M&E deals shrink in value


MUMBAI: The global economic slowdown shook tremors in the Indian media and entertainment sector as deal activities dropped in value in 2010, making many companies cash strapped and freezing large-scale expansions.

Although the number of deals stitched in 2010 remained the same, in value 2009 scored higher at $722 million. In 2010, 27 deals yielded a value of $693 million, according to KPMG.

Market valuations of media and entertainment companies have fallen significantly, impacting deals. The sector has, in fact, seen a slide in the last couple of years, as in 2008 38 deals were hatched for a total value of $1.5 billion.

Some of the major deals in the year included Malaysia‘s Astro All Asia Networks acquiring stakes in NDTV Lifestyle, GETIT Infoservices, Turmeric Vision and Sun Direct TV. It contributed $175 million of the total deal value in 2010.

Other marquee transactions included Blackstone PE‘s investment in Jagran Media ($49 millionn), Jagran‘s subsequent acquisition of Midday Multimedia ($40 million) and Rajeev Chandrashekhar-backed Jupiter Media & Entertainment Ventures‘ investments in Express Publications for $53 million.

In 2010, the sector witnessed 10 private equity deals valued at $170 million, as against 12 deals valued at $335 million in 2009. Restrictions on FDI and a lack of quality assets apart, most media companies have traditionally taken to public markets for funding, limiting the role of PEs.

“Our discussions with PEs and industry players indicate that most are bullish on the segment in general and find almost all the sub-segments of interest in varying degrees”, KPMG said.

TV broadcasting

The global economic slowdown in 2009 resulted in a significant reduction in corporate spending across media platforms, thus adversely impacting the advertising industry. This directly impacted the major revenue source for broadcasters and resulted in companies rationalising their existing portfolios by exiting segments that were non-core.

NDTV exited the GEC space by selling its 92 per cent stake in NDTV Imagine to Turner International for $117 million.

In 2010, there has again been very limited consolidation in this sector with Astro All Asia Networks accounting for a majority of transactions such as NDTV Lifestyle and Turmeric Vision and Zee’s acquisition of the 9X channel.

The TV broadcasting industry in India is currently characterised by high fragmentation, low entry barriers and high carriage fees, with the top 2-3 channels getting a disproportionate share of advertisement dollars.

Accordingly, the sector witnessed limited PE investments in 2010.

Regional channels are expected to be the next growth sector given the disproportionate share of viewership and advertisement spend. Further, with sectors like telecom, consumer goods and automotive showing robust growth in Tier I and II cities and rural areas, advertisement for regional channels is expected to increase significantly. Many regional channels did not witness the impact of the economic slowdown in their advertisement revenues as local advertisers did not defer a significant portion of their ad spends.

This, coupled with the fact that regional players will seek to diversify into different genres to create a bouquet of channels by pursuing organic and inorganic growth strategies, makes regional channels attractive to PEs, the report said.

Consolidation within the industry is expected with larger TV broadcast networks such as Zee, Turner, Viacom and Sony expected to acquire or partner with regional networks.

Distribution Biz

Apollo Management, a US-based private equity firm, acquired 11 per cent stake in Dish TV for $100 million. In another significant development, Reliance Communication’s DTH arm acquired Digicable to become one of the largest global players to offer a full suite of triple pay services.

Both Cable and DTH are likely to raise capital in the short term, which will help accelerate the process of digitisation of the distribution landscape in India.

However, the DTH segment is currently characterised by overcapitalisation with the different players trying to capture more subscribers by installing their equipment at low ARPU’s. Therefore, this sector is expected to attract PE investment only after the DTH market stabilises in ARPU terms.

In the near term, the cable segment, which is a more evolved opportunity, will relatively see more investment activity.

The report also suggest that in 2011, deal activity will continue to be driven by acquisition of LCOs by MSOs to secure last mile connectivity. There is also likely to be fund raising by MSOs and DTH operators to fund customer acquisitions and their infrastructure roll out.


In the near term, regional print companies will raise capital either through public markets or private equity to expand their businesses and compete against larger print companies.

Historically, consolidation within this sector has been limited, given that the industry is characterised by high entry barriers and promoter mindset against dilution of their stake. Accordingly, it has been difficult for regional players, other than the No.1 and No.2 to grow. However, consolidation within this sector appears to be imminent as large players will seek to improve margins and expand into newer markets through acquisitions, KPMG said.
FDI caps in sector continue to be an impediment for investment from international players and rationalisation of these restrictions is likely to boost investment flow into this sector.

Internet companies/Online media

PE houses are unanimously upbeat on the outlook of ‘online media’ which is expected to benefit from an increase in share of consumers’ media time. On the back of India’s recent investments in building a strong broadband infrastructure, rising consumer preference for online shopping and largely moderate valuations (relative to the dot. com era), web portals are fast attracting the attention of both advertisers and investors alike.

While e-commerce web sites are not strictly comparable with traditional media platforms, they still vie for a share of advertising dollars and hence compete with media companies with respect to investor interest as valuations are still driven largely by ad revenues.

Most leading PE houses have significant investments in this segment internationally; they track the segment actively and are keen to replicate their international successes in India.

However, with the exception of a few dot.com players most other players do not have the scale to attract big ticket investments as yet. Given that investments are expected to be largely early stage /mezzanine in the immediate future, PEs may need to evaluate these sectors wearing a VC hat– which is different from evaluating investments in traditional media.


Radio is still an early stage segment characterised by multiple players with little differentiation in product offerings, FDI restrictions and regulatory bottlenecks in setting up multiple frequencies and operating news channels.

Regulatory changes such as permission to own multiple frequencies in a city and relaxation of FDI limits could facilitate consolidation amongst domestic players and also attract global private equity to help spur growth in this segment.

The recent ruling by the Copyright Board reducing the royalty burden on radio companies is expected to improve profitability and spur PE interest in the segment, KPMG said.

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