSI 7.7% 5.7% 5.2% 5.5% 4.3% -14% Real Estate/Home Product 3.3% 2.8% 3.3% 3.3% 3.7% 3% Corporate 3.6% 2.5% 2.7% 2.5% 3.4% -1% Alcoholic Beverages 0.8% 0.4% 0.6% 0.8% 0.9% 3% % of Overall Rev Targetted at Males 40.2% 34.6% 35.0% 36.7% 34.0% -4%
TV Ad Revenue (INR Crs) 8,200 8,800 10,300 11,600 12,480 11% TV Ad Revenue (USD Mn) 1,519 1,630 1,907 2,148 2,311 11% 7% 17% 13% 8% Male Skewed Category Size (USD Mn) (90% of Overall Category Target) 549 507 601 710 707 7% -8% 18% 18% 0%
Hindi News + Sports genre spends is approximately USD 420 – 460 Mn (INR 2,300 - 2,500 Crs)
Male category spending is growing lower than the overall TV advertising industry
We should aim to target at least 30-35% of this pie Source: Pitch Madison Report 2013 - Confidential - 69 Currently, Male Ratings are driven by Hindi GEC & Movies… Male CS 15+ Ratings Spread Male Hindi Movie Pie Male Hindi GEC Pie
Bangla Others DD Sahara Others Kids Infotainment Z Classic MAX Regional 8% 2% 4% 2% 4% 20% National One Sports 4% Hindi GEC Star Plus UTV Action Star Utsav 2% 3% 4% 37% 19% 7% Youth and 4% Music Life OK UTV Movies 5% 11% 8% Others FILMY Colors 11% Z Cinema SAB 16% 2% 20% Hindi News Z Action 12% 6% 3% Zee Maharashtra Movies OK Star Gold SET Regional Hindi Movies 10% 18% 15% 16% 6% 21%
Hindi GEC (1,135 GRPs) Star has the highest share amongst males followed by Colors SET and SAB contribute to 28% of the ratings Hindi Movies (688 GRPs) Zee Cinema has the highest share amongst males at 21% MAX follows a close 2 nd at 20%
Ratings for all channels may possibly be equally affected and not just SET and SAB TG: Week 1-13, 2013 CS 15+ Males - Confidential - 70 Male affinity towards Channel Genres Genre size Male 4+ Fem 4+ Genre (CS 4+ GRP) Index Index On indexing the ratings in Any Channel 3291 94 107 English Bus News 1 149 59 individual TG with CS 4+, we English News 3 135 69 understand the gender skew of Sports 77 127 68 English Movies 26 120 74 the channel genres Infotainment 48 119 79 Strong Male skew English Ent 3 116 86 (Male index above 100) Channel genres which show Hindi Bus News 6 112 77 Hindi Movies 566 108 90 strong male affinity contribute Kids 267 107 91 North Region News 5 107 90 35% ratings to the overall TV Hindi News 143 107 91 South Regional 6 96 115 viewership Others 161 96 106 Bhojpuri Regional 6 95 107 Moderate male skewed genres Oriya Regional 11 95 110 Moderate Male skew Gujarati regional 11 94 108 contribute 19% while low male (Index between 90 & 100) Marathi Regional 225 92 109 affinity genres contribute Punjab Regional 25 92 111 Youth & Music 161 91 110 remaining 44% to the overall Religious 23 91 113 Health & Lifestyle 7 84 115 TV viewership Low male skew (Index Hindi GEC 1275 83 120 less than 90) Bangla Regional 172 79 125 Teleshopping 1 61 119
A channel with Infotainment and Movie- Confidential content - is likely to appeal more to males 71 What are Males watching on TV? Avg Wkly Male Male Male Male Male Male Male Male Male Male Channel GRP 4-14 yr 15-24 yr 25-34 yr 35-44 yr 45-54 yr 55+ yr SEC A SEC B SEC C SEC DE (Males 4+) Any Channel 3105 95 93 91 90 95 104 94 92 96 96 Hindi GEC 1057 82 83 79 80 86 91 84 83 84 82 Hindi Movies 612 95 129 123 100 100 83 83 92 110 134 Kids 287 300 45 49 63 28 40 107 106 103 112 Maharashtra Regional 209 61 85 106 108 104 125 89 87 118 81 Hindi News 155 50 95 106 130 167 178 148 121 95 81 Youth & Music 147 74 140 89 74 82 59 87 94 89 94 Bangla Regional 134 38 43 59 82 103 263 84 79 87 73 Sports 97 87 152 132 123 135 151 157 145 113 104 Infotainment 58 112 140 118 102 116 104 137 124 114 105 English Movies 32 62 168 156 100 113 97 167 122 97 98 Hindi Bus News 6 27 63 162 183 217 159 226 170 58 48 North Region News 5 46 97 131 180 292 347 276 183 99 63 English News 5 30 134 189 139 199 229 343 130 81 25 English Entertainment 3 58 171 190 84 123 146 241 130 105 66 English Bus News 2 12 135 302 390 318 341 582 325 71 6
Sports and infotainment channels have a very high skew amongst all males cutting across all SECs and age groups Movies & news channels are also popular amongst males Hindi GEC channels show a relatively lower skew amongst males indicating a low content preference amongst them Sports & infotainment channels are amongst the most popular in males Source: TAM, Jan to Dec ’12; TG – CS Males 4+; HSM - Confidential - 72 What programme genres are Males watching? Wkly Male Male Male Male Male Male Male Male Male Male Language-Genres GRP 4-14 yr 15-24 yr 25-34 yr 35-44 yr 45-54 yr 55+ yr SEC A SEC B SEC C SEC DE Hindi-Serials 534 72 73 69 71 79 89 75 72 75 74 Hindi-Feature Films 479 95 124 115 94 95 80 82 89 107 125 Hindi-Comedies 131 131 102 82 92 96 81 104 112 104 89 Hindi-Action/Thriller 126 82 97 107 99 94 95 90 95 97 96 Dubbed Hindi-Feature Films 120 97 142 133 96 97 78 82 94 115 141 English-Cricket Match 109 87 140 133 129 129 140 147 139 112 104 Marathi-Serials 79 56 77 97 92 95 132 86 80 109 73 Hindi-Film Songs 72 71 123 93 79 87 65 76 89 85 101 Bengali-Serials 61 35 36 45 69 80 241 67 68 74 65 Hindi-Mythos/Costume Dramas 46 80 87 85 86 101 132 90 91 96 89 Hindi-Talent Search/Feats 46 83 100 84 80 94 78 97 89 88 80 Marathi-Feature Films 37 78 97 116 114 86 92 75 88 131 94 Hindi-Reality Shows 29 63 111 83 68 95 86 116 93 83 60 Marathi-News Bulletin 20 51 98 127 139 143 150 112 106 129 91 Hindi-Events/Concerts/Awards 18 79 89 79 79 90 85 95 87 82 73
Analysis of key program genres across 52 channels that garner 70% of the male TG ratings in CY2012 Hindi Serials, Hindi Movies, Hindi Comedies & Hindi Action Thriller contribute 41% to overall male ratings Cricket matches in English & Hindi contribute another 4% to the ratings and cuts across CS 15+ age groups and all SEC Dubbed Hindi movies & Hindi Film songs show a strong skew towards male youth and lower SEC’s Hindi Comedies show a higher skew amongst the younger age group of CS 4-24 Yrs. & SEC ABC
While Hindi Serials garners the highest GRPs, it has a lower skew across all male demographics. Hindi Films, comedies and action/thriller content has a higher skew outside sports and news
Source: TAM, Jan to Dec ’12; TG – CS Males 4+; HSM - Confidential - 73 Hindi serials dominate the Top 50 show list, but rate amongst the lowest Ratings of programs genres in top 50 shows – Average TVR # of programs Program Genres Male 4+ Male 15+ Male 15-34 yr. in Top 50 Game Shows/Quiz 1 3.5 3.5 3.0 Action/Thriller 3 3.1 3.2 3.3 Talent Search/Feats 5 2.9 2.9 3.0 Comedies 4 2.4 2.4 2.3 Reality Shows 3 2.2 2.4 2.4 Serials 31 2.0 2.0 1.9 Mythological/Costume Dramas 2 1.8 1.8 1.6 Talk Shows/Chat Shows 1 1.4 1.5 1.3
Game Shows & Action/Thriller are amongst the highest rated shows in male TG KBC is the sole Game Show to feature amongst the highest rated programs Action/ Thrillers comprise CID & Crime Patrol (on SET) and Fear Files (on Zee TV) Talent Search programs includes Indian Idol, DID & India’s Got Talent All the top comedy shows like Comedy Circus, Taarak Mehta & Chidiya Ghar are from the Sony Network Reality Shows includes Jhalak Dhikla Ja, Satyamev Jayate & Big Boss Low ratings indicate a possibility of lack of content options for males and hence forced viewership for Hindi serials Source: TAM, Jan to Dec ’12; TG – CS Males 4+; HSM - Confidential - 74 The Average male doesn’t have one dedicated Entertainment channel catered to his needs…
Channel for the 15+ Males in the HSM Markets
Content would be a mix of Original Programming (Action, Thriller, Infotainment) and Movies
Male audiences don’t have content focused towards them. This would be a channel for them to have their daily dose of entertainment
Sports & News command higher ERs for reaching out to this audience
Create a platform for Advertisers to reach out to the Male audience outside the traditional News/ Sports genre and charge a premium for this
Create a new GEC channel targeted- Confidential - to the Hindi speaking males 75 From 117 GRPs in Year 1, ratings will grow to 200 GRPs by the 10 th year FPC Prime Time Monday Tuesday Wednesday Thursday Friday Saturday Sunday 07:00 PM Gizmo/Tech Show 07:30 PM Avg Rating Assumed Male 15+ : 0.1 08:00 PM Courtroom Comedy Comedy 08:30 PM Avg Rating Assumed Male 15+ : 0.96 Avg Rating Assumed Male 15+ : 1.38 Avg Rating Assumed Male 15+ : 1.38 09:00 PM Thriller Gameshow Gameshow 09:30 PM Avg Rating Assumed Male 15+ : 1.62 Avg Rating Assumed Male 15+ : 2.1 Avg Rating Assumed Male 15+ : 2.1 10:00 PM Crime Reality Reality 10:30 PM Avg Rating Assumed Male 15+ : 1.56 Avg Rating Assumed Male 15+ : 2.1 Avg Rating Assumed Male 15+ : 2.1 Horror 11:00 PM Avg Rating Assumed Male 15+ : 1 Ratings
Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Ratings 117 125 135 150 155 160 165 175 185 200 Weekday Programming (7 pm – 11:30 pm) ― Gizmo tech show on the lines of Tech Guru/Gadget Guru ― Courtroom/Thriller/Crime/Horror benchmarked against SET shows like Adaalat/CID/Crime Patrol/Aahat Weekend Programming (8 pm – 11 pm) ― Driven by non fiction; Gameshow (Minute To Win It), Comedy (Comedy Circus) and a big ticket reality show (Fear Factor) Original content cost in the 1 st year is USD 85m (INR 460 Crs) driven by high weekend
- Confidentialspends - 76 Losses are driven by high Programming costs
Total Revenues (USD M) Key Assumptions:
173 Ad Revenue : 180 151 − FCT of 12 mins, with fill rates growing CAGR 131 22% 70 from 58% in Year 1 to 100% from Year 5 115 61 120 100 − CPRP benchmarked average at INR 87 53 46 14,500 till Year 3 and INR 16,000 for Year 69
USD M USD 40 35 4 and 5 60 50 40 28 104 91 29 20 79 Programming Cost – Average Week day ½ hr 16 69 53 60 12 42 30 episode cost is USD 17.5k (INR 9.4 lacs) while 17 24 0 weekend ½ hr costs are USD 71k (INR 38.4 Year Year Year Year Year Year Year Year Year Year lacs) 1 2 3 4 5 6 7 8 9 10 Net Ad Revenues Subscription Revenues Marketing – USD 11.2m (INR 60 Crs) in launch
EBIT (59) (71) (72) (62) (52) (49) (45) (39) (31) (22) year with annual marketing spends of USD 9m (INR 48 Crs) from Year 2 growing 10% Y-o-Y
DWM (USD M) (568) Carriage – USD 6.7m (INR 37 Crs) in Year 1, NPV (USD M) (342) reducing at Y-o-Y IRR N/A
- Confidential - 77 Male Action channel – P&L
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total CAGR Revenues Gross Ad Revenues 20.3 28.6 35.0 48.8 61.8 70.9 81.2 93.0 106.9 122.6 669.1 22% Less: Agency Commission (3.0) (4.3) (5.3) (7.3) (9.3) (10.6) (12.2) (13.9) (16.0) (18.4) (100.4) 22% Net Advertising Revenues 17.2 24.3 29.8 41.5 52.5 60.3 69.0 79.0 90.9 104.2 568.8 22% Subscription Revenue (Domestic) 11.5 16.2 19.8 27.7 35.0 40.2 46.0 52.7 60.6 69.5 379.2 22% Other Income 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 1.5 10% Bad Debts, Discounts & Rebates (0.2) (0.2) (0.3) (0.4) (0.5) (0.5) (0.6) (0.7) (0.8) (0.9) (5.2) 22% Total Revenues 28.7 40.4 49.5 68.9 87.2 100.0 114.5 131.2 150.9 173.0 944.2 22%
Expenses Carriage 6.7 5.4 5.1 4.6 4.2 3.8 3.2 1.9 0.8 0.2 35.8 -34% Programming Cost 66.8 94.7 104.2 112.1 120.0 128.4 137.4 146.9 157.3 168.3 1,236.2 11% Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 -1% Marketing Cost 11.0 7.5 8.2 9.0 9.9 10.9 12.0 13.2 14.5 16.0 1 12.3 4% Dealer Incentives 0.3 0.4 0.5 0.7 0.9 1.1 1.2 1.4 1.6 1.8 10.0 22% G&A 0.5 0.6 0.6 0.7 0.8 0.8 0.9 1.0 1.1 1.2 8.1 9% Manpower 1.7 1.9 2.3 2.7 3.1 3.5 4.0 4.6 5.3 6.1 35.3 15% Total Expenses 87.6 110.8 121.3 130.2 139.2 148.9 159.1 169.5 181.0 194.0 1,441.7 9%
EBITDA (58.9) (70.4) (71.9) (61.3) (52.0) (48.8) (44.6) (38.3) (30.2) (21.1) (497.5) -11% Depreciation 0.4 0.4 0.5 0.5 0.4 0.4 0.4 0.4 0.5 0.5 4.5 2% EBIT (59.3) (70.9) (72.4) (61.8) (52.4) (49.2) (45.0) (38.7) (30.7) (21.6) (502.0) -11%
High Programming- Confidential Costs - drive losses 78 Male Action channel – Cashflow
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Inflows Net Advertising Revenues 12.9 21.8 27.3 37.2 47.9 56.0 64.1 73.4 84.4 96.8 521.7 Subscription Revenue (Domestic) 9.5 14.8 18.4 25.3 32.3 37.5 42.9 49.2 56.5 64.8 351.3 Other Income 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 1.4 Total Revenues 22.5 36.7 45.8 62.6 80.3 93.6 107.2 122.8 141.1 161.8 874.4
Outflows Carriage Payout 6.7 5.4 5.1 4.6 4.2 3.8 3.2 1.9 0.8 0.2 35.8 Programming Cost 66.5 94.6 104.0 112.0 120.1 128.3 137.2 146.9 157.4 168.2 1,235.3 Broadcast & Uplink Cost 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 3.9 Marketing Cost 8.3 8.3 8.0 8.8 9.7 10.7 11.8 12.9 14.2 15.6 108.4 Dealer Incentives 0.3 0.4 0.5 0.7 0.9 1.1 1.2 1.4 1.6 1.8 10.0 G&A 0.5 0.6 0.6 0.7 0.8 0.8 0.9 1.0 1.1 1.1 8.1 Manpower 1.7 1.9 2.3 2.7 3.1 3.5 4.0 4.6 5.3 6.1 35.3 Capex 1.6 0.2 0.2 0.2 1.1 0.2 0.2 0.2 1.4 0.2 5.4 Total Outflow 86.0 111.8 121.2 130.1 140.2 148.7 158.9 169.3 182.2 193.8 1,442.2
Net Cashflow (63.5) (75.1) (75.4) (67.5) (59.9) (55.1) (51.7) (46.5) (41.1) (32.0) (567.8)
DWM (USD M) (568) NPV (USD M) (342) IRR N/A
- Confidential - 79 Opportunity 4 – Digitally distributed TV Channel
Strategic New Initiatives
- Confidential - 80 More users are spending increasing amount of time online
Growth in the Internet user-base in India Page views and Time Spent
160 150 Page views # of unique visitors Claimed Users (mn) Active Users (mn) 137 75,000 75
120 112 70,000 Unique visitors (Mn) Uniquevisitors 93 90 65 79 65,000 80 71 63 58 60,000 46 45
Page Page views (Mn) 55 40 32 32 21 55,000 16 12 9 8 11 5 2 4 0 50,000 45 2000 2001 2003 2004 2006 2007 2008 2009 2010 2011 2012 Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- 11 11 12 12 12 12 12 12 13 13 TSU 765 777 771 770 772 750 732741 689 696 Active internet users reached 137 mn in 2012 (min) Growth in key metrics in the last 1 year: ― 27% growth in Unique visitors per month ― 10% decrease in the time spent per user per month ― 6% increase in the page views per month
Source: I-Cube 2005, 2009, 2011; IAMAI and Comscore reports - Confidential - 81 The devices are getting smarter, the users more engaged
India - Active Internet Enabled Smartphone's Smartphone’s and tablets have an installed 250 241 base of approximately 44 million and 2.5 200 200 million units respectively, comprising a third 153 150 of internet enabled devices in India 101 100 74 2013 will be the first year when feature 50 38 phones will cease to be the main use of
0 internet access in the country 2012 2013P 2014P 2015P 2016P 2017P
Share of Internet Enabled Devices – 2012 Share of Internet Enabled Devices – 2017P
22% 5% 17%
2% 46% 16%
30% 62%
Feature Phones Smartphones Tablets PCs & Notebooks Feature Phones Smartphones Tablets PCs & Notebooks
The share of Smartphones is expected to increase to 67% of all devices, by 2017
Source: FICCI KPMG 2013 - Confidential - 82 We are expecting an exponential rise in video consumption on mobile… # of Indian Mobile Internet users India Internet vs. TV Penetration
848 873 70 900 791 820 60 731 762 48 600 496 35 426 35 351 24 26
Millions 276 Milliions 300 226 174 10 12 2 0 0 2009 2010 2011 2012 2012 2013P 2014P 2015P 2016P 2017P
Claimed Users (mn) Active Users (mn) Internet Users TV Viewers
895m Telco subscribers of which 865 are Wireless subscribers
700m unique mobile users of which 50mn are internet users. 500+m mobile data users by 2015
2nd largest internet market by 2015 crossing 300m users
Rising Smartphone and internet penetration is expected to drive higher video
consumption- Confidential - 83 Digital Advertising market
Online Display and Mobile Ad market size (USD M)
1800 1,600
CAGR 255 32% 1,182 1200 164 891
USD M USD 673 109 527 1,345 600 73 400 55 1,018 36 782 600 473 364
0 2012P 2013P 2014P 2015P 2016P 2017P
Online display ad revenues projected to grow at 30% while the mobile ad revenues are projected to grow at 48%
25% of mobile ads as on today are in-app advertising and 75% on web browsers
Source: FICCI KPMG M&E Report 2013 - Confidential - 84 Internet advertising will be the dominant revenue stream, while the Mobile platform will drive revenue directly from consumers
Product / Service Revenues Costs
Content TV / Film video clips acquisition / licensing Advertising Internet
Music – audio/video Technology Streaming / Download / Streaming In-App billing/ Subscriptions Social Networking Revenue share Mobile Text Downloads Infotainment Marketing / Promotion
The appropriate balance of providing various services over Internet and mobile, will be based on consumer preference as well as monetizing potential - Confidential - 85 Competition has started experimenting with Online and Apps
Company Mobile Online
Star Sports launched Star Sports APP for Planned a launch of Star player – site for showcasing the ICC Champions Trophy. Free subscription based video content Videos but ICC Event is on a pay wall Currently they monetize channel websites
Box TV – an aggregated VOD based site with Times Internet launched Box TV Mobile APP– subscription model Subscription based service for TV Shows and IPL – online viewership increasing by 56% Movies- Indian and Hollywood Content Heavy advertising through their media businesses
Zee launched Ditto VOD + LIVE TV Channel app Online Portal offering Video on Demand and Freemium model Movies for Consumption First Player to launch White-labeled Mobile TV Services across All Telcos in India Launched the beta version of Myplex-TV which is a portal for streaming Movies- Indian and Apalya launched Myplex NOW, a D2C product. Hollywood Partnerships with OEMs like Samsung, RIM.
Strong Player on Mobile TV with a wider presence NA across Mobile APP Stores
Operates on a Advertising Model NA APP embeds on Nokia Asha Series devices Eros NOW- Mobile APP for Full Movies with 14 Erosnow.com – Eros’s online destination for days FREE Trial movies, music videos and trailers Eros Lite- Mobile APP based on short Clips from Movies are offered at a premium package of
Movies. Completely FREE. - Confidential - $2.99/month 86 A linear channel exclusively for “People on the Go”
MSM to launch a linear Streaming Channel available exclusively on the digital platforms
A channel targeted to the youth of today
A mix of original and existing programming:
― Short Form Content (15 Mins)
― Comedy
― Bollywood Gossip
― Entertainment
― Game shows/Trivia
SET and SAB are already available on the following Mobile TV platforms:
― Apalya (SET)
― Ditto (SET, SAB and MIX)
― NexG TV (SET, SAB and MIX)
― Zenga (SET, SAB and MIX) - to be signed
- Confidential - 87 Original Programming – Quick snacking content for the Youth of today
Home / Lifestyle – For Urban / semi-urban audiences. Shows on home décor, furnishing, party- ideas, health & fitness, etc.
HHC videos – Similar to the website High Heel Confidential – mirrors fashion trends followed by the rich & famous women - fashion faux-pas and the general happenings in the fashion industry
Biopics – Biographical episodes that dramatizes the lives of Superstars from Bollywood, Sport, Fashion etc.
Food / Drink – Along with Traditional house recipes include clips on international cuisines, desert making, etc.
Eating Out / Travel – Adventure and exotic travel destinations and food fancies alongside
Comedy
− Stand up – Famous Comedy stars from the Television and Theatre circle
− Sketch – Shorter webisodes of older famous TV shows like Sarabhai, Dekh Bhai Dekh, Taarak Mehta Ka Ooltah Chashma
Short form content which is not in the “daily soap” format would consumers to sample
- Confidentialon the - go 88 FPC would be a mix of short form catch-up and original programming Year 1 Year 10
Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sunday 08:00 AM SET/SAB Mobisode 08:00 AM SET/SAB Mobisode 10:00 AM 10:00 AM 08:00 PM Trivia/ Quiz show 08:00 PM
S Biopics/HHC S Bollywood Gossip 08:15 PM T 08:15 PM T
08:30 PM A 08:30 PM Eating Out/Travel A
Comedy (Sketch/ Standup) E E 08:45 PM 08:45 PM Food/Drink
P P
09:00 PM E 09:00 PM Trivia/ Quiz show E
09:15 PM R 09:15 PM Bollywood Gossip R SET/SAB Mobisode & Repeats 09:30 PM 09:30 PM Comedy (Sketch/ Standup) 09:45 PM 09:45 PM
One hr of Original content per day in the 1 st year which will grow to 2 hrs at the end of the 10 th year The channel will be short of content in the 1st year it should have a mix of Original and Short form (mobisodes) catch-up content from SET and SAB Catch-up content (15 min mobisodes of SET and SAB content) - this will be played out in the morning (8-10 am) One hour of Original content (15 min episodes) will be shown during prime-time along with SET and SAB repeats One hour of Original content will built-up to two hours by Year 10
Mix of original and catch-up content may drive audiences to sample the channel
- Confidentialinitially - 89 Challenges for Mobile TV (1 of 2)
Download Pricing Subscription Pricing Installed Base Mobile TV (Android) Android iOS Windows BB Nokia Ovi Quaterly Monthly Weekly Daily
100k-500k Free NA Free NA NA - - - -
100k-500k Free NA Free Free Free - 100 50 10
100k-500k Free Free Free Free Free 349 | 149 | 99 129 | 99 | 49 - -
1Mn- 5 Mn Free INR 110 N A Free Free - - 28 4
100k-500k Free Free Free NA NA - 150 | 170 - -
Cost of Original Programming is very high, as compared the revenue potential on such a channel
Growth in revenues in an Advertising only model is negated by higher bandwidth and streaming costs
Mobile/Web specific content, has shown limited audience uptake, the most popular content is mainstream GEC content
Stand alone, we will have to spend a large amount of Marketing monies - Confidential - 90 Challenges for Mobile TV (2 of 2)
The Consumer mindset does not favor paying for both content & data
Data charges is currently a big deterrent for consumers. Bundling of data with content access will be critical.
3G services have not seen the uptake that was anticipated
People know SET, SAB, MIX, etc. i.e. there is power in the brand, which is why people are consuming it on mobile
Key learning’s from existing partnerships:
― Individual Channel subscriptions have seen limited subscriptions
― Choice of multiple channels packaged into one pack may work better
FX rate USD 1= INR 54.265 - Confidential - 91 Stand alone linear channels have seen limited subscriber offtake
Apalya Subscriber Base
1,200,000
800,000
400,000
0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Total Subscribers SET Subscribers SAB Subscribers
SAB TV subscribers dropped when it was moved from the all channel pack to
individual- Confidential subscription - 92 High content costs and low subscription revenues limits profitability Total Revenues (USD M) Key Assumptions: Channel will be available in Indian and 125 119 International markets through Apps and online 20 100 Ad revenue model in the initial 5 years CAGR 78 110% 75 14 From Year 5 Ad revenues will be supplemented 49 with the introduction of subscription packs USD M USD 50 99 32 10 Subscription packs from Year 6 priced at USD 7 64 25 19 0.5 (INR 30) per month in India and USD 5 per 9 39 4 5 0 1 2 26 month Internationally 9 14 0 0 1 2 4 Year Year Year Year Year Year Year Year Year Year Programming costs have been budgeted at USD 1 2 3 4 5 6 7 8 9 10 37k (INR 2 lacs) per 15 min episode Net Ad Revenues Sub Revenues Marketing – USD 925k (INR 5 Crs) launch EBIT (7) (8) (8) (11) (10) (4) (1) 5 22 49 budget with annual marketing spends of USD 555k (INR 3 Crs) growing 10% YoY DWM (USD M) (69.0) NPV (USD M) (26.4) IRR N/A
Reluctance to pay for content and low- Confidential ticket - size limits Subscription revenues 93 Mobile TV Channel P&L USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total CAGR Revenues Gross Ad Revenues- India 0.1 0.5 1.3 2.6 5.5 9.6 17.3 26.9 44.7 69.7 178.0 103% Gross Ad Revenues- International 0.1 0.4 1.1 2.2 4.6 7.4 12.8 19.3 31.1 47.2 126.1 112% Total Gross Ad Revenues 0.2 0.9 2.3 4.8 10.1 17.0 30.0 46.2 75.8 116.9 304.2 106% Less: Agency Commission (0.0) (0.1) (0.4) (0.7) (1.5) (2.5) (4.5) (6.9) (11.4) (17.5) (45.6) 106% Net Advertising Revenues 0.1 0.7 2.0 4.1 8.6 14.4 25.5 39.2 64.4 99.4 258.6 106% Net Subscription Revenue - - - - - 1.4 2.0 2.8 4.0 5.8 16.0 Other Income ------Bad Debts, Discounts & Rebates (0.0) (0.0) (0.0) (0.0) (0.0) (0.1) (0.1) (0.1) (0.2) (0.3) (0.9) 124% Total Revenues 0.1 0.7 2.0 4.1 8.6 18.9 32.0 48.5 77.8 118.6 311.4 110%
Expenses Streaming + Subscription Costs 0.1 0.2 0.5 1.7 2.9 5.2 12.6 17.4 24.1 33.4 98.2 94% Programming Cost 3.7 5.0 5.5 7.9 9.5 10.4 11.4 15.3 17.8 19.6 106.1 20% Marketing Cost 1.7 0.9 1.0 1.2 1.3 1.4 1.7 1.8 2.0 2.2 15.1 3% Dealer Incentives ------G&A 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.5 0.5 0.5 3.5 12% Manpower 0.7 0.8 0.9 1.1 1.3 1.5 2.0 2.2 2.6 3.0 16.1 17% Total Expenses 6.4 7.2 8.2 12.2 15.2 18.8 28.0 37.2 47.1 58.8 239.1 28%
EBITDA (6.2) (6.5) (6.2) (8.1) (6.6) 0.1 4.0 11.3 30.8 59.8 72.3 -229% Depreciation 0.7 1.0 1.8 2.5 3.3 4.3 5.5 6.8 8.5 10.5 44.8 34% EBIT (7.0) (7.5) (8.0) (10.6) (9.9) (4.2) (1.5) 4.6 22.3 49.3 27.5 -224%
- Confidential - 94 Mobile TV Channel Cashflow
USD M Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Inflows Net Advertising Revenues 0.1 0.6 1.6 3.5 7.3 12.6 22.1 34.6 56.3 87.6 226.3 Subscription Revenue (Domestic) - - - - - 1.2 1.9 2.7 3.9 5.5 15.1 Subscription Revenue (International) - - - - - 2.5 4.2 6.0 8.6 12.4 33.7 Other Income ------Total Revenues 0.1 0.6 1.6 3.5 7.3 16.3 28.1 43.3 68.8 105.5 275.1
Outflows Streaming + Subscription Costs 0.1 0.2 0.5 1.7 2.9 5.2 12.6 17.4 24.1 33.4 98.2 Programming Cost 3.6 5.0 5.4 7.9 9.5 10.3 11.3 15.2 17.9 19.5 105.9 Marketing Cost 1.3 1.1 1.0 1.1 1.3 1.4 1.6 1.8 2.0 2.2 14.6 Dealer Incentives ------G&A 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.5 0.5 0.5 3.5 Manpower 0.7 0.8 0.9 1.1 1.3 1.5 2.0 2.2 2.6 3.0 16.1 Capex 3.0 1.1 3.0 3.1 5.8 5.2 7.7 8.4 12.6 13.4 63.3 Total Outflow 8.8 8.5 11.1 15.2 21.1 23.9 35.5 45.5 59.7 72.1 301.5
Net Cashflow (8.7) (7.9) (9.4) (11.8) (13.8) (7.6) (7.4) (2.3) 9.1 33.5 (26.4)
DWM (USD M) (69.0) NPV (USD M) (26.4) IRR N/A
- Confidential - 95 Recap – Putting it all together
- Confidential - 96 Hindi GEC will start making profit from Year 4, due to high revenues
Total Revenue (USD M) Total Cost (USD M)
CAGR 146 8% 150 CAGR 100 93 126 85 28% 77 109 71 95 75 60 65 100 83 53 56 73 45 49 61 50 46 50 31 16 25
0 0 Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
EBIT (USD M) Channel will address smaller towns with a
Year Year Year Year Year Year Year Year Year Year female skew; strengthening the overall bouquet 1 2 3 4 5 6 7 8 9 10 offering 60 53 41 32 Small-town urban India is very attractive – in 24 30 18 terms of purchasing power, time spent on media 12 5 and product consumption and are taking center 0 stage in marketing strategies of India’s leading (7) brands -30 (18) (29) - Confidential - 97 FTA Channel will start making profit from year 4 due to low costs
Total Revenue (USD M) Total Cost (USD M)
CAGR CAGR 14.9 16 10 3% 9.2 17% 13.0 8.4 11.4 7.1 7.6 12 8 6.9 6.6 9.9 6.0 6.3 8.6 5.8 5.9 7.4 6 8 6.4 5.5 4.5 4 3.6 4 2
0 0 Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
EBIT (USD M) If 2/3 rd of the TAM boxes are installed in rural areas it could be a game changer for channel Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 ratings. SET could stand to lose further ground 8 5.7 Placement in the FTA pack of MSOs, along with 6 4.6 3.8 4 2.8 DD Direct and other DTH operators 1.9 1.1 2 0.4 Help building the Sony brand in the rural 0 markets and develop a potential future pay -2 (0.4) (1.2) subscriber base for SET and SAB -4 (3.3) - Confidential - 98 Profitability for the Male Channel is unlikely due to the high costs involved
Total Revenue (USD M) Total Cost (USD M)
CAGR 9% 195 200 200 182 CAGR 173 170 160 22% 151 140 149 150 131 150 122 131 115 111 100 100 87 100 88 69 40 50 50 29 50
0 0 Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
EBIT (USD M) This would be a channel for males to have their Year Year Year Year Year Year Year Year Year Year daily dose of entertainment who don’t have any 1 2 3 4 5 6 7 8 9 10 0 content focussed towards them
-20 Create a platform for Advertisers to reach out to (22) the Male audience outside the traditional -40 (31) (39) News/Sports genre at a premium (45) -60 (52) (49) (59) (62) Content would have Original Programming -80 (71) (72) (Action, Thriller, Infotainment) and Movies
- Confidential - 99 Mobile Channel will start making profit only in the 8 th year
Total Revenue (USD M) Total Cost (USD M)
125 119 CAGR 75 69 110% CAGR 100 56 78 29% 75 50 44 49 34 50 23 32 19 19 25 15 25 9 7 8 10 0 1 2 4 0 0 Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
EBIT (USD M) 700m unique mobile users of which 500m Year Year Year Year Year Year Year Year Year Year consume data along with the 2nd largest internet 1 2 3 4 5 6 7 8 9 10 60 market by 2015 expected to drive an rise in 49 video consumption 40 22 Young India is driving internet usage and half of 20 their time is spent on Entertainment 5 0 A Linear Channel Exclusively for “People on the (4) (1) Go” with a mix of original and existing short (7) (8) (8) -20 (11) (10) - Confidential - form content 100 To Summarize… Female-skewed, Lower Free To Air (FTA) GEC Male focused Hindi Digitally distributed TV SEC GEC Channel Channel Entertainment Channel Channel
An FTA channel offering A Linear channel available Focused towards fulfilling A niche channel created to the best of archival SET exclusively on digital the content needs of cater to the daily dose of and SAB shows that will platforms for “People on Summary small town/ semi urban Entertainment for males with be placed in the base the Go” with a mix of India with high emotional thriller/action and comedy tier/ free pack of MSOs/ original and existing short drama and social content content DTH operators form content Fills a content gap in the Platform for Advertisers to Network catering to a Introduces the Sony reach out to the Male Caters to the fast growing large semi-urban/rural brand to a large audience at a premium digital audience in the audience audience, enabling Pros content sampling and Ring fences the network country Enhances the bouquet from losing its traditional cultivating a potential A first of its kind unique offering for one stop shop male audience of SET by future pay subscriber offering for advertisers to reach base offering them another out all target groups alternative High Programming costs Stand alone mobile does not make the channel Competition is offering content difficult to Possible cannibalization current content that profitable Cons monetize of SET & SAB ratings gives them a strategic May cannibalize into the SET Long gestation period to advantage audience base resulting in turn positive lower ratings EBIT: $131M EBIT: $15M EBIT: ($502M) EBIT: $28M DWM: ($65M) DWM: ($6.6M) DWM: ($568M) DWM: ($69M) Financials NPV: $0.9M NPV: $0.5M NPV: ($342M) NPV: ($30M)
IRR: 12.3% IRR: 13.4% - Confidential - IRR: NA IRR: NA 101 MSM – Industry Update and the Road ahead Man Jit Singh
10 June 2013
- Confidential - 102