In Focus: Sun Rise

The media and entertainment sector has seen a lot of action in the past couple of years but the only two listed companies that have managed to see their market capitalisation grow to qualify for a large cap tag have been ZEE Entertainment and Sun TV. The company has a network that spreads across 20 channels in four languages (Tamil, Malayalam, Kannada and Telugu), two daily newspapers, four magazines and 44 FM Radio licenses of which, (only seven are currently operational).

The company has managed to effectively leverage on its size and popularity to get the maximum out of content providers by passing on programming risks to producers through a unique model of selling telecast slots to producers. Another strategy that has worked in favour of the company is the consistent purchase of south Indian movie releases, ensuring a perpetual supply of quality content. Sun TV's telecast slots are booked for the next two years and the channel boasts of having the largest library of movies in India with over 7,700 titles to its name across languages.

As of now the industry is in an evolutionary phase with many new broadcasting formats emerging without any one format achieving significant popularity; consequently, digitization is the need of the hour for all broadcasters. To this extent the company has moved out of the FTA (free to air) regime to a paid channel format with a bouquet of channels. Increased addressability from digitization and newer distribution platforms will open up new revenue streams for the company. Further the subscription to a bouquet of channels will increase the viewership across different channels. In addition to these positives, the company recently increased its ad rates which will further buffer the company's revenues during the new fiscal.

While the company has built considerable equity in its current avatar, there remains many potential areas for the company to diversify. Firstly, there lies a large untapped potential in radio broadcasting, and over time Sun will look at radio as an additional revenue stream. Another area that the company is looking at is the international market which consists of a sizeable opportunity. The network has only recently received an approval to broadcast via cable in the US. There are several other markets in Europe which have not been fully tapped.

So far, the company has achieved tremendous success through its operation in the domestic market itself. With the penetration of cable growing steadily, the time before the management can say 'cut and wrap up' is still far away. India has a relatively low proportion of advertising expenditure to GDP, which will rise to mirror those of the similar economies.

On the whole Sun TV has managed to establish different revenue streams for itself rather than an over reliance on ad revenues. What remains to be seen for the company is its ability to fully exploit the advantages that lay before it. Sun’s ability to cope with the dynamic regulatory environment will be a key to its growth.

The timeliness of bringing in digitization at Sun TV will be closely watched. No wonder then the company figured in the list of most bought stocks by mutual funds in February.