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RIL-Network18 deal signal consolidation in media

Reliance Industries Ltd's (RIL) complex two-way deal with Network18 might well be the first among many such transactions in the Rs 32,000 crore broadcasting industry, where a few large players are jostling with hundreds of regional broadcasters for eyeballs, Anita Sharan reports. Media Marraiges

business Updated: Jan 12, 2012 02:48 IST

Reliance Industries Ltd's (RIL) complex two-way deal with Network18 might well be the first among many such transactions in the Rs 32,000 crore broadcasting industry, where a few large players are jostling with hundreds of regional broadcasters for eyeballs.


Analysts tracking the sector feel that bleeding balance sheets could force many small and marginal media firms to cash out to larger conglomerates. Large players are looking for a foothold in media, which has the potential to return rich yields given the promise of digitised content delivery on mobile handsets and other platforms.

Almost half the firms that run nearly 700 television channels are in losses.

While both TV Today and NDTV reported losses for the September quarter - Rs 9 lakh and Rhttp://www.hindustantimes.com/Images/HTEditImages/Images/12-01-12-buss19.jpgs 10.69 crore respectively - BAG Films reported a marginal profit of Rs 51 lakh and Zee News a bottomline of Rs 2.04 crore for the same period.

"There are too many players operating in the same genre and there is barely any differentiation," said G Krishnan, former CEO, TV Today Network. "Consolidation is the way forward. The industry should look at the regional space, which is taking off."

"Marginal players or individual media firms, who do not have deep pockets, find it tough to survive," said Gaurav Dua, head (research), Sharekhan.

"Media is like any other sector and this is the time that large groups, which have established themselves and have deep pockets, will go for acquisitions," Dua said.

NDTV's stake sale to chemicals firms Oswal and Walt Disney's buyout of Ronnie Screwvala-controlled UTV Software recently point towards a gradual consolidation in the industry, analysts said.

"Consolidation has been going on in India for a long time now," Sunil Lulla, managing director and chief executive officer, Times Global Broadcasting, said. "You'll see more of these deals but don't expect valuations to go up. The ad volumes have not shown healthy growth last year and the industry itself is not too big. Network18 has got a lease of life, it has challenges ahead."

All eyes are on TV Today amid speculation that the Aroon Purie-promoted network will announce major deals in the coming months, especially in regional media.

"In 2010, of total ad revenues on television, 53% was in regional channels… growing from 47% in 2009," TV Today noted in its 2010-11 annual report.

Some media industry experts, however, do not expect a flood of deals in the short-term. Most transactions will be focussed on fund-raising to stay afloat.

"I would look at consolidation happening seriously if the moves happen from within the television industry. Right now, it seems to be more about cobbling together of funding," said Santosh Desai, media analyst and chief executive officer of Future Brands.

"Consolidation normally happens when two players of any size, operating in the same business, come together or merge. To date, that has not happened," Screwvala said.

"It will take another two or three rounds of consolidation over the next five years for media behemoths to come into existence," media observer and author of The Indian Media Business, Vanita Kohli-Khandekar said.

Some experts expect distribution, rather than content, to drive the initial rounds of consolidation in the broadcasting industry, where volumes and economies of scale are critical to offset low margins and high capital costs.

"New money has to come in for digitisation. Distribution has to be settled first," said Timmy Kandhari, leader (entertainment & media practice) of consulting firm PricewaterhouseCoopers India.

Neeraj Roy, managing director and chief executive officer, Hungama Digital Media, expects consolidation and alliances between content deliverers and network technology, similar to the RIL-Network18 deal, in the short term.

"It is even possible that technology companies could take strategic stakes in TV media companies to get these companies to digitise on their platforms," Roy said.