Monday, 7th July 2008

DATA BOX

Developing Markets to Propel Ad Growth
ZenithOptimedia Report on Info IQ, 4th Jul 2008

High energy and commodity prices are stoking inflation, so real growth (after adjusting for inflation) is unlikely to exceed 1% in either region, but forecasts for 2009 and 2010 in light of stronger-than-expected growth in internet advertising. Ad spend growth has been downgraded in 2008 from 3.7% to 3.5% for North America and from 3.9% to 3.7% for Western Europe, citing credit-crunch worries by investors, consumers and advertisers in Western markets, according to a detailed report by ZenithOptimedia.

* World ad spend will grow 6.6% in 2008, up slightly from the 6.5% growth.
* Aside from North America and Western Europe, forecasts for the rest of the world are up from 11.1% to 11.8%.
* Developing markets will contribute 62% of ad expenditure growth between 2007 and 2010, and increase their share of the global ad market from 27% to 33%.
* Economic uncertainty in developed markets is accelerating the shift of budgets to accountable internet advertising.
* Internet advertising will break the 10% share barrier this year and account for 13.6% of world ad spend by the end of 2010.

The rest of the world, in stark contrast to North America and Western Europe, is exhibiting even more strength than it was three months ago. Number show ad expenditure outside North America and Western Europe to grow 11.8% over the course of this year, 0.7 percentage points more than forecasted at the end of March. After earlier export-led expansion, domestic consumption is assuming growing importance in developing-market economies, providing fertile ground for advertisers to establish and expand their brands:

* The net result is that the world ad market is forecast to grow 6.6% this year, fractionally more than the 6.5% predicted in March and well above the 5.2% rate at which it has grown over the last 10 years.
* Growth is expected to remain above-trend in 2009 and 2010, thanks to continued dynamism in Asia-Pacific, Central & Eastern Europe, Latin America and the Middle East.
* China, Russia and Brazil follow closely behind the US as contributors to growth over the next three years, even though China’s ad market is just 9% of the size of the US ad market, and Brazil’s and Russia’s are 5%.
* Over the same period, developed markets (North America, Western Europe and Japan) will contribute 38% of new ad expenditure, while developing markets (everywhere else) will contribute 63%.
* Over that period the proportion of global ad expenditure going to developing markets will rise from 27% to 33%.

Between 2007 and 2010, Brazil will rise in the rankings of the largest advertising markets from eleventh to sixth, and Russia will rise from thirteenth to seventh, displacing Spain and Australia from the top 10. Internet ad growth continues to run ahead of expectations. Faced with an uncertain economic future, Western advertisers are shifting even more of their budgets online, where the returns on investment are obvious, easy to quantify and fine-tune. Moreover, the quantity and quality of online video is improving all the time, and online audiences for full-length films and television programs - and the ads that surround them - are growing rapidly. Paid search continues to attract new advertisers, particularly small companies that may previously have advertised only in directories, if at all.

* Internet advertising to grow 26.7% and break through the 10% share barrier this year, a year earlier than predicted just three months ago.
* By 2010, Internet advertising will attract 13.6% of all advertising

Newspapers, magazines, television and radio are all losing share to the internet, but newspapers are clearly suffering the most, partly because news websites offer more timely coverage and instant reaction, and partly because classified advertising works better online than offline.

* Newspapers’ share of the global ad market fell by 7.6 percentage points in the 10 years to 2007, and Zenith expects it to fall another 3.5 points by 2010.
* 4% growth in nominal newspaper ad expenditure between 2007 and 2010, but this equates to a 6% drop after adjusting for expected inflation.

Outdoor is the only other medium to be gaining market share. As well as investing in traditional displays, contractors are installing digital billboards that can display eye-catching creative, change at short notice and interact with consumers (for example by sending messages to their mobile phone by Bluetooth, or by using motion sensors to react to their movements), all of which make outdoor more attractive to advertisers.


SPORTS SHORTS

* The University Athletic Association of the Philippines (UAAP) and the National Collegiate Athletics Association (NCAA) basketball tournaments are set to be shown in high definition by broadcaster ABS-CBN in the 2009 season through Sky Cable. The HD format is fast becoming a standard for major US sporting events such as the National Basketball Association (NBA), National Football League (NFL) and Professional Golf Association (PGA) tour events. Before the assembled press on Monday, ANS-CBN Sport vice-president Peter Musngi reiterated the company’s commitment to finding promising new presenting talent. Sports Media, 3rd Jul 2008

* The doping scandals surrounding the Tour de France do not appear to have put off international broadcasters, with a total of 92 television stations set to provide coverage of this year’s event to 180 countries. Live coverage will be available in 168 countries, with France Télévisions acting as the host broadcaster. France Télévisions, along with JSports in Japan, supported the first high-definition broadcast of the Tour de France in 2007, and HD will unsurprisingly be more prominent this year. On top of the two channels to air HD programming last year, Eurosport, NOS in the Netherlands, VRT in Belgium, Sky TV in New Zealand and TV2 in Denmark will also be providing coverage via new HD channels for the 2008 race. Sports Media, 3rd Jul 2008

* Meanwhile, Neo Sports has announced an agreement with the Amaury Sport Organisation to provide live coverage of the cycling tournament Tour De France from 2008 to 2010. The channel will telecast the next edition of this tournament live from 5 July at 3:30 pm. The tournament will continue till 27 July. Sports City, 4th Jul 2008

* ESPN Star Sports (ESS) announced an eight-year broadcast partnership with Arab Digital Distribution (ADD), the pay TV platform management company in the Middle East and North Africa (MENA), for all International Cricket Council (ICC) events from 2008 to 2015. The deal includes the ICC Cricket World Cup due to take place in 2011 in Asia and 2015 in Australia. The distribution partnership covers all television and new media platforms including internet and mobile. It will make ICC events available across the MENA region. Indiantelevision.com, 5th July 2008

* The International Olympic Committee (IOC) has launched its latest public service announcement (PSA) called Heroes. Olympic athletes like Roger Federer, Yao Ming, Laure Manaudou, Liu Xiang and Yelena Isinbayeva are part of this PSA, lauched a little over a month before the start of the Beijing Olympics. Heroes leverages the determination and performance of Olympic athletes to communicate the key Olympic values, claims IOC. Indiantelevision.com, 5th July 2008

* Superleague Formula co-founder Robin Webb has revealed the selection of clubs for the series revolves around those with large fanbases. The series, aiming to mix football and motorsport, roars from the Donington Park grid on August 30-31 and currently has 13 of its 20 clubs signed up. AC Milan, Al Ain, Anderlecht, Borussia Dortmund, Corinthians, FC Basel, FC Porto, Flamengo, Galatasaray, Olympiacos, PSV Eindhoven, Rangers and Sevilla are the clubs to have signed up so far, but the remainder are soon set to follow. Webb revealed that two Barclays Premier League clubs are set to join the action, along with representatives from Russia and China but France's Ligue 1 Orange is unlikely to have any representation. Football Insider, 3rd Jul 2008

* TransTeleCom, a telecommunications backbone operator in Russia and NTT Communications, have switched on the Hokkaido-Sakhalin Cable System (HSCS). The cable system directly links the two companies' telecom networks via an undersea cable between Nevelsk, Sakhalin in Russia and Ishikari, Hokkaido, Japan, the two firms said. The two companies jointly started to construct the fibre-optic submarine cable HSCS in 2007 and the work was completed in December 2007. HSCS measures 570km in length and has a capacity of 640 Gbps. Telecomasia.net, 7th July 2008

* The Women's Tennis Association is fighting a losing battle to keep Sony Ericsson as title sponsor after the they issued a profits warning last month. The joint-venture company made the WTA the richest property in women's sport in 2005 when it signed a £47m deal. With two years to run, sources say negotiations would ordinarily be in progress with regard to extending the contract but the WTA has privately conceded that it has almost no chance of persuading Sony Ericsson to renew. Although it is expected that the company will maintain links with the tour championships finals and the Sony Ericsson Open, the WTA will have to go to search for a new sponsor amid a worsening period of global economic downturn. Sports City, 3rd Jul 2008

* Argentina has held talks with leading southern hemisphere nations over the possibility of expanding rugby union’s Tri-Nation series. Talks were held with Sanzar (the South African, New Zealand and Australian unions), as well as Canada and the USA over proposals to put to broadcasters next year. Meetings are also scheduled with Japan, Fiji, Samoa and Tonga. Argentina, who finished third at last year's Rugby World Cup, have been keen to join either Europe's Six Nations or the southern hemisphere's Tri-Nations in order to find regular top-class opposition. Sport Business, Sportcal, 4th Jul 2008


MORE NEWS

Indonesia/Rights: Viewers to miss Televised Olympics Again

For the second time in a row, Indonesians will miss their chance to watch the Olympic Games live and free of charge, as no local broadcaster has made plans to air the Beijing Games next month. After the 2000 Sydney Olympic Games, when the country's TV audience enjoyed free coverage of the quadrennial event aired by private television station RCTI, viewers had to subscribe to cable TV Kabelvision to witness the glorious moment of Indonesian shuttler Taufik Hidayat winning the gold at the 2004 Athens Games.

"Unfortunately, no Indonesian broadcaster has yet taken the broadcast rights," said John Barton, director for sports at the Asia Pacific Broadcasting Union (ABU), which represents 28 Asian countries in airing the Olympics.

ANTV, partly owned by worldwide TV STAR, said it had no plan to broadcast the world's top sporting event due to "pricey rights." "It's too costly for us to run a program that attracts not many advertisers and viewers," ANTV's general manager for sports programming Reva Deddy Utama told The Jakarta Post on Friday. "In 2000, the offering price was around US$2 million. This year, I believe it will be much higher," he added.

The rights for broadcasting the Beijing Games has reportedly soared to $13.7 million, but the ABU has declined to confirm the figure. Deddy added that the event was not saleable since badminton is the only sport featuring Indonesian athletes playing well. "And there is no package on offer to buy broadcasting rights per sport event."

According to Deddy, the biennial Southeast Asian Games was more preferred by his company's sport advertisers -- often cigarette and energy drink companies -- than the Olympics, since the former held higher chances of seeing Indonesian athletes win medals.

In Athens, Indonesia brought home one gold and one silver from weightlifter Lisa Rumbewas and two bronze from shuttler Sony Dwi Kuncoro and men's doubles Flandy Limpele and Eng Hian. State Minister for Youth and Sports Affairs Adhyaksa Dault said earlier that Indonesia aimed to mirror the feat in Beijing. "We will strive to maintain our tradition to bring home a gold medal during the Games," he said.

Voicing similar concern over the price, RCTI also said it had no plan to purchase the rights again. "We cannot afford the expensive rights," RTCI manager Dini Putri told the Post. RCTI along with TPI and Global TV under the MNC Group aired the successful 2008 Euro soccer championship last month. RCTI program director Harsiwi Ahmad added that RCTI would focus on some local major events in the next months and had no plans to buy the Olympic rights.

Separately, while refusing to reveal exact figure of the rights, ABU director John Barton emphasized that the price was not the only issue. "The Olympic Games is worth something to many people, more than just money," he said. He added that Indonesian broadcasters still had one week before the deadline to submit a proposal for purchasing the rights. "It is still possible for Indonesia to buy the rights," he said. Jakarta Post, 5th Jul 2008

Mid-East/Rights: IAAF and Al Jazeera Sport agree TV deal until 2013

The IAAF agreed a deal through its Marketing Partner Dentsu that gives Al Jazeera Sport the broadcast rights in the Middle East for the package of IAAF World Athletic Series events for the period 2010 to 2013. With the conclusion of this deal the IAAF and Al Jazeera Sport extend a collaboration that started in 2003, meaning over 10 years of a mutually beneficial partnership.

Following strong interest from multiple parties, the agreement was made with Al Jazeera Sport on the basis of a strong financial offer from the broadcaster which provides for extensive coverage of the IAAF’s premier series of competitions. The agreement perfectly dovetails with Al Jazeera Sport’s position as the host broadcaster of the 13th IAAF World Indoor Championships which will be held in 2010 in Doha, Qatar.

Al Jazeera Sport will provide extensive live coverage of the IAAF’s flagship events, the World Championships in Athletics and World Indoor Championships as well as guaranteed coverage of all other World Athletics Series events during the period across 23 different territories in the Middle East and Northern Africa, with a potential reach of over 200 Million views across the region.

Nasser Al-Khelaifi, General Manager of Al Jazeera Sport Channels said “We are delighted to renew our agreement with the IAAF for the 2010 to 2013 period and to extend our partnership by acting as host broadcaster for the 13th IAAF World Indoor Championships in 2010 in Doha. Al Jazeera Sport will continue to showcase IAAF World Athletic Series events raising the awareness and interest in IAAF events in the Middle East and North Africa.” Sport Business, Sports City, Sportcal, 4th Jul 2008

Global/Rights: Now Eurosport Is in Rights Talks over French Ligue 1

Eurosport, the pan-European cable and satellite broadcaster, has said that it is ‘in discussions’ over acquiring broadcast rights in territories outside France for Ligue 1, the top-tier French soccer league, following on from the news that the broadcaster is also looking at acquiring international rights of Germany’s top-tier Bundesliga division.

Jacques Raynaud, Eurosport’s vice-chairman, told Sportcal.com that the five top leagues in Europe – those of England, France, Germany, Italy and Spain – all have ‘a certain international potential’ and that the French league was of interest. Asked about a bid for Bundesliga rights, he said: ‘We are in discussions with other leagues, the French league, we have been looking at the Italian and now the Bundesliga has ordered the tender so like anyone being professional we’re looking into it.’

Canal Plus Events, the events arm of French pay-television broadcaster Canal Plus, is distributing the international rights to Ligue 1 after agreeing an eight-year deal that starts with the 2008-09 campaign. Eurosport was among the unsuccessful bidders for the domestic rights to Ligue 1 from next season onwards, although it is understood that it was not in contention for the live rights.

Raynaud revealed last month that Eurosport had already held discussions with the DFL, the German football league, about buying rights to broadcast the Bundesliga outside Germany from 2009-10 onwards. He told Sportcal.com that there was ‘no sensation’ about the bid, and that ‘instead of only going behind the scenes we have clearly expressed our interest this time.’ He also said that competition for the Bundesliga rights would be ‘fierce.’ Eurosport already holds rights in Hungary and Romania for the FA Premier League, England's top division.

The DFL is to form its own agency this summer, to be based in Frankfurt, the headquarters of the league, to distribute the international rights for the league in-house and has targeted an increase in their value from €20 million ($31.4 million) a season to €30 million a season by 2009-10 season, and to €35 million and €40 million in the subsequent two seasons. Eurosport was reported to be seeking to pay between €16 million and €20 million a season for international rights for the Bundesliga, a large investment for the broadcaster.

From 2009-10, the DFL has targeted increased exposure and revenue from broadcast deals in Eastern Europe and Asia, and a single deal with Eurosport would guarantee widespread coverage in large parts of those regions.

Eurosport’s Asia-Pacific channel is available in territories such as Australia, Hong Kong, Indonesia, Malaysia, Myanmar, the Philippines and Singapore, and the main Eurosport channel is broadcast in Eastern European countries that include Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovenia and the Ukraine. Eurosport is often found on pay-television platforms in these countries.

Eurosport France, the French-language version of Eurosport broadcast in France, Belgium, Switzerland and Monaco, has rights to French soccer's second-tier Ligue 2 until the end of the 2009-10 season. Sportcal, 4th Jul 2008

India/General: Private Equity Pours into Media Sector

Do you know that 55% stake in INX Media is held by Temasek Holdings, New Silk Route Partners, New Vernon Private Equity Fund and Employee sweat equity. Do you also know that the shareholding pattern of NDTV Networks includes Lehman Brothers, Goldman Sachs, CSFB and eight others, who jointly hold as much as 24% stake in it. Ashmore Investment Management owns 49% stake in Digicable Network. Warburg Pincus invested in the out-of-home (OOH) advertising company Laqshya Media. Goldman Sachs and Lehman Brothers also invested in an another OOH media firm.

Moreover, what's common among companies like BAG Infotainment, Times Innovative Media, Hathway cable, UFO Moviez and India TV, besides the fact that they operate in the media & entertainment space. They all have private equity (PE) firms' expressing their newly found love for them, by buying stakes in these companies. The Indian Media and Entertainment sector has never been a hot cake among PE investors. But of PE firms are showing great interest in the sector. Blackstone's 26% stake in Ushodaya Enterprise for $ 146 million, Chrys Capital's 27% stake in Hathway cable for $ 120 million, Shyam Equities' 20% stake in Independent News Service, holding company of India TV for $ 25 million are few examples.

In 2005, there were just eight PE deals amounting to $ 142 million in value terms in the M&E space. In 2007, the number of PE deals have shot up to 31 with a combined value of a whopping $ 999.22 million. The percentage rise in terms of number of deals is close to 300% and the total value of PE deals in M&E space has escalated a mind boggling 600%. However, the share of M&E in the total private equity pie is still low, accounting for just 5% of the PE deals in terms of volume, and 7% in terms of value in 2007.

"Indian media companies have scaled up the extent where even companies like Walt Disney and Time Warner have struck equity deals with them," points out Gaurav Saxena, media analyst with a reputed research firm.

According to the FICCI-PWC report on Indian M&E sector the sector is currently (in 2007) worth Rs 513 billion, 17% higher than last year of Rs 38 billion. The M&E industry has been growing with a CAGR of 19% over last three years. The report estimates that the industry will grow at a CAGR of 18% for the next five years and touch the mind boggling figure of Rs. 1.157 trillion by 2012. The market cap of the media companies has also touched $15 billion. Preeti Saxena, equity analyst, SMC India explains, "The major revenue drivers of the media industry are getting a boost which in turn is luring the PE investors."

The advertising revenue is expected to shoot up in coming years. Currently the Indian advertising industry is worth Rs.196.4 billion and is expected to grow at a CAGR of 18% for next five years to touch the magical figure of a staggering Rs 453 billion. This in itself indicates that there is a huge unexploited potential in the industry, which is what is pulling the PE industry towards them. Analysts say that another big reason for rising PE investments in media is the loosening up of government policies, besides lower valuation of the media companies at present.

"Generally a PE investment ranges for a stake between 5-25% depending upon the valuations in the industry and of the company. But the PE investments in the media sector have been of a slightly higher stakes ranging between 10-30%, reason being lower valuations of the media company," says Anubhav Gupta, investment analyst, KIM ENG Securities India. PE investors manage to garner a higher stake in a media company for a lesser price as compared to other sectors like banking or infrastructure. The growing wave of consolidation and structural changes in the sector is only going to grow bigger and better in the country, forcing the valuation graphs of media businesses to move northwards. Televisionpoint.com, 7th July 2008