Mar 24 2024, 08:48
Disruption by OTT players and rising costs turn the spotlight away from media stocks:
Media and entertainment stocks, once romanced by investors, have been losing their sheen of late. While a dramatic shift in how content is consumed and the consequent spike in costs are to take the blame, this basket has also seen its share of outliers, with a few companies handsomely rewarding their investors.
Two companies deserve a special mention here:
1. Saregama India, the music label which shed its B2B strategy on the back of a new category product, Caravan.
2. Shemaroo Entertainment, the family-run company which got listed in October 2014 and managed to keep pace with digitisation.
Eros was recently downgraded by CARE Ratings by 10 notches to default while US-based Hindenburg Research published a report alleging financial irregularities in the company, triggering an 87% drop in its share price over the last one year.
Analysts tracking the sector believe that the Internet and digital revolution has taken the sector on a whirlwind ride, changing the way the business is perceived and customers are served. Shortsighted companies that failed to spot this shift in trend have seen a devaluation in their shares.
"Most sub-segments in media have gone through a major digital disruption over the past five to seven years and the inability of many companies to ride this wave led to de-rating of valuation multiples, which explains the loss in shareholder wealth," says Rohit Dokania, senior vice-president (research) at IDFC Securities.
Now, let's take a closer look at sectoral trends.
Cinema exhibition:
India is the world's largest producer of films in terms of numbers. Though the slow pace of real-estate development has led to the lowest screen density in the world, the cinema- exhibition sector has still seen a lot of action led by companies such as PVR, INOX Leisure, Cinepolis, and Carnival Cinemas.
"Media companies or broadcasters have been facing similar problems of late apart from the concerns around pledged shares and promoters-specific issues," says Rajiv Sharma, co-head, Institutional Research at SBICAP Securities. "A new tariff order and the disruption from OTT [over the top] clearly have raised the costs for broadcasters, as they need to spend more on content."
While OTT platforms don't share viewership data of their shows, Netflix has stated that Sacred Games has been one of its most popular shows from India, with two out of every three viewers from outside the country watching the show. The OTT service's animation series for kids, Mighty Little Bheem has also broken all viewership records and is the biggest pre- school show on the platform.
Shows on Amazon Prime Video such as Mirzapur, Four More Shots Please, Breathe, and Made in Heaven have also clicked with the viewers.
TV broadcasting
MCAP (INR crore)
TV Today Network
1,663.02
Zee Entertainment Enterprises
Sun TV Network
18,086.30
31,965.44
TV18 Broadcast
3,840.14
Zee Media Corporation
561.66
New Delhi Television
223.73
Network 18 Media & Investments
2,570.24
Raj Television Network
210.02
Print media
Despite showing growth in regional languages, print-media companies have not been able to boost investors' confidence.
Jagran Prakashan, DB Corp, Hindustan Media Ventures, and HT Media, all have seen a fall in their share prices over the last five years.
Print media
MCAP (INR crore)
648.21
HT Media
Hindustan Media Ventures
653.17
3,327.17
DB Corp
Jagran Prakashan
3,036.62
Change in share prices
-22.50
-15.85
-32.16
-36.20
-62.28
-56.45
-42.86
HT Media
Hindustan Media Ventures
DB Corp
Jagran Prakashan
Though late in joining the digital bandwagon, the vernacular print media has fared better than English newspapers. In the meantime, many online news aggregators run by nimble startups have also established their presence.
According to Sharma of SBICAP Securities, the decline in print is driven by the growth in smartphone connections. "The physical distribution in print keeps the storytelling and ad revenues together," he says. "But it was disrupted with the growth in broadband, as now distribution has no cost and all stories have become modular."
Besides, it has been tough for print companies to monetise digital platforms, adds Sharma.
India has been ahead of global markets in attributing lower earnings multiples to shares of print media companies owing to their highly stretched valuations and poor returns. With ripples of disruption unwilling to die down and the consequent churn underway, this indeed is a sector to be closely watched.
source: et
Mar 24 2024, 09:13
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