Media sector update

 Advertisement and subscription are the key revenue streams for media companies.
 It seems that Indian broadcasters are well positioned to benefit from mandatory digitization. This is expected to increase broadcasters’ digital subscriber base by around three times over the next three – four years.
 Advertisement revenue is also expected to recover in FY13, due to interest rate cut leading to strong corporate revenue growth.
 Cash generating broadcasters are expected to benefit from digitization and recovery in advertisement spends.
 Among them, Sun TV is expected to benefit substantially in the long term and the stock is our top pick.
 Zee Entertainment is also a beneficiary and ‘buy’ call on the stock is retained.
 Dish TV is another potential beneficiary and the stock has been upgraded to ‘hold’ from the earlier ‘reduce’ recommendation.
 Positive catalysts for the sector could be strong execution of digitization and the increase in ARPU (average revenue per user). Negatives/ risks could be continued weakness in advertisement revenue and delays in implementing digitization.