ITV

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  • ‘Zee Telefilms to see ad revenue growth of 12 – 15% in FY07’ : Rajiv Garg – Essel Group CEO of corporate strategy and finance

    ‘Zee Telefilms to see ad revenue growth of 12 – 15% in FY07’ : Rajiv Garg – Essel Group CEO of corporate strategy and finance

    Cable and direct-to-home (DTH) is where Zee Telefilms Ltd (ZTL) chairman Subhash Chandra is planning to put the accelerator on. Wire and Wireless India Ltd (WWIL), the cable outfit, will enjoy an investment of Rs 5 billion to lay out a digital platform, gear up for triple play and expand in value-added services. And to fight Tata Sky in the DTH business, he will pump in Rs 2.5 billion over two years.

    Zee News Ltd. (ZNL), which will have news and regional channels under its umbrella, is looking at a turnover of Rs 2.5 billion this fiscal. The listing of these demerged companies is expected to be in September-October.

    In an interview with Indiantelevision.com’s Sibabrata Das, Essel Group CEO of corporate strategy and finance Rajiv Garg talks about the reasons for the demerger and the expansion plans of these separate entities.

    Why did Zee Telefilms Ltd (ZTL) decide to demerge its businesses into separate entities?
    The driving argument for demerger was that all these businesses had become big in themselves. Huddled together under Zee, they were not given the right strategic focus as the company was very broadcast-oriented. In cable, for instance, we felt that we were not doing justice to its growth potential. Also, in certain lines of activity the government regulations were impinging upon the growth prospects of the company. The idea was to see if we could create that focus and comply with the government guidelines. With so many technological advances taking place, we felt it was the right environment to carry this out. We decided to create independent governing structures and managements, delink cable from broadcasting, and put together certain news-bearing channels into an independent entity.

    Why was the direct-to-home (DTH) business housed in complex structures which did not allow for tax efficiencies?
    The idea was to provide specialist services in specific entities. As the competencies lay in them, the DTH business was spread across three outfits. Integrated Subscriber Management Systems Ltd, for instance, has an expertise in such areas like subscriber billing. Siticable has been negotiating content from the time the cable industry began in India. New Era Entertainment formed the marketing and ad sales arm. The aim was to create a revenue-sharing arrangement with ASC Enterprises Ltd (Ascel), the DTH license holder. When we did this structuring, there was no service tax applicable to the industry which was introduced later. We did not anticipate taxation developments to happen so quickly and cause financial inefficiencies. Besides, demerger will provide clarity of structure and add value to shareholders.

    Since regulation allows for a broadcast cap of 20 per cent, why didn’t ZTL hold stake in the DTH business?
    It would have happened in due course. We were in no hurry as we wanted to present the DTH platform as broadcast neutral. The internal intention was to acquire equity once the key relationships came in.

    What does the demerger process in the DTH business involve?
    In the first stage, Siticable will hive off its cable TV business into Wire and Wireless India Ltd (WWIL). The residual Siticable and its wholly owned subsidiary New Era Entertainment Network Ltd will then merge with Ascel, thus consolidating all the DTH operations under one company. Zee Telefilms shareholders will get 23 shares of Ascel for every 10 shares held.

    How did you arrive at this exchange ratio and why did you prescribe for a subsequent cancellation of shares?
    It is the independent valuer (Deloitte Haskin & Sells) who came up with this ratio. As for cancelling three of every four shares held in Ascel, this is to bring back the capital base to the pre-merger level. The paid-up equity of Ascel would have bloated to around Rs 1.66 billion after the merger, up from the base of Rs 411 million. This would have been too large an equity for a company of this size. So we wanted to compress the capital base. We could have given a predetermined base, but didn’t know the ratio the valuer would arrive at.
    ‘DTH revenues will touch Rs 8 billion in FY08 as subscribers rise to 3.15 million and ARPU to Rs 310‘

    Zee’s operating revenues from the DTH line of business was Rs 818 million in FY06 while losses stood at Rs 790 million. What is the investment plan and how do you see subscribers and average revenue per user (ARPU) size up over the next two years?
    The net expense for DTH operations so far is Rs 3.8 billion. We are planning to pump in a further Rs 2.5 billion over the next two years. But we are sitting on a dynamic model and if Tata Sky and us are aggressively competing, there is a possibility of the subsidy amount further increasing. It is a factor of what strategies we adopt to develop our subscriber base. By the end of FY06, we reached close to one million subscribers. We project a gross revenue of Rs 3.2 billion in FY07 on a subscriber base of 2.4 million and an ARPU of Rs 250 (up from Rs 190) mainly because of the launch of value-added services. And in FY08, we see ourselves growing to a revenue of Rs 8 billion as subscribers rise to 3.15 million and ARPU to Rs 310.

    When do you expect to sign up with Sony and how do you see content growing?
    We expect Sony to happen within a month. Gradually, the content kitty is filling up. We are also looking at creating new DTH channels. Our plan is to expand to 200 channels.

    Will transponder space be a limitation?
    We will have to find space. We may have NSS when Doordarshan’s DD Direct vacates the satellite to move to Insat 4B. We are also talking to Isro (Indian Space Research Organisation) to launch a dedicated satellite for us.

    Are your Korean set-top vendors planning to set up a manufacturing facility in India?
    I don’t think it is viable at this stage. The volumes are too small for us to ask our STB vendors to manufacture in India. When we scale up to five million (boxes a year), then it may be a feasible project.

    Which do you think will attract investors first, the DTH or cable company?
    Both have attractive growth paths. We are looking at a mix of debt and funding coming from strategic or private equity investors.

    Are you looking at a small dilution initially of up to say 26 per cent?
    It all depends on what is the offer. Yes, if you initially dilute a small stake you have the advantage of discovering value as the company grows. But we have a flexible approach and it all depends on how lucrative the proposal is.

    Have you started talking to investors?
    We have been approached by many, but nothing is imminent yet.
    Will WWIL infuse massive capital towards digitisation of cable and triple play?
    We know the cable business has a lot of undiscovered value and will be giving it a big push. WWIL has a business plan which would take in an investment of Rs 5 billion over three years to drive digitisation, broadband and triple play rollout. It is a classic example of how the focus has been lacking and we have not taken advantage of the technology advances. We are looking at a million digital cable subscribers in the first year as we bundle service and hardware together in some form of subsidy. We also plan to make the network available to telecom operators for voice. Valuation of the cable business can only go up as the industry is badly suppressed. Conditional access system (CAS), digitisation and triple play will liberate the industry and growth in revenues can be rapid.

    How much debt you will raise to fund the expansion?
    We are looking at a debt-equity ratio of 1:1. The net worth of the company currently is not that strong to support that size of debt. We are, after all, planning to pump in Rs 5 billion to expand the business.

    What was the need for restructuring Zee News again?
    The restructuring started a couple of years ago when the uplinking guidelines were changed. Since we had a substantial foreign holding in ZTL, broadcasting of news and news-bearing channels were placed on a separate footing. Gradually as a response we shifted news gathering and uplinking to a separate company, Zee News Ltd, which was in compliance with the guidelines.

    But in the last few months, we have been mutilating this model as we found that there is a lot of strategic gap or clarity between the thinking of the producer (Zee News), the distributor (Zee Telefilms) and the team that exploits the commercial rights (Zee Telefilms) to such channels. So we thought we would close the gap and put everything in an entirely separate entity. All strategic decisions should be taken in an integrated manner by one team – be it production, news gathering, programme slotting, distribution or commercial exploitation.

    So what were the strategic gaps?
    The differences sprung because there was a revenue sharing arrangement between the two, but I can’t give you the minute details. It is not a good idea tactically to unite even if both of them are part of the same family.

    Zee news and regional channels had a combined turnover of Rs 2 billion in FY06. Were regional channels brought under Zee News Ltd (ZNL) because they could add to the company’s topline growth?
    The main reason for this kind of arrangement is that they are news-bearing channels; the regional channels have a strong component of current affairs and news programming. One of the consequences of this combination, of course, can be fattening of the topline. We are projecting a revenue of Rs 2.5 billion in FY07 and Rs 2.9 billion in FY08.

    As part of the restructuring, 137 ZNL shares will fetch 100 shares in ZTL. But with the total foreign shareholding in ZTL at 54.69 per cent, how does ZNL fall within the regulatory cap of 26 per cent?
    ZTL chairman Subhash Chandra will be transferring his foreign holdings (22.77 per cent is foreign promoters holding in ZTL) to an investment company in India. Also, foreign institutional investors (FIIs) will be given preference shares to bring the cap under limit (FIIs hold 31.51 per cent in ZTL).

    When are you planning the launch of Tamil and Malayalam language channels? How much are the new southern channel launches consuming as investments?
    The two channels should see launch in the current fiscal and in FY08. Along with the Kannada launch, the total investments would be in the region of Rs 350 million.

    With the demerger, won’t the topline of core Zee Telefilms see an erosion?
    Even after physically transferring the topline out, there is enough of a mandate to register growth. We have the number two and three (Zee Cinema and Zee TV) channels in the country. If they continue to focus on the products they have, their growth path is mandated. The flagship channel, Zee TV, is seeing a surge in ratings and ad rates.

    For core ZTL (after demerged businesses), we expect an advertising revenue growth of 12-15 per cent in FY07. While international business will sustain its 10-12 per cent growth (adding of channels and gain from Middle East), domestic subscription will stay steady. Overall, the core ZTL (after demerged businesses) will see a growth of 10 per cent in the current financial year.

    Will the bottomline look healthy after hiving off the loss-making businesses?
    The pullout is of minor loss-making businesses. The impact will largely even out as Zee News and the regional channels were profit-making. Still, there will be some positive outcome.

    How will Zee Sports play out on ZTL’s bottomline, particularly after bagging at a whopping price of $219.15 rights to 25 offshore cricket matches over five years?
    Zee Sports is at a development stage and there will be investments made for the long term development of the channel. There is a particular sequence in which we have to pay and the outgo for the first year will be $5.04 million per match. That will give us reasonable time to drag on the investments and build the channel. Besides, we will be bidding for other major sports properties including the ICC World Cup which is coming up for grabs.
  • BBC launches free HD broadcasts

    BBC launches free HD broadcasts

    MUMBAI: UK pubcaster The BBC will give the UK’s first high definition viewers a curtain-raising treat of the whole of Planet Earth part one, followed by classic Dickens drama Bleak House over Whitsun Bank Holiday from 27 to 29 May 2006.

    The BBC starts the UK’s first free-to-air high definition (HD) consumer broadcasts this week, at the start of a 12 month trial of this new sharper, clearer TV format. Meanwhile research disclosed by the BBC suggests that the majority of people who know about HD expect the BBC to broadcast in HD, and to do so free to air, funded by the licence fee. They also expect high definition broadcasting to be available on all platforms including Freeview.

    The BBC’s HD stream starts broadcasting tomorrow 11 May with a promotional preview. The broadcasts will initially be available to viewers on satellite who have the right HD equipment. Sky has announced it will start installing HD set top boxes from 22 May. The BBC’s HD stream will also be carried in some cable areas in time for the World Cup, following a successful carriage agreement with NTL Telewest.

    From 9 June, the BBC’s World Cup coverage will be simulcast in HD, as will major Wimbledon matches. From July the stream will show BBC highlights in drama, documentaries, events and music for a few hours each day.

    BBC director of television Jana Bennett said, “These are small but exciting first steps in the BBC’s ambition to offer the option of high definition to all in the future. It’s clear that licence fee payers expect high definition broadcasts from the BBC, the same way they have moved to colour television, widescreen, digital radio and online services with us in the past.”

    The BBC says that HD provides sharper, clearer pictures and the potential for surround sound. It needs different technology from ‘standard definition television’ at every link in the chain, from the way programmes are shot and broadcast to the equipment in viewers’ homes.

    The BBC is conducting an end-to-end trial of HD broadcasting over the next 12 months as a test of the technology and trial of the audience appetite for the format. The findings will inform any ongoing offer. BBC HD broadcasting will start officially at noon on 11 May 2006 when the offer appears for the first time to viewers on the Sky electronic programme guide.

    GfK NOP conducted an online survey for the BBC of a representative sample of about 1,500 respondents. They were asked what they knew and thought about high definition television. Seventy three per cent of the sample had heard about high definition television. The figure was much higher for men (83 per cent) than women (62 per cent) and digital homes (77 per cent) rather than analogue homes (62 per cent).

    Of those that were aware of high definition:

    87 per cent said that they expected the BBC to broadcast in high definition in future;
    93 per cent expected those broadcasts to be free to air;
    95 per cent expected HD broadcasts to be available on all platforms – satellite, cable and Freeview;
    88 per cent disagreed that HD viewers should pay a higher Licence Fee.

  • Sun TV to bank on pay revenues and radio biz for growth

    Since Kalanithi Maran started his media business 13 years back, he has been fighting against one rival: himself. Now, after years of staying almost unchallenged in the southern region, he is setting himself up for battle in newer markets.

    He has an expanded war chest of Rs 6.03 billion which he raised through an initial public offering (IPO) of Sun TV Ltd (STL) to pledge his new bet on private FM broadcasting. Also in the pipeline is a direct-to-home (DTH) service through Sun Direct TV, a privately held company.

    Holding 90 per cent stake in STL, Maran is worth Rs 78.28 billion. And the market cap of STL has hit Rs 86.98 billion in a brief span of two weeks, enjoying a 44 per cent premium over its IPO price. In media business, only Subhash Chandra‘s Zee Telefilms has a higher market cap with Rs 110.9 billion.

    Indiantelevision.com takes a close look at the ambitious plans Maran has to grow his media empire and the challenges that lie ahead of him as he heads a listed company.

    Concern for topline growth

    At question is Maran‘s ability to counter slow growth from his traditional revenue lines – advertising sales and broadcast fees. To squeeze more out of matured channels who enjoy a very high level of audience share can turn out to be a challenging task.

    Ad revenues have stayed flat for two years, sitting at Rs 1.55 billion in FY04 and Rs 1.56 billion in FY05. Broadcast fee (time slots that Sun sells to content producers on its channels) has also seen small change, going up from Rs 458 million to Rs 495 million during this period.

    Maran has attacked this somewhat in FY06. Advertising income was up 24.7 per cent to Rs 889 million in the first half of the fiscal, as against Rs 713 million a year ago. This was the period when Sun‘s combined audience share for all its Tamil channels (Sun TV, Sun News, KTV and Sun Music) went up from 60 per cent in FY05 to 70 per cent in the first half of FY06. In Kerala, the company‘s aggregate audience from its Malayalam channels (Surya TV and Kiran TV) rose from 29 per cent to 34 per cent during this period.

    The growth could escalate for the year-period (Sun has not yet announced its FY06 results), fuelled by a rate increase for Sun TV channel by seven per cent in September 2005. This is the first rate hike the channel has come up with in the last three years.

    Analysts also expect Surya TV to put up a better show in FY06, estimating its revenues to touch Rs 450 million. The Malayalam channel, facing stiff competition from Asianet, was raking in close to Rs 300 million. Other channels like KTV have also the potential to stimulate marginal growth.

    But several content producers and marketing agents associated with Sun network feel the potential to exploit more ad revenues from existing channels is limited. “With such a dominating viewership, Sun has been commercially exploiting its slots to the optimum. There is very little scope to raise ad or auction slot rates. This is particularly true of Sun TV, the Tamil flagship channel. And in case of Surya TV, the main Malayalam channel, Maran has to take into consideration the presence of Asianet as a strong competitor,” they say on request of anonymity.

    For speeding the growth engine, Maran has a multi-pronged strategy. In the short run, he expects pay-TV revenues to climb significantly once he takes flagship channels Sun TV and Surya TV pay. And in the medium-term period, the radio operations should be able to generate substantial cash flows to drive the company‘s topline growth. Also adding to the kitty will be the three yet-to-be launched channels and rise in international revenues with new alliances in overseas markets.

    “A master tactician, Maran has protected himself adequately from any slowdown in growth. Topline growth can see faster growth if Sun gets into movie production as well. Pay revenues will also fatten Sun‘s profitability,” an analyst in a leading equity firm says.

    A drag on the company‘s profitability, Maran has hived off his cable distribution business ahead of the IPO. Kal Cable, which operates under the SCV brand, was separated from 1 April 2005. In FY2005, SCV‘s revenues stood at Rs 156 million while costs were at Rs 301 million. The FY06 results will, thus, exclude the financial performance of Kal Cable.

    A result of this: net profit has surged to Rs 614 million in the first half of FY06, up from Rs 322 million a year ago. Rich profits have always been the strength of STL. On a turnover of Rs 2.9 billion for FY05, net profit stood at Rs 778 million. In fact, net profit as a percentage of total income has averaged 27.6 per cent over the past five financial years.

    “STL, the dominant broadcaster in the South Indian languages of Tamil and Malayalam, enjoys a phenomenal net profit. With a slot auction model for the main channels, programming expenses are in any case low,” says an analyst at a brokering firm.

    So how do the revenues pile up? Several estimates by analysts are available, ranging from Rs 7.5 billion to Rs 8.4 billion by FY08. Conservative estimates put it at a little over Rs 6 billion. Net income is also estimated to jump to over Rs three billion in FY08.

    A lot of these projections, however, will depend on how much growth takes place from pay-TV revenues and on the success of Maran‘s FM radio expansion.

    Sun to ramp up pay revenues

    Keeping flagship channels Sun TV and Surya TV free-to-air, STL has clocked pay-TV revenues well below its potential. In FY05, it stood at Rs 398 million, up from Rs 325 million a year ago.

    Maran wants to change all this by turning Sun TV and Surya TV into pay channels. Currently, it has three pay channels – KTV, Sun News and Sun Music. But in Chennai which is a conditional access system (CAS) market where consumers can view pay channels through a set-top box (STB), all these pay channels are free-to-air.

    Sun is yet to ramp up its pay-TV revenues. Analysts estimate revenues from pay-TV to go up progressively from Rs 500 million in FY06 to Rs 1.1 billion in FY07 and Rs 1.7 billion in FY08. This calculation is based on Sun TV going pay in the middle of this year and Surya TV converting from the free-to-air mode later in the year.

    “There is going to be a definite and substantial upside for Sun TV Ltd‘s pay revenues. Sun can scale up its pay-TV revenues by converting flagship and new niche channels to pay mode. The number of cable households, paying subscribers and pay channel rates are also expected to go up,” an analyst says.

    Sun TV, which is expected to be priced at Rs 15-20, is expected to ramp up STL‘s current 2.8 million paying subscriber base. Taking Surya TV pay, however, will be a difficult task if Asianet decides to stay free-to-air.

    STL‘s pay revenues will also come from its content contracts with direct-to-home (DTH) operators. Revenue from DTH consumers is estimated at Rs 260 million, putting the company‘s subscription revenues in the neighbourhood of Rs two billion by FY08 at the optimum level.

     

    Radio to tune in growth

    FM radio will be Maran‘s first media vehicle to have a national footprint, taking him outside the southern language market. He will operate 46 stations across the country through Sun TV Ltd‘s two subsidiaries, Kal Radio and South Asia FM.

    The investment required: over Rs 3.3 billion. Kal and South Asia FM will, in fact, require an approximate of Rs 1.83 billion towards acquisition of broadcasting equipement (FM transmitters, FM antennas, payment of common infrastructure), setting up of local offices and radio studios.

    But Maran realises this is where his big leap in revenues for Sun TV Ltd will come from. Though profitable, the revenues from the four operating stations are small. In Tirunelveli, for instance, Sun earned revenues of Rs 28 million in FY05 and Rs 13 million in the first half of FY06. And in Coimbatore, the income stood at Rs 56 million and Rs 32 million during this period.

    Some analysts, however, expect radio operations to contribute to 20 per cent of Sun‘s total revenues by FY08, compared to around five per cent in FY05. Sun‘s radio revenues are expected to leapfrog from Rs 147 million in FY05 to Rs 1.97 billion in FY08. In the southern language markets, Sun has the advantage of dominating ownership of movie rights which it can leverage for its radio business. But it remains to be seen how successful he can be in new markets outside the southern region.

    The structure that Maran has outlined for FM radio looks somewhat like this: Kal Radio (where Sun TV owns 89 per cent) will operate in the southern language states, while South Asia FM (Sun has 94.91 per cent equity) will take up stations beyond the Southern markets.

    Maran has not bid in Delhi, Mumbai and Kolkata, leading to speculation in the market that he may have some understanding with Astro (Sun has a JV with Astro for launching language channels). These are the cities where Red FM, which was acquired by a consortium of NDTV, Value Labs and Astro from Living Media Group‘s Radio Today, operates. But no official confirmation is available on this and it may be a matter of pure coincidence.

    Maran‘s plan is to consolidate the radio assets. The existing licenses of the four operational radio stations are, thus, being transferred to Kal Radio. While Suryan FM has licenses and operates in Chennai, Coimbatore and Tirunelveli. Udaya TV Pvt Ltd. runs Vishaka FM in Visakhapatnam.

    Analysts say Sun‘s design to operate the FM radio business through subsidiaries is to separate radio from other segment revenues for licence fee computation (4 per cent of gross revenues). Besides, Sun will have the flexibility to rope in a joint venture partner.

    Sun‘s ownership of rights of a vast number of films in various South Indian languages will provide it with a unique advantage to grow its radio revenues and earnings strongly over the next few years.

    Flexing muscles for cable distribution in South India

    Maran may be the king of content but he realises the importance of having distribution in his winning mix. Which is why he wanted to acquire Indian Cable Net (formerly RPG Netcom), the largest multi-system operator (MSO) in Kolkata, ahead of launching Bengali channel Surjo.

    Maran was so confident of the deal sailing through that in an earlier interview with Indiantelevision.com he admitted he was “on the verge of closing it.” But, as events rolled out, Subhash Chandra beat him to it and Siticable snapped up Indian Cable Net. Surjo‘s launch was shelved and the media king of the south is yet to gat a foothold into the northern market.

    No major investments have been made into the cable business for over a year. Maran did try to expand GCV‘s presence in Hyderabad but without much success. He even explored talks with Siticable to work together in that market but nothing conclusive came up. Sources say Siticable, which doesn‘t have signals from Star and Sony, is finalising plans on how to revive its network independently as it has lost market share in the city to Hathway Cable & Datacom. Maran will, thus, have to come out with a different formula even as he nurses ambitions to spread GCV‘s tentacles across Andhra Pradesh.

    In Tamil Nadu, the story is entirely different. SCV dominates cable TV operations, so much so that chief minister Jayalalitha introduced legislation in the state assembly that would allow the state to acquire and take over bigger cable TV networks in Tamil Nadu, including MSOs and optical transport systems. Though controversial, a lot of how things shape up will depend on who wins the assembly elections.

    Control of the distribution chain has put Maran in a unique position in Chennai, a conditional access system (CAS) market. The low offtake of set-top boxes (STBs) has meant that CAS has more or less been killed in this market. Sun has indirectly benefited by the virtual blackout of all the English-language channels like Star World, Star Movies and HBO. Hindi channels, in any case, did not have much of viewing in this southern-language market.

    “All the other channels have lost their business models here. Sun with its strong language content channels have become more powerful in this market,” the head of a large broadcasting company says.

    In a corporate restructuring, Sun has terminated its cable TV distribution agreement with Kal Cable from 1 April 2005. The reason: cable was losing money. “Unlike MSOs operating in the Hindi belt, SCV will have very less carriage fee. For digital to get a push, Sun TV has to go pay in the Chennai market,” says an analyst.

    Gearing up for DTH

    It is a slice of the business many players are keen to lay their hands on. In India, it doesn‘t matter if you run cable TV or IPTV operations. DTH promises to bring about addressability and better quality of service in a distribution chain that has been dominated by an unorganised cable TV industry.

    Maran hopes to kickstart DTH operations this year even as Insat 4C launches in July. Having booked space on the satellite, he is negotiating with the Indian Space Research Organisation (Isro) for eight Ku-band transponders. Initially, he had asked for five transponders on the satellite which could later be ramped up to nine.

    Sun Direct will join the race after Tata Sky launches its service. Already in existence are Dish TV and Doordarshan‘s DD Direct Plus, which offers subscribers free-to-air (FTA) channels. Soon to follow will be Anil Ambani‘s Blue Magic service, which has also booked space for its own DTH plans.

    So how will Maran stand out in this crowded market? He may come out with a specific south language package, keeping the pricing low. Along with this basic bundle, he can add sports and the other language channels to consumers who want more. Tata Sky and Dish TV as national players will find it difficult to compete in a target-specific market. Even if they match the pricing, they may not be in a position to offer all the south channels due to lack of transponder space.

    For broadening the menu to South Indian audiences, Maran will have to create more niche channels. Also necessary is to have Sun TV and Surya TV as pay channels by then. For those subscribers he fails to tap in DTH, he will try to retain through his cable network. But whatever DTH plans he has, no information is coming out from the company.

    Finding favour in the stock market

    Some analysts feel STL is an expensive buy with the stock price quoting at around Rs 1260 per share. But there are several indicators one should consider before taking a final view.

    a) There is a scarcity premium on the stock. With Maran offloading just 10 per cent stake, there is a chase among buyers.

    b) Sun enjoys a clear leadership position and there is no credible competitor emerging to challenge this status. Asianet is a strong contender but only in the Malayalam market. Maran is adequately protected with his breadth of channels. He has also developed extensive programming assets and holds rights for 2,650 movies (60 per cent are Tamils and 40 per cent Malayalam). He is in an ideal position to exploit content across all platforms including DTH.

    c) There is a growth trajectory in radio and pay-TV business. The success in these two areas is crucial to STL‘s future earnings and valuations.

    d) Profitability is the most attractive element in Maran‘s business and this is likely to continue

    e) Launch of kids and documentary channels will further add to STL‘s topline growth. Maran is in talks with Hungama TV for partnership in the kids space. While he will take care of the distribution infrastructure, the programming and other support for the southern version of the channel with initial focus in Tamil language will be handled by Hungama TV.

    f) Maran can also create a slew of channels for DTH which will allow him to increase bandwidth.

    g) These fresh investments run the risk of facing failure in the marketplace. But investors are currently betting on Sun more for its strategic than growth value.

    h) Maran has the flexibility to do a private placement and get in a strategic investor. The Foreign Investment Promotion Board (FIPB), in fact, has formally cleared STL‘s application for issue of preferential allotment of shares to foreign investors. No allotment has been made so far.

    i) Sun can also expand internationally through a $25 million joint venture agreement with Malaysia‘s Astro All Asia Network. The JV plans to collaborate in content creation for filmed and other entertainment products in Indian languages including Tamil, Telugu, Kannada, Malayalam, Hindi and Bengali for distribution to international markets.

    j) The market expects Maran to merge Gemini and Udaya at some stage with STL. But these are speculations and could prove to be wrong. Incidentally, Maran consolidated his ownership position by buying out entire stakes of Sharad Kumar and Dayalu Ammal (wife of DMK president M Karunanidhi). In Gemini and Udaya, he still has minor partners.

    k) When actor-cum-politician Sarath Kumar quit DMK to join AIADMK, speculation was rife that wife Radhika would walk her production house Radaan Mediaworks out of Sun TV. Since Radaan is the leading producer for Sun network with popular shows like Chithi and currently Chelvi, this would have an impact on STL. Nothing has happened so far and Radaan has not started making shows for Jaya TV. If it does, then it can‘t make content for Sun as Maran has a policy that disllows production houses from making shows for rival broadcasters. Will that be a severe blow for Sun? Analysts feel broadcast platforms have far higher long term strengths than production houses, particularly when competing channels are so far behind.

    Sun’s IPO may set the trend in the South

    Sun‘s IPO may have a ripple effect in the southern region, inspiring several broadcasting companies to tap the market.

    A strong case in point could be Asianet, though it has not expressed its intent to get listed so far. But Hyderabad-based Maa TV, which has been struggling to raise funds, is considering taking this route. Even Raj TV is closely observing the market trend.

    “We realise we have to add up channels so that we grow to some size. For our expansion, we require funds. We have been trying to raise private equity but have failed. We may plan for an IPO,” says a senior company executive.

    South-based listed companies like Radaan, Telephoto Entertainment and Pentamedia have actually spoilt the market with their poor financial performance after the IPO. A healthy company like Sun can open up the capital market for other players to step in.

    The problem is that companies of the size of Maa TV may not attract investor confidence unless they work out better business models. And those like Raj TV may not want to change the way they run their closely held business.

    But a transition in culture may well be on the way. Media organisations will have to keep pace with the changing times if they have to grow and flourish.

  • Cable operators black out Star chnls in Kolkata

    Cable operators black out Star chnls in Kolkata

    MUMBAI: A majority of cable networks in Kolkata have blacked out the Star group of channels, protesting against a seven per cent rate hike. Another contention is the forcing of the second bouquet which includes channels like Star One.

    The Star channels including Star Plus are not available to most viewers in the city since Saturday midnight. The decision was taken by the last mile operators (LMOs) who also blamed Tata Sky, in which Star is a 20 per cent joint venture partner, for approaching housing societies with the offer of a central dish antenna through which individual installations could be provided for direct-to-home (DTH) service.

    Indian Cable Net (which was bought out by Siticable) and Manthan Cable Network, the two big multi-system operators (MSOs) in the city, are not having the Star channels on their cable systems. “We were asked by the last mile operators not to carry the Star channels,” says an executive in Indian Cable Net.

    Earlier, Star had switched off signals to Manthan after claiming outstandings of over Rs 20 million. “Manthan owed us money and we switched off signals on 15 March after giving a month’s notice. There is no reason for the other cable operators blacking us out as the Telecom Regulatory Authority of India (Trai) has allowed a seven per cent hike,” says a Star India spokesperson.

    Manthan director Gurmeet Singh admits Star was off the network from 15 March, but says the case regarding dues is pending in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).

    The protest against carriage of the Star channels was led by the Forum of Cable Operators and Cable Operators Sanjukta, two association bodies of the last mile operators in the city. “Star was asking for a hike, which we couldn’t have passed on to the consumers. Besides, Tata Sky, where Star is a partner, is wanting to grab subscribers by offering housing societies free cabling from a single central antenna,” says Cable Operators Sanjukta spokesperson Papi Banerjee.

    Star channels are, however, available on Cablecom and Purvalaya Communications. “Star is also supporting some operators by issuing decoder boxes,” says a last mile operator in Kolkata.

  • Content remains major issue for IPTV providers: seminar

    NEW DELHI: The industry is hyping IPTV in India as the next revolution, but has actually done little on the content side, said former member of Telecom Regulatory of India (Trai), DPS Seth.

    Speaking here today at IPTV India 2006 conference, organised by Bharat Exhibitions, Seth disagreed with some of the speakers before him saying that people who have been talking about IPTV have “failed to address the issue of content,” which could be delivered through IPTV.

    A certain section of the industry, especially the telecom companies have touted IPTV as a technology ready to ready to change the way Indians have been watching television.

    With its advantages over the current cable and satellite TV technologies, IPTV can be typically bundled with other services like video-on-demand (VOD), voice over IP (VoIP), or digital phone, and Web access, which are collectively called triple play.

    But, asked Seth, not many have given a thought to the type of content that should be generated to be delivered over this triple play platform.

    Seth¡’s argument was that unless the content issue is addressed — especially as in this segment content has to be customized — IPTV may languish.

    A report by Multimedia Research predicts that IPTV adoption worldwide will grow from 1.9 million users in 2004 to 25.3 million in 2008 and that the service provider revenue from IPTV is likely to jump from $ 635 million to 7.2 million by 2008.

    Various speakers at today’s IPTV seminar harped on strategies to tap this opportunity in India as the consumer is getting increasingly demanding.

    Some of the pertinent questions that were raised during the day-long conference were the following:

    What should be the policy framework that will govern IPTV in India?
    How will the interdependence between various service, technology and hardware providers work?
    Will it require further expansion of broadband spectrum?
    What are the operational challenges that would be faced by service providers in transforming their existing businesses models to the one suiting IPTV?

    Key panelists included Airtel CTO (mobility) Jagbir Singh, Sun Microsystems director (telecom) Kapil Sood, URStarcom director sales K K Peringhat, Alcatel South Asia Ltd vice president and head of sales, India, Fixed Communications Group Anuj Kapur, BSNL director (planning and new services) RL Dube and Siemens Public Communication Networks (Pvt.) Ltd MD Michael Kuehner.

  • TVHead licenses Tetris for interactive TV

    TVHead licenses Tetris for interactive TV

    MUMBAI: Capitalising on a truly global game phenomenon, TVHead has secured the worldwide interactive TV rights for Tetris – including cable, satellite and IPTV – through 2010. The games-on-demand television network will provide the game to cable and IPTV subscribers as part of its premium offerings.

    With its user-friendly interface and addictive appeal, Tetris is believed to be the world’s best selling electronic game, due to its wide availability on almost every modern computer and game system available.

    “Tetris is more than just a game… it’s a phenomenon with a level of consumer loyalty and awareness equal to top TV programs. Not only is Tetris the number one downloaded wireless game by a large margin, but it has also been incredibly successful on every other platform on which it has been introduced. We are thrilled at the opportunity to provide Tetris to TV audiences because television is the perfect casual games platform. By offering such a consumer-demanded blockbuster, TVHead enables operators to keep their game playing subscribers happy and in front of the TV,” said TVHead CEO and founder Sangita Verma

    TVHead will offer two versions of Tetris: Tetris Classic and Tetris Battle. In the classic Tetris puzzle game, players must clear horizontal rows to score points by creatively rotating and aligning falling blocks while the action accelerates with every move.

    Additionally, Tetris Classic will include high scores, multiplayer and advance play modes. Tetris Battle, a new multiplayer version currently in development, begins when a player submits his or her ‘best of’ game as a challenge to others. Competitors can then select to play against this game—being dealt the same pattern and speed of falling blocks—to see if they can best the score. Highest scores continue to move up the ranks with postings on leader boards and prizes for obtaining high-score benchmarks. Rankings span first local, then regional, and finally national status.

    TVHead is also working with Blue Planet Software Inc., the exclusive worldwide licensing agent for The Tetris Company, to create a consistent multi-platform game experience in which players are able to compete against each other using television and PCs.

  • I&B ministry finalizing terms of law on broadcast regulator

    I&B ministry finalizing terms of law on broadcast regulator

    MUMBAI: The terms of reference of a law that will bring about a separate broadcast regulator are almost ready.
    This was revealed to Indiantelevision.com by Information & Broadcasting secretary SK Arora on the sidelines of the convention for the business of entertainment, Ficci Frames, this morning in Mumbai.

    Once the framework of the law is finalized, it would be distributed among the interministerial committee for comments and any possible fine tuning, Arora said,”From here, the document would have to be scrutinized for a final say by the Union cabinet, after which it would then be presented before Parliament.”

    While Arora declined to give a time frame under which this process would move forward, he expressed confidence that from his ministry’s end, the law would be ready “at the soonest”.

    Queried about the role of the current regulator for both the telecom and broadcast sector, Telecom Regulatory Authority of India (Trai), Arora noted that the challenges for the broadcast industry and telecom are different. First, it is important that convergence is facilitated within the broadcast sector. After that one can look at facilitating convergence between sectors i.e. broadcast and telecom. The regulatory body will work towards ensuring that the fruits of development are not vitiated by adversarial relations. “The aim of regulation is to preserve development. We will also be coming out with a regulation on content code,” he said.

    Ficci is assisting in formulating the draft of the regulation. The Group of Ministers (GoM) who concentrate on the Ice industry will fine-tune it. Then it will be sent to the cabinet. It will be passed when the cabinet approves of it. A further announcement on this regulation is expected in the coming weeks.

    Basically it is aimed at being a self regulatory mechanism. Arora however conceded that regulation always lags behind technological changes. The broadcast industry has been no exception. He also stressed the importance of content providers and creators reaching remote areas of the country. “Whether it is cable, DTH, cinema halls, no villager should be left behind. If we work on this, then the potential will be double than what has already been achieved.”

    Arora also highlighted the concern of piracy. He said that the government has been working with Ficci on the Optical Disc Law and this work will continue in the months ahead. “The reason why we approach the industry is that we want to have a regulatory framework that helps the industry move forward.”

    “Another important area that is growing is animation and gaming. We need investment from foreign players and leaders in this area. The challenge for us is to attract foreign firms in this area. At this time, there are foreign firms coming into India while Indian firms travel abroad. Foreign firms bring their brand in. However, Indian firms when they go abroad do so under an international brand. The exception is the Indian film industry and for this I want to congratulate them,” said Arora.