Companies with end-customer data are valued far higher than traditional media or telecom cos: Report
MUMBAI: Neither content nor distribution is the king. It’s customer data which is the king and will drive future mergers & acquisitions (M&A) in the media and entertainment sector.
According to the FICCI-EY report, customer data is the new oil and this can be seen as companies with end-customer data are valued far higher than traditional media or telecom companies.
It further stated that the M&E sector will see opportunistic M&A as companies fill in gaps in their existing portfolios and communities. Further, alternate structures such as joint ventures, partnerships and tie-ups will be seen in the sector to pool capabilities while growing end-customer access
The report also expects to see increased number of investments in building unique capabilities relevant in the digital age — companies leveraging artificial intelligence machine learning, analytics, recommendation engines, behavioral sciences, etc. – to acquire customers, retain them and engage more with them.
It stated that investments will also be seen by companies as they aim to meet and serve the non-content needs of communities they have built or identified for monetisation. This could result in media companies acquiring non-media companies viz, brokerages, education etc.
The report also noted that partnerships with payment gateways, particularly WhatsApp Pay once it operationalizes, can revolutionize the subscription industry
With an increasing number of investments over the years, the sector could see successful investor exits in the future, as investors realign their investments to the digital era, it added.
Furthermore, convergence led investments will increase as new business models evolve: the line between media, technology, and telecom will continue to fade.
According to the report, the media & entertainment sector witnessed a tepid year in terms of M&A activity in 2019. Although the number of deals increased to 64 in 2019 from 41 in 2018, the overall deal value was much lower at Rs 101 billion as compared to Rs 192 billion in the previous year. This was largely due to the absence of big-ticket deals with only four deals crossing the US$100 million threshold.
The highest investment was seen in television, followed by digital, radio and gaming. While television and digital have headroom to grow (penetration in around 60% and 35% respectively in India), radio continues to hold on to its listeners as per IRS 2019 Q3 and gaming is still in its infancy in India.
As in the last couple of years, deal activity was spearheaded by new media such as digital and gaming, which witnessed 54 deals in 2019. However, in terms of deal value, the share of traditional media segments such as TV, radio and film exhibition was 63%
Unlike in 2018 where more than 60% of deals were led by strategic investors, in 2019, 52% of the deals were driven by strategic investors. However, strategic investors contributed 39% of deal value whereas PE/VC accounted for the major chunk in terms of deal value with a contribution of 61% of the pie.
There were just 10 deals in the traditional media space in 2019, however, they accounted for 63% of the total deal value
There were four marquee deals across the TV, radio and film exhibitions space. These include Essel Group’s sale of 11% stake in Zee Entertainment Enterprises Limited to Invesco Oppenheimer Developing Markets Fund for Rs 42 billion, Sale of around 91% stake in TV9 (Associated Broadcasting Co Ltd) to Alanda Media and Entertainment, PVR’s QIP of INR5.0 billion for ~5.65% stake, and Music Broadcast Limited’s acquisition of Big FM for Rs 10.5 billion.
► Television broadcasting saw one of largest deals in the M&E space wherein the Essel Group, in its bid to repay promoter level debt, sold 11% stake in Zee Entertainment Enterprises Limited (ZEEL) to US based Invesco Oppenheimer Developing Markets Fund for Rs 42 billion
► Further, in November 2019, Singapore based GIC (on account of the Government of Singapore) and the Monetary Authority of Singapore together acquired a 2.97% stake in ZEEL via a secondary market
► In May 2019, Associated Broadcasting Co Limited, the company that runs the TV9 brand, sold around 91% stake in the company to Alanda Media and Entertainment
► In Aug 2019, Cable TV and broadband service provider GTPL Hathway acquired 100% stake in SCOD18 Networking Pvt Limited, a Mumbai based MSO player
► 2019 also saw the consummation of one of the biggest deals in the M&E sector globally – Disney’s acquisition of Rupert Murdoch’s 21st Century Fox. With this, Star India and its OTT platform Hotstar, came under the purview of Disney
► After a phase of high deal activity over the past few years, the film exhibition sector has become fairly consolidated and there were no major M&A deals in 2019.
► PVR Cinemas raised Rs 5.0 billion via a Qualified Institutional Placement (QIP) in October 2019 for 5.65% stake in the company
► The QIP saw investments from the likes of Norway’s Government Pension Fund, Kuwait Investment Authority and other mutual fund houses and global public pension funds
► The merger of UFO Moviez, one of India’s largest digital cinema distribution companies, with Qube Cinemas was not approved by the NCLT with a view to protect minority shareholders’ interests12
► Going ahead, there could be some limited acquisition appetite for smaller, regional multiplex chains as the top players consolidate their presence into tier II and tier III markets via a mix of organic and inorganic growth strategies
► As observed during the last few years, the print segment did not see any marquee activity in 2019
► While the segment witnessed degrowth in advertising revenues, circulation revenues grew and print companies continued to post positive operating cash flows and healthy margins
► However, the industry continues to feel the pressure from digital consumption and all the listed players witnessed a significant drop in share price and valuations over the last year
► Music Broadcast Limited, which controls 39 stations under Radio City, acquired Reliance Broadcast Network Limited, a Reliance Anil Ambani Group company which houses 92.7 Big FM, one of India’s largest radio networks with 58 stations
► The combined network will have 79 stations, making it the largest radio network in India with a market share of around 28-30%
► However, the deal is not consummated yet as it awaits regulatory approvals. Other deals in the radio space have also met with delays in culmination due to the same reason
► As we saw in 2018, 2019 too saw a huge share of the deals coming in from new age media assets
► Digital content saw the maximum number of deals, followed by gaming, digital advertising and news platforms
Digital is going regional
Regional language content creators and platforms saw the highest deal activity in the last year, across both video and text formats
► MX Player raised Rs 7.8 billion in a new round of funding led by China’s Tencent
► Last year, the video platform had sold a majority stake to the digital arm of media conglomerate Times Group
► The MX Player platform, apart from streaming from different networks, has also begun to produce its own original shows — it has an online streaming library of over 150,000 hours of content across 10 languages
► Hotstar continues receiving funding from its parent with latest investment of ~Rs 10 billion in March 2019
► With leadership in sports streaming, it is currently focusing on building its original content to compete with Netflix and Amazon
► Pocket Aces raised funding of Rs 1 billion in July 2019 to expand its content library and technology platform
► The company will also build team and capacity to create as many as 30 long-form shows a year, and three new content channels
► InMobi Group acquired short-video content platform Roposo to ramp up curated content on its platform
Glance in regional Indian languages
► Glance will get access to the 42 million user network of Roposo as well as its technology and brand
► In May 2019, The Viral Fever raised Rs 350 million from US-based Tiger Global in series D round
► Prior to this, the company has raised over INR1 billion from Tiger Global in two rounds
► Regional and hyperlocal news platforms saw a lot of interest in 2019, especially from PE / VC funds. Companies such as Lokal, Localplay, PublicVibe, Awaaz and Circle have raised funding in the past year
Activities in the gaming sector continue to follow the upward momentum of the last few years. This has been the result of the availability of affordable smartphones and data, along with a vast youth population (below the age of 24) in the country that form ~60% of India’s online gamers.
► Nazara made five acquisitions last year as part of its strategy to become the leading gaming platform in the country
► Acquired 51% stake for Rs 835 million in Paper Boat Apps, a boutique games studio which creates educational digital content for children; it publishes the edutainment app Kiddopia
► In September 2019, Nazara acquired majority stake in Sports Unity, the creator of multiplayer quiz called Qunami with the aim to build quizzing as one of the leading real money gaming
categories in emerging markets
► It also acquired 67% stake in the sports content portal Sportskeeda for Rs 440 million to increase user engagement in existing products and help scale up Sportskeeda
► Nazara entered into fantasy gaming by investing Rs 400 million in Halaplay in March 2019 to boost its marketing and product development and expand its team
In May 2019, it invested in vernacular social contesting platform Bakbuck, which uses technology and immersive user interface transforming popular Indian games like Antakshari, Saanp Seedhi and Tol mol ke Bol into online contests that users can play anytime, with anyone
► Fantasy gaming continues to witness impressive growth in users as well as investor interest
► Steadview Capital joined Dream11 as it became a unicorn after completion of secondary investment
► Online fantasy gaming platform BalleBaazi raised Rs 300 million in a Series A funding round from two private equity funds based out of Singapore and Delhi, to expand its business to newer
markets and enhance the gaming experience for users26
Advertising and experiential
Leading global advertising agencies continued expanding inorganically in India and strengthened their local offerings.
► French-based Havas Group expanded its expertise and scale in India with three acquisitions last year:
► Acquired experiential agency Shobiz in December 2019 to add experiential marketing capability in the Indian market
► In September 2019, it acquired majority stake in Langoor, an end-to-end digital marketing agency
► Acquired user experience design agency Think Design in May 2019, which has four design centers in India including Delhi, Mumbai, Hyderabad and Bangalore and provides user experience vision and design strategy to clients