This is in line with our forecast of INR 500bn, driven by a 30%/70% premium on the TV/digital base price, which was also in line. IPL media rights have been sold for INR 484bn, which is roughly in line with our expectations. While 49% of media rights are held by digital (including cluster), only 22% of Viacom 18’s revenue comes from this segment; therefore, we believe Viacom 18 paid a substantial premium to benefit both Jio subscribers’ retention (through the possibility of a bundling plan) and the OTT platforms’ valuation.
SVOD and AVOD revenues are expected to expand at a rate of 30 per cent over the next five years, whereas TV revenues are expected to grow at a rate of 6-8 per cent. The cost of rights on a per-match basis for digital has now equalled or exceeded the price of rights for major leagues like the EPL, demonstrating the compelling quality of IPL content.
Currently, 60 per cent of the TV and digital advertising expenditures go to significant sectors like e-commerce and FMCG; however, if IPL rights are sold separately, we predict fierce competition for ad budgets on both TV and digital platforms.
Financial technology (fintech), commerce (commerce), education technology (ed-tech), and electric vehicles (EVs) are expected to witness significant shifts towards digital. At the same time, FMCG and auto will largely depend on TV for mass marketing.
While we expect TV to break even in the second year since premiums on packages B and C of the media rights have been restricted, we expect digital to break even in the fourth year owing to high content costs driven by steep premiums on packages B and C.
Digital, on the other hand, has the potential to yield a gross margin of 24% in the fifth year, compared to TV’s gross margin of only 13%.
Media rights revenue is expected to grow by 2.2x (between INR 6.5bn-8bn) on average, while the number of matches is likely to increase by 40% (compared to the previous cycle). EBIT margins are expected to rise by 40% to 48%, while player expenses remain limited.
SUNTV’s market cap contribution is 40%, while UNSP’s is closer to 14%. We had previously incorporated the listed businesses’ revenue and profit statistics (UNSP and SUNTV) in our estimations. We continue our assessment that SUNTV will experience a more significant differential. Both stocks get a BUY rating from us.
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