| Understanding the media buzz |
Like they say - there is a time for everybody. Its the time for the media companies. Its a boom phase for them and many companies are making strategic plans for the future. Some of these are tapping the Primary Market to fund their activities. These companies are not only receiving a warm welcome in the primary market, but they are also crazily sought after in the secondary market. But do we, as investors, know exactly what a media company is all about? Do we really understand the valuations of these companies to make an investment decision? Or is it that we most of us are investing in these companies with a herd mentality? Well, its never too late to learn something. Let us get a clearer picture of what the media industry today is all about.
Media industry can be broadly classified into two Film making and Television business. The business can be further classified into: broadcasting, content provision and marketing and distribution. Broadcasting companies basically earn by advertisements and subscription. buy content and broadcast the same. For example, Zee Television. Content providers on the other hand, mainly supply the content to the channels or also to a film. Cinevista Communications is one such company. Then come the marketing companies like Tips. The third category also includes the cable operators.
Broadcasting
This business includes lot of investment in the form of infrastructure and
usually had a lead time of 4 years before the business starts paying off. There will be
marginal difference in the costs for these companies. The margins are mainly dependent on
the revenues generated from advertising, which is dependent on the popularity of a
channel. Like we all know now, how Kaun Banega Crorepati is earning crore of rupees for
Star Plus. To judge whether a company is likely to do well or no, one can easily go by the
popularity criteria.
Content Providers
The life of any channel is content. The broadcasters generate in-house content,
but they also source the content from companies exclusively engaged in the same. The
content providers generate revenue by selling their programs to the channels. Once sold,
they lose their rights over their programs.
Cable Operators
Cable operators like Siticable earn their revenue by giving subscriptions and from
one time installation charges. These companies also generate marginal revenues from
advertisements.
Marketing Companies
Normally, the music of a film gets released much ahead of the film. These music companies
like Tips buy the rights of the music. Then onwards, any revenues from the sale of the
cassettes or CDs goes directly to these companies. Sometimes, the music company, instead
of purchasing the rights, pays royalty to the music directors.
Valuations
Among these companies, Zee Telefilms is the most popular scrip on the bourses. Companies
like TV18 had done very well during the IPO boom. But now their prices are lying low.
Mukta Arts had come out with an IPO recently and was well received by the market.. The
company got listed at a premium to the issue price. The IPO of Tips is now on.
Tanuja R N