As TV18 Broadcast is set to merge with Network18 Media and Investments, Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital believes that following this Network18 will be able to cross-sell strengths of all media assets and target better advertising revenue with scale over the medium to long term.
Network18 Media & Investments and TV18 Broadcast on Wednesday announced a Scheme of Arrangement in terms of which TV18 and e-Eighteen.com Limited (“E18”, which owns and operates moneycontrol website and app) will merge with Network18.
The proposed Scheme will consolidate the TV and Digital news businesses of the Network18 group into one company.
Taurani emphasised that the merger of TV18 and Network18 is a serious attempt to target a larger share in the fragmented media and entertainment (M&E) market of India, specifically within digital media (search, display, social, e-commerce, video, news, audio), which also has a larger set of advertisers spread across SMEs, apart from large verticals.
India’s M&E market for TV, print and digital put together is quite large at Rs 1,530 billion (CY22). Having a bundled offering with a larger target audience/reach will help scalability on revenues and also help a better reach amongst a varied set of advertisers. The merger could be a potential win-win for both entities as Network18/TV18 has reported a tepid EBITDA margin of a mere 12.3%/13.4% (average of last four years), he added.
“We believe that cost control measures and synergy benefits will drive efficiencies for the merged business. Further, a bundled offering under the Network18 umbrella, with a subscription plan at a discounted price augurs well for a price-sensitive market like India, coupled with a large reach of more than 450 million smartphone users by Jio (part of Reliance Industries, which is Network18’s parent Company),” Taurani said.
India's market is all about the aggregation of content across various mediums, which will offer better subscription revenue and visibility over content spends across mediums to create a strong pay/subscription-based model via bundling in a price-sensitive market like India. Higher subscription revenue can offer better visibility over content costs (across mediums). A superior user experience across all offerings coupled with differentiated and good quality content will be the only factor to drive a potential subscription revenue base.
“We don’t foresee any negative impact of the above for listed peers like Zee and Sun TV, as they don’t have a presence in the news segment. However, in the case of Network18 forming a media super app, providing a variety of content could pose a threat to the M&E ecosystem. Listed news players like TVT could see a negative impact of the above merger as they have digital news assets and TV channels,” Taurani added.
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