Media Sector

Media Sector

Digital TV auction: original free-TV entrepreneurs with great market share still at advantage
As we predicted, original free analog-signal TV entrepreneurs are likely to face fierce
competition in long run as new entrepreneurs are seizing advertisement revenue,
pressing advertisement price rates to rise with more difficulty. However, with the
capital potential of BEC, MCOT and Channel 7, they can win the auction for 2-3
channels, boosting their service power to compensate for advertisement price rates
that may fall. Government free TV channels (Channel 5, 9 and 11) can broadcast
original analog channels along for 5 years (2013-2018). Channel 3 and 7 are under
protection according to their original concession contact (analog-signal) until 2020 and
2022, respectively. This makes original free analog-signal TV entrepreneurs, especially
BEC which has the biggest audience base in Bangkok and important provinces, gain
more advantages in accessing audiences more widely. MCOT may be affected by more
and tougher competitors due to its weaker audience base and program content, yet it
gains revenue by providing digital TV network service and gains B720m/year rent
(B60m/channel/year x 6 SD channels, plus B180m/channel/year x 2 HD channels) to
compensate some concession revenue from True Vision and BEC that will end in 2019
and 2020.
- Mid-small newcomers at disadvantage, facing more broadcast cost
Initially, we predicted that digital TV helps small and medium satellite channel
entrepreneurs like WORK, NCB, GRAMMY and RS best due to advertisement revenue
rising from providing digital TV channel. However, original free analog-signal TV
entrepreneurs are advantageous. There are issues of digital TV network expansion,
distribution of set top box (converting digital signal to analog signal) to cover every
household in initial stage, and changes in 'must carry rule' that the owners of the
satellite/cable TV platform e.g. PSI, True Vision, CTH don't have to put 24 commercial
digital TV channels into their platform, but have right to broadcast only the ones with
the best rating(from initially needed to broadcast 24 channels), making new digital TV
entrepreneurs (who originally have no channel or used to be the owner of satellite
channel) have less accessible to audiences compared to original free analog-signal TV
entrepreneurs. To keep present audience base, new digital TV entrepreneurs need to
broadcast on ground digital TV and rent satellite signal broadcast satellite channels
until ground digital TV network cover over 50% of total household in Thailand. We
believe that new digital TV entrepreneurs will not be able to break even in first few
operation years. For alternative media e.g. cinema media, MAJOR is an outstanding
company, able to make continuous profit in long run by expanding the amount cinema
in Bangkok and other provinces with net profit growth up to 31%.
- Investment weight "Underweight", favor BEC and MAJOR best in entertainment sector
Though 2013 EPS growth in entertainment sector is 25.8%, close to market profit
growth, small enterprises may need to face more broadcast cost after digital TV
auction, so we downgrade to "underweight". Major entrepreneurs like BEC is projected
to keep their growth rates, so we recommend "BUY" BEC(FV@B78) for its strength on
content and probability to win 3 digital TV channels, and "BUY" MAJOR([email protected]),
projected that 2Q13 earning result is likely to be blissful as many films made higher
gross than expected.