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Budget 2013 - Media

Tuesday 19 March 2013

Budget 2013 not really music to the ears of the Media Industry.

Posts the Union Budget 2013, what consumers can expect are higher costs of the mandatory digitization of the media industry. Pre Budget Demands for nil duty and aid relating to help in funding digitization have been met with an unexpected response. The Budget has actually proposed raising the customs duty on set-top boxes to 10% from the previous 5%.

In order to digitize content, set-top boxes have become mandatory and such requirements are usually being fulfilled by overseas vendors. Thus, the imposed duty is expected to have a negative impact on DTH/ MSO companies.

The Union Budget has also announced the next Phase of auctions for radio FM licensing. The Budget has proposed to expand private FM radio services to 294 more cities and approximately about 839 new FM radio channels are expected to be auctioned in the coming year. Expansion of the radio networks is expected to positively impact the sector that has already been showing strong growth with a CAGR of 15% over last 3-4 years.

The Union Budget has proposed to continue full exemption of service tax on copyright on cinematography but has limited this to films exhibited in cinema halls only. This does seem like a positive move and is expected to reduce the costs for various players of the Indian film industry.

So who wins this year?

Expect slower digitization as there remains a possibility of companies offsetting the price rise in set top boxes with a higher price to the consumer. While the move has been made to promote the indigenous manufacturing of STBs, this move is expected to have a negative impact on digitization efforts and expected to affect stocks in the sector.

Also the announcement for radio FM licensing was as expected and is not of any significant consequence to impact market sentiments and stocks. Other demands from the industry, including abolishing service charge on advertising in broadcasters, rationalization of taxes in entertainment / broadcasting, and grant of infrastructure status to broadcasting distribution companies (DTH/ MSO) have not been met, leading to the Union Budget being neutral.

Want the stalwart of the industry analyze the budget for you? Click here.

Looking to invest in the Media sector? Click here to open an account with Kotak Securities.

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