Sun TV Network: Spreading the light

The new arrangement will enhance Sun TV’s presence in the market and give it an edge.

Sun TV Network has a bright future in the entertainment business. The tie-up with Network 18 and creation of Sun 18 is slated to create a dent on the Rs 18,000 crore pay television market. This comes on the back of an expectation of strong growth in its core business.

Sun TV has a leadership position in three of the four lucrative southern markets, accounting for around 73 per cent of the regional TV ad market. DTH and analog average revenues for Sun TV are extremely low at around Rs 26 and Rs 17 as compared to the industry average of around Rs 160 and Rs 155, respectively.

Despite this and the loss-making radio operations, the operating profit is around 75 per cent, which is rather high for a media company. But, the hike in advertising rates is expected to boost revenue growth and lower losses from the radio business, where operating losses amounted to Rs 20 crore, and break even in FY12. Ad rates have been increased five to 33 per cent across channels. The average revenue per unit (ARPU) is also slated to rise from Rs 26 to Rs 40 a month as five more Malayam channels turn to the ‘pay’ mode from free to air.

Overall, the media and entertainment industry is expected to rebound and record a compounded rate of around 13 per cent over the next five years. Here, the television sector is expected to fare well and grow around 15 per cent. The television channels have quadrupled to around 460 since FY04. The going has been good for this media. Sun TV, with its regional dominance, has been a strong player, cornering around 73 per cent regional advertisement revenues.

During the March 2010 quarter, the company reported a subscriber base of a million and a sharp uptick in DTH realisations to Rs 35-36 a month (from Rs 26-27 a month) on account of five new niche channels turning pay, adding to the company’s ARPUs, say analysts at Angel Broking. With the new tie-up the market just opens up for Sun TV. Analysts expect the implications of this to be factored in as execution picks up.