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Sector Update January 11, 2019 Key events to watch in Q4FY19 Media Box office collections of key movies Uri, Thackeray, Manikarnika, Super 30, Gully Boy, Total Dhamaal, Badla in Lot of moving variables ahead… Q4FY19 Q3FY19 was a news heavy quarter for the media sector with new flows Deal pipeline of Zee5 and Technology annoucement of Zee such as deferral of tariff order implementation (to be implemented by Entertainment February 1, 2019), fund raising announcements by multiplexes, GST rate Implementation of Trai tariff order effective from February 1, cut, etc, hogging the limelight. Notably, the market share (BARC rating – 2019 taking into account top five players) of Sun TV in Q3FY19, in its core Moderation of newsprint prices in Q4 and tailwinds of market of Tamil Nadu continued to slide and is now below 40% (300 bps election related spends QoQ decline to 39.4%) while Zee Tamil improved 150 bps QoQ to 21.6%. Any uptick on footfalls on account of GST rate cut on cinema Zee continues to enjoy healthy viewership growth trends in some key tickets effective from January 1, 2019 markets of Marathi and Oriya and giving tough competition to the ABP group in the Bengali market. In the Telugu market, Star Maa (Star group) continued its market share gain while Sun TV owned Gemini TV continued to lose. Aaj Tak maintained its leadership in the Hindi news segment, albeit viewership share came down while News18 India continued its viewership gain momentum. Net domestic box office collections for the Research Analyst quarter remained healthy despite the high base of Q3FY18. Newsprint Bhupendra Tiwary prices, as per management, have reversed and are ~15% down from [email protected] peak prices, the benefits of which are likely to fully seen from Q1FY20 onwards. Going ahead, we expect a multitude of variables such as impact Sameer Pardikar [email protected] of Trai tariff implementation and OTT space expansion in broadcasting space, multiplexes capital raising & deployment plans, election led tailwinds to advertisement (across segments) to determine the way ahead. Zee market share gain continues; inches closer to leader in Bengali Zee Entertainment continued to witness a rise in some of its key markets including Marathi (Zee Marathi, Zee Talkies) where its market share improved 50 bps QoQ to 60.6% in Q3FY19. At least three shows of Zee were among top five Hindi GEC shows during all the weeks of the quarter. In the Bengali market, the viewership share of Zee Group (Zee Bangla, Zee Bangla Cinema) continued to be healthy at 42% while that of STAR group improved 20 bps to 43.5%. In the Tamil market, Zee Tamil continued to give stiff competition to market leader, Sun TV, on account of which market share of Sun TV now fell below 40%, to 39.4% while that of Zee Tamil improved 150 bps QoQ to 21.6% The viewership share for Zee Tamil has improved nearly 770 bps since Q3FY18. Aaj Tak maintains leadership in Hindi news; News18 catching up In the Hindi news segment, Aaj Tak maintained its leadership position with 24.7% viewership share, albeit its market share declined 180 bps QoQ. The viewership share for Zee News has declined 40 bps QoQ to 18.3%. That of ABP News improved 70 bps to 19.3%. News18 India has been improving its market share impressively and has now secured No. 2 position. Viewership share for the channel improved 150 bps QoQ and 330 bps YoY to 19.9% now. Strong box office collections; multiplexes step up growth plans Despite high base, box office collections (ex- regional) for Q3FY19 were at | 990 crore, up ~15% YoY. The collections were led by healthy box office performance from 2.0 (Hindi collections of ~| 188 crore) and ‘surprisingly healthy collections from Badhaai Ho, which collected ~| 136 crore during the quarter. Top five movies contributed ~64% box office collection for the quarter. Inox also recently raised | 160 crore by allotting 6.4 million shares to parent GFCL at | 250 per share. Similarly, PVR is also seeking to raise ~| 750 crore, largely to accelerate the screen addition rollout ahead. We also note that PVR’s management, in the media, indicated an investment of ~| 2500-3000 crore in the next three to five-year horizon specifically targeting exhibition opportunity in Tier II/III cities in India. ICICI Securities Ltd. | Retail Equity Research Some developments in OTT space during quarter i) Netflix has announced a content slate of 32 originals in India, ii) Reliance Jio expanded its content slate with Disney deal, iii) Shemaroo’s OTT service ‘ShemarooMe’ is slated to be launched in Q12019, iv) Eros Now intends to launch 50 short-format series by 2019, v) ZEE5 launched 20% discount offer for Australia, Singapore markets, vi) ZEE5 inked strategic tie-up with Zeasn to bolster its presence in Asia, ME, Africa while vii) Balaji Telefilms invested | 450 crore in ALTBalaji till September BARC ratings market share (based on Top five) Exhibit 1: Tamil market trend Viewership market Share of Sun TV has fallen below 40% 50 47.0 46.2 now. Zee Tamil continued to gain. Market share is at 21.6% 45 43.0 42.5 40 39.4 35 30 (%) 25 21.6 20 18.5 20.1 16.5 15 13.9 10 5 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Sun TV STAR Vijay KTV Zee Tamil es Source: BARC, ICICI Direct Research Exhibit 2: Telugu market trend In a competitive Telugu market, Star Maa gained viewership market share rapidly while viewership market 30 share of Zee Telugu was steady at 22.6% 29.0 28 27.3 26 23.4 24.9 24 24.2 24.0 (%) 23.6 22.5 22.8 22.6 22 22.6 21.8 20.7 20.7 20 19.9 18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 STAR Maa ETV Telugu Gemini TV Zee Telugu Source: BARC, ICICI Direct Research | Retail Equity Research ICICI Securities Ltd. Page 2 Exhibit 3: Kannada market trend In the Kannada market, viewership market share of Zee 33.4 Kannada continued to improve and is now almost at par 34 32.9 31.3 32.6 32.5 31.2 31.3 with Sun TV owned Udaya. Colors Kannada has maintained 32 32.5 its leadership 30 29.0 28.6 28 31.0 (%) 27.2 26 24 23.1 23.0 22 21.5 20 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Colors Kannada Zee Kannada Udaya Movies + Udaya TV Source: BARC, ICICI Direct Research Exhibit 4: Marathi market trend Zee maintained undisputed leadership in the Marathi 62.8 60 59.9 60.1 60.6 market with viewership market share continuing to be over 57.4 60% (Zee Marathi + Zee Talkies) 50 40 (%) 30 20 17.5 17.3 14.6 16.8 16.8 14.9 16.9 16.5 10 15.5 15.8 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Zee Marathi + Zee Talkies Colors Marathi STAR Pravah Source: BARC, ICICI Direct Research Exhibit 5: Bengali market trend 65 58.8 55 Viewership market share for the Zee group improved more 49.7 49.9 than 1000 bps YoY, almost at par with the market leader 45 43.2 43.5 42.2 42.0 i.e. STAR group 35 36.1 35.8 (%) 31.5 25 15 5 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 STAR Jalsha +Jalsha Movies Zee Bangla + Bangla cinema Colors Bangla Source: BARC, ICICI Direct Research | Retail Equity Research ICICI Securities Ltd. Page 3 Aaj Tak maintained its leadership, albeit with some Exhibit 6: Hindi news market trend moderation in viewership market share while News18 India is now at the No. 2 position 28 26.5 25.5 24.8 24.7 23 23.7 (%) 19.9 18 18.1 18.4 16.6 15.8 13 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Aaj Tak Zee News ABP News India TV News18 India Source: BARC, ICICI Direct Research Exhibit 7: English news market trend 39 36.5 35.3 36.1 34 34.2 34.2 30.4 31.3 29 29.4 29.0 29.1 (%) 24 19 16.5 14 14.2 14.3 14.7 14.0 11.8 11.5 10.3 10.9 9 9.3 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 ‘Republic’ and ‘Times Now’ remained at No 1 and 2 Republic TV Times Now position while TV Today owned India Today continued to India Today Television CNN News18 be a laggard Source: BARC, ICICI Direct Research | Retail Equity Research ICICI Securities Ltd. Page 4 Exhibit 8: Movie collection trend Q1FY18 Collections (| cr) Q1FY19 Collections (| cr) YoY (%) Baahubali 2 511 Avengers: Infinity War 223 Tubelight 121 Race 3 161 The Fate Of The Furious 77 Raazi 123 Key movies for Q4FY19- Uri, Thackeray, Manikarnika, Hindi Medium 69 Baaghi 2 120 Super 30, Gully Boy, Total Dhamaal, Badla Half Girlfriend 60 Veere Di Wedding 80 Others 175 Others 436 Total Collections 1,014 Total Collections 1,143 12.7 Q2FY18 Collections (| cr) Q2FY19 Collections (| cr) Toilet - Ek Prem Katha 134 Sanju* 268 Baadshaho 78 Stree 127 Jab Harry Met Sejal 63 Gold 107 Mubarakan 55 Satyameva Jayate 89 Jagga Jasoos 53 Mission: Impossible - Fallout 77 Others 458 Others 372 Total Collections 840 Total Collections 1,040 23.9 Q3FY18 Collections (| cr) Q2FY19 Collections (| cr) Tiger Zinda Hai* 252 2.0(Hindi) 188 Golmaal Again 206 Thugs of Hindustan 145 Judwaa 2* 101 Badhai Ho 137 Fukrey Returns 79 Simba* 96 Secret Superstar 62 Zero* 95 Others 197 Others 366 Total Collections 897 Total Collections 1,027 14.6 Q4FY18 Collections (| cr) Padmaavat 300 Sonu Ke Titu Ki Sweety 102 Raid 97 Tiger Zinda Hai* 87 PadMan 79 Others 253 Total Collections 918 * collections during the quarter Source: Koimoi.com, ICICI Direct Research | Retail Equity Research ICICI Securities Ltd.