Friday, June 5, 2009

Are media players paying heed to hour call ?

Besides the debilitating punch it has landed on household spending, the recession in the US economy has several side effects; one of them is the ever falling marriage rates due to rising insecurity. But there could not be a better time for corporate marriages (M&As), as weaker companies are ready to sell themselves off for a pittance. Particularly for fragmented sectors like media & entertainment (M&E), the time is right to unite. So are the Indian M&E players actually paying heed to the call of the hour ? As per the Intelligence Unit estimates, the total M&A deals announced by Indian companies in 2008 fell to about 450, as compared to 675 in 2007.

On the contrary, the number of deals in M&E was 38, one more than the number in 2007. The total deal value of M&As in 2008 fell to $ 32 billion from $ 51 billion in 2007. But the deal value of M&As in media & entertainment shot up to $ 580 million last year, as compared to $ 530 million in 2007, TIU says. In terms of number of deals, the broadcast media has had the maximum share so far, so it makes sense to analyse this area in particular. In the TV space, genres like news and regional channels may see more action on the M&A front as compared to other genres like GECs. Industry experts feel that this is because there is much more scope to grow in these genres than in GEC space.

Also experts feel that most deals will be with a strategic purpose as Jehil Thakker, executive director, head, Media & Entertainment, KPMG India, argues, "This is a right time for people who wanted to enter this business as many good properties are available at cheap rates, since sustaining a channel (or any other media vehicle for that matter) is becoming tougher by the day." So people with deep pockets may have a dream run during this slowdown. Star India is planning to buy-out Hyderabad based Maa TV Network, which runs Maa TV and Maa Music channels.

Says an Star India's spokesperson, "Regionalisation will be the next big thing in TV media in India, thus we may expect some heated action on that front. We are currently auditing Maa TV and will announce the deal in some time." We could infer from this that national media houses like Star India, Network 18, Multi Screen Media, Zee Entertainment Enterprises, may go for those regional channels, which were doing well earlier, but aren't able to sustain in tough economic times. Additionally, it's the right time to expand for media houses like TV18, which don't have an expansive channel bouquet as compared to older players like Star India and Zee Entertainment. "This is the best time for M&As in Indian media, because valuations are at an all time low. Most of the media stocks have fallen by as much as 80-90 per cent", agrees Anand Shah, analyst, Angel Trade.

However, in the same breath, Shah cautions that the acquirers need to be quite careful and selective about the companies that they want to pick up. This means that one needs to ensure that the property being acquired fits well in the acquiring group's portfolio. Take 9X for instance. INX Media is trying to sell the channel for quite some time now, but it is not getting suitable buyers. Reason ? The asking price of 9X is too high compared to its pathetic performance. "It will make more sense for a strategic investor to start a new channel rather than buying 9X at those insensible prices," says another media analyst. It would be illogical to buy an entity just because it's available cheap; buyers will have to exercise extreme caution before they walk the aisle.

- A Televisionpoint Article

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