The India We Will Know

India’s broadcasting sector is well accustomed to turbulence and paradigm shifts, which are usually caused by government regulation. These days, the market and the government are driving change. As distribution models evolve through the introduction of digital networks, including cable, satellite, broadband and wireless, market leaders like STAR India (STAR), Zee Telefilms (Zee) and Sony Entertainment TV (Sony) – and the egos that steer them – are finding themselves at the center of a pitching battle for market share.

While the growth of regional, news and niche entertainment TV channels has reduced its market share, the Hindi entertainment space still had more than 40% of annualized TV advertising in 2005 and just below 40% of total viewership. But with more niche channels emerging this year, along with sports events, that share has slightly eroded. And along with it so has the dominance of the traditional power player, the foreign-owned STAR.

News Corp.-owned STAR’s leading channel, STAR Plus, which has long held 40 of the 50 top TV shows in India, is even seeing its authority challenged, partly due to the inevitability of cycles, but also due to a renaissance at Subash Chandra’s Zee, previously deposed from its market leader position five years ago, when Rupert Murdoch and his executives came up with a new broadcasting strategy lead by Kuan Banega Cropreati (KBC, Who Wants to be a Millionaire). However, certain changes in other players have allowed Zee to formulate itself as the biggest challenger to STAR. In addition, Zee has increased its return on investment for some of its key newer shows and TV channels. Then, at the end of October, the finale of its game show, Saregama Little Champs, elevated it to the top of the ratings charts.

Though STAR maintains overall leadership in the market as the industry heads into 2007, Zee’s growth, a sliding Sony and management changes at the number four player, Sahara, have become the topic of scrutiny and debate in various broadcasting and advertising communities, as people begin to make predictions on how Zee will break the hegemony of the mighty STAR in the digital evolution occurring in India.

SIGNIFICANT PROSPECTS

As the power structure shifts, the number of revenue prospects rises. According to AMJ publisher Media Partners Asia (MPA), the TV advertising market is expected to grow at an average annual rate of over 11% over the next four years to reach Rs94.3 billion (US$2.1 billion) by 2010. TV channel subscription revenue, boosted by the growth of digital directto- home (DTH) satellite, the deployment of digital cable (or CAS) and the slow emergence of IPTV could grow from a low base to reach Rs56.5 billion.

And, going forward, the Hindi general entertainment space will continue to own a significant share of broadcasting sector value. “It is the most lucrative stake in the whole television business as it consists mainly of women viewers and families,” says Starcom India CEO Ravi Kiran. “You’re basically getting close to an audience of 350 million.” According to Kiran, this is the audience which STAR Plus has had a vise-like grip on for almost five years with its stable of soaps during prime-time and day parts, including Kyunki Saas Bhi Kabhi Bahu Thi, Kahaani Ghar Ghar Ki, Kasauti Zindagi Kay, Kaahin To Hoga (all in the 8:30 p.m. to 11:30 p.m. slot) and Bhabhi, Kumkum (in the afternoon slot) alongside its greatest shows KBC and KBC 2.

STAR has never been anything but dominant and its competitors are aware of this. “STAR has grown by more than 30% every year, expanding all aspects of its business over the past 5 years,” says Sony Entertainment Television CEO Kunal Dasgupta. “Anyone would envy those numbers. But now the company is facing the acid test with Zee attacking aggressively and we’re also trying to fight our way back.”

Sony has a fast-paced Zee with which to contend. Along with its talent show (Saregama), Zee has powered ahead with two soaps Kasamh Se and Saat Phere and has seen its ratings and channel shares climb up significantly. These days, its programs occupy 14 of the top 50 slots with its shows leading in the 8 p.m., 9 p.m. and 9:30 prime time slots while its soap Ghar Ki Lakshmi Betiyann (weekdays 10 p.m.) has been vying to take away eyeballs from STAR Plus’ ratings buster Kahaani Ghar Ghar Ki.

The performance is boosting Zee’s ad revenue, up 43% year-on-year in the September 2006 quarter to Rs2.1 billion. Excluding in-season sports channels, ads were up 20%. Historically, the company’s ad growth has either been in line or marginally below the industry average while STAR has outperformed. These days, Zee is also outperforming.

“We are introducing many new initiatives focusing on improving inventory utilization and attracting higher yielding categories of business and increasing effective rates across time to time,” says Zee chairman Subhash Chandra. “These efforts have resulted in revenue growth faster than that of industry. We hope to further build on the momentum in the future. Zee TV is the only general entertainment channel, which has continued to gain viewership. The other general entertainment channels have been dropped, be it STAR or Sony.”

On the slate for the future are shows with a religious and mythic feel, one of which looks at the story of the Ramayana from the demon god Ravana’s perspective, which will likely draw in Indian audiences who remain fascinated with such programming. Back in the 1980s, when terrestrial broadcaster Doordarshan controlled the market (prior to the invasion of satellite channels), India’s streets used to be deserted on Sunday morning when programming built around the Mahabharat and Ramayan used to air. Zee hopes to re-awaken such impulses in the public, and is investing about Rs15-20 million per episode in its new religious series. It’s also bringing back talent search shows, capitalizing on the success of Saregama with a new show focusing on the hunt for new Bollywood actors.

Zee director Punit Goenka, the son of Subhash Chandra, who heads up the Zee TV business, says that this year’s activity is only a small beginning. “We still have a long way to go. It’s a long battle ahead but we have turned the corner. We just have to maintain and increase the momentum,” he says.

WHAT SHAKEOUT?

Though industry talk smacks of a hierarchical shakeout, there are those who disagree. While acknowledging that Zee has made some headway in eroding some of STAR’s share, STAR Entertainment CEO Sameer Nair says: “For all the talk of a shakeout, it has not really happened. The only difference is that our direct competitor has changed from Sony Entertainment to Zee TV. Zee is still only ‘challenging’ our hegemony.”

According to Nair, STAR is also moving fast to maintain and grow its leadership. Over the past few months, it has launched shows such as Antariksh (a futuristic sci-fi show based on the Ramayana) in the weekday 8 p.m. slot, countering the attack from Zee TV’s Banoo Teri Dulhan. It has also stacked up the weekend with soaps, family and period dramas such as Thodi Si Zameen Thoda Sa Aasmaan, Prithviraj Chauhan, Lucky, and Aek Chabhi Hai Padoss Mein, hoping to increase stickiness amongst viewers.

Meanwhile, STAR’s long running shows such as Kyunki Saas Bhi Kabhi Bahu Thi (10:30 p.m. weekdays), Kahaani Ghar Ghar Ki (weekdays 10 p.m.), Kasautii Zindagi Kay (8:30 p.m. weekdays) and Kaahin To Hoga (11:00 p.m. weekdays) remain strong leaders in their respective slots.

The number two provider, Sony, has looked to less mythical and less fantastic fare for its two front offensive. It has launched a reality and talent show tactic. Its GRPs (gross rating points) have been hovering in the 150-160 range, way below its peak of 240-250 a couple of years ago. As a result, Sony management are desperately looking for a big ticket item to bring the broadcaster back in the reckoning and replicate the earlier success of Jassi Jaisi Koi Nahin (the Indian version of Ugly Betty) and Indian Idol.

“Our earlier decision to air Indian Idol during soap time on Monday to Tuesday was a bad one in hindsight,” says Dasgupta. “Zee TV concentrated on our soap viewers and took them away. And once you lose momentum from the beginning of the week, you keep slipping all the way. Now it is reconstruction time.”

Part of that reconstruction has come with the hiring of new business head Albert Almeida, and a chief creative director in Sandiip Sikcand for Sony TV. Sikcand was earlier with Balaji Telefilms, the producer of many of STAR’s hit shows and programs. Dasgupta has also closely aligned chief operating officer N.P. Singh as his number two, managing strategic business and the distribution of Sony’s bouquet of local and international TV channels.

For now, Sony is moving cautiously, focusing on soaps, reality and talent search shows, says Dasgupta. Reality shows will be relegated to Fridays, Saturdays and Sundays, while the rest of the week will see soapy dramas and talent searches taking center stage. Among the first of these moves this year was Jhalak Dikhhla Jaa – Dancing Stars, an adaptation of a BBC (U.K.) format, which notched up impressive ratings for its finale. Sony has also followed up with an Indian version of Big Brother, Big Boss.

“In just a couple of months we will have launched four new shows between the 8 and 9:30 p.m. slots,” says Dasgupta. “Our problem has been that we have had spikes, not a consistent performance; the endeavor will be to achieve that this time around. We need two shows to be winners, and we will regain our number two spot in the next six months.” Zee’s Goenka is wary. “STAR is my competition, but I have not forgotten Sony,” he says, “Every move has a reaction and we have yet to feel the force of a Sony comeback.”

Both Zee and Sony will also need to keep their eye on Sahara, now actively managed by the Roy family (the company’s main shareholders) once again, who are hoping to replicate the improvement shown by Zee TV after Chandra’s son (Goenka) assumed control of the content business. The Roy family has deep pockets and remains committed to turning Sahara into a big player in both broadcasting and the movie business, potentially through equity-lined partnerships with strategic global media groups such as Viacom.

Sahara One CEO Shantonu Aditya says that in one week in late October the channel had come pretty close to grabbing the number three slot from Sony. “We were very close… our GRPs in that week were 122, and Sony’s were 125,” he says. New soaps such as Solhah Singaarr Kuch Apne Kuch Paraye are selling well, and “more large initiatives on these are planned,” says Aditya. “We are going to get aggressive in our space and we are open to experimenting,” he says.

Meanwhile, secondary entertainment channels from Sony and STAR such as SABTV and STAR One have also started securing share with comedy and youth-oriented programming. And yet others are pacing the sidelines; among them are Viacom and NDTV.

WARNING SIGNS

However, Madison group chairman Sam Balsara warns that the Hindi entertainment segment may continue to lose share to the kids and news channel segments. “From 39% of viewing last year, it has now come down to 32% this year,” he says. “It is going to become even more competitive.”

This year, the ad market for the Hindi entertainment space has been somewhat soft, according to Dasgupta. “We have had Champions Trophy cricket and the Malaysian cricket tournament. Next April, we will have World Cup cricket,” he says. “For general entertainment channels, there’s going to be an impact on revenues.”

STAR India grew subscription in the September 2006 quarter but it saw lower ad revenue at flagship STAR Plus in India, where the decrease in advertising partially reflected last year’s high base comparison when revenue grew 20-30% due to the successful broadcast of KBC 2.

Zee TV has been a gainer, but only marginally, as it has been locked in to existing deals with advertisers made at the time when its ratings did not look so attractive. “We have been fulfilling commitments,” says Goenka. “You will see an upswing early next year as we increase our ad rates to reflect our status. Our internal target has been to outperform the market growth rate. When we up our ad tariffs, our revenues too will go up substantially.” Aditya, meanwhile, says Sahara plans to maintain rates and hopes to reap the rewards from potentially successful new shows.

On the distribution front, all channels are hemmed in by the basic analog channel price freeze mandated by the regulator, Telecom Regulatory Authority of India, and unrealistic price caps for digital cable. While STAR, Sony and Zee are encouraged by the growth of DTH, most don’t see a scenario where digital CAS will start making a material contribution to the general entertainment channel pie. “We need large volumes – at least 10 million – for a digital premium Hindi entertainment channel to start recovering money if the CAS price ceiling of Rs5 per channel continues under current regulation,” says Dasgupta. “We don’t see that going soon.”

Such pricing may also become the norm for DTH, though its volumes could be significant, reaching over 14 million on pay platforms by 2011, according to MPA research. “Digital cable and DTH will not spell an end to analogue services as they will take time to spread,” concludes Nair. “But they will gain a critical mass in the long term and this will have a significant and hopefully positive impact on advertising and distribution opportunities for channels, especially once we get past the current price ceiling.”