Sudhanshu Vats couldn’t have walked into the crease at a better time to start his innings as the Group CEO of Viacom18, a 50:50 joint venture company between TV18 and Viacom. Colors had settled as one of the leading Hindi general entertainment channels (GECs) while MTV was also sustaining growth.
Vats’ task was to grow Colors to a new level, chalk out expansion plans and clock faster growth for the company. His focus was also on profitability and a step in that direction was to shelve the launch of a Hindi movie channel.
Viacom18 saw opportunity in launching segmented channels at a time when India’s cable TV networks were asked by the government to digitise. So Sonic, Comedy Central and Nick Jr. were launched in quick succession.
Vats’ next big growth pillar could be the addition of the ETV GECs. TV18 Group has offered Viacom the option to acquire the remaining 50 per cent stake in ETV’s five GECs and 24.5 per cent equity interest in ETV Telugu.
This is a follow-up to the acquisition deal inked by TV18 in January 2012 to acquire 50 per cent stake in ETV‘s Marathi, Bangla, Kannada, Gujarati and Oriya entertainment channels, along with the option of picking up the balance 50 per cent interest. It also has 24.5 per cent stake in ETV Telugu and can add a similar equity interest in the Telugu GEC.
After getting Viacom’s equity participation, the ETV GECs will get housed under Viacom18. The new owners will, thus, get full ownership of the five ETV GECs (ETV Marathi, ETV Bangla, ETV Kannada, ETV Gujarati and ETV Oriya) while half of ETV Telugu’s equity will get transferred.
An FMCG industry veteran with over 21 years of experience, Vats feels that the Indian broadcasting industry has huge growth potential with the onset of digitisation and opportunity to correct advertising rates.
In an interview with Indiantelevision.com‘s Sibabrata Das, the Group CEO of Viacom18 talks about the company‘s portfolio of channels and its growth plans in the backdrop of digitisation.
Excerpts:
Q. Has TV18 Group offered Viacom the option to buy the remaining 50% stake in five of ETV’s regional general entertainment channels and 24.5% equity interest in ETV Telugu?
Viacom has the option to acquire stake in ETV’s entertainment channels. A due diligence is being conducted.
Q. Will the ETV GECs be housed under Viacom18?
That will depend upon Viacom’s approval to pick up equity in the ETV assets.
Q. So the next pillar of growth for Viacom18 will be the regional channels?
We have been aggressive all along. We have launched three channels (Sonic, Comedy Central and Nick Jr) within a year’s time to take our total bouquet offering to seven. When the ETV channels integrate, we will have a new growth area in regional-language entertainment broadcasting.
Q. Will we see regional movie channel launches as well?
We are not looking at that at this stage. We will, however, be acquiring movies for the regional GECs when they come our way.
‘We will definitely evaluate the regional music broadcasting space. We are entering into regional movie production’
Q. Even the launch of the Hindi movie channel was shelved. Does this mean that there is a focus on segmented products rather than mass entertainment channels that consume huge capital?
We are committed to most of the genres. We have no immediate plans to look at sports or movies in the broadcasting space.
The business case for a Hindi movie channel from us looks weak at this stage. We can’t come out with a product that is differentiated enough. The other question we ask ourselves is whether we have the right library. The answer is in the negative. The acquisition prices have also climbed steeply. And our studio business, which can provide captive content for the channel, is growing but needs to size up more.
Q. So the growth strategy at this stage also fits into your overall philosophy of segmentation and psycho-graphic market approach which you carried out so well during your long stint at HUL?
We have been sharply segmenting the market, particularly in the kids television space. We have Nick Jr, which targets the preschool segment. Nick addresses the 4-14-year-olds while Sonic has a skew towards young boys. MTV appeals to the youth and so does Vh1. You could probably see us working immediately on more segmentation as the market moves towards digitisation.
Q. Have the early results of digitisation shown any benefits?
Digitisation has actually been a shot in the arm for channels like MTV. We are also bullish on the kids TV space as it is a low-powered ad index category. Besides subscription gains, we can build in ancillary revenue streams by developing the ecosystem.
Having Viacom as a partner also helps as we can leverage on the international parent in terms of content and research. Kids internationally is a hugely researched category and the best part is that the segment is more universal in nature.
Q. Is the youth genre like MTV showing a particular level of saturation on the ad revenue front?
Apart from the organic ad growth, an ecosystem can be created to build ancillary revenues. There is scope for live concerts and advertisement-funded programmes. We are taking MTV Block Party to five towns. MTV Video Music Awards India is taking place on 21 March. The youth-cum-music genre will also be able to increase subscription revenues in a digitised environment. But yes, the genre will see more of youth than music content.
‘Viacom has the option to acquire stake in ETV’s entertainment channels. A due diligence is being conducted’
Q. Will Viacom18 also explore the regional music broadcasting space?
We will definitely evaluate this space.
Q. Don’t you have to work on the English content side as Comedy Central has a long way to go?
English entertainment is better indexed on both the revenue counts – ad as well as subscription. Segmentation will happen in these genres. Comedy Central is picking up well.
Q. What is the growth path for Colors in a digitised climate?
We will have more genres to widen the appeal of the channel. Colors is more urban now; we are making it all inclusive. We are rounding up the genres for the channel – crime, comedy and mythology. We have already demonstrated that we can come out with good fiction and non fiction shows.
Q. Is there scope for correction in advertising rates?
I am bullish over a five-year horizon. India is one of the cheapest ad markets in the world. The time regulation on commercial time (as defined by the Telecom Regulatory Authority of India) will have a positive impact on rate inflation. However, it should be introduced after digitisation matures. I also see media buyers differentiating between reach and quality reach.
Q. At a macro level, what are Viacom18’s key thrust areas?
Sharper segmentation is a must as India moves from a collective to an individualistic content consumption habit. Technology and multiple screens will be available to consume that content. The third force will be digitisation. With the distribution pipe becoming broader, the system will allow a channel to launch and at a lower cost of carriage. This will make the business model viable. The dependence on advertising revenue will reduce as an alternative income system grows.
The fourth area is something we have to shape up and, to my mind, is more difficult to execute. This is what I call behavioural research, which allows us to move from just idea and gut feel to something more scientific. No doubt the first two are very important to have and will always remain core to the media business. But we need to also have a system that can develop and test the power of that idea.
Within Viacom18, we are also keen to drive in internal synergies. The challenge is to develop the different lines of businesses into one company – family entertainment channels, music content and movies. We are also seeing experimentation in TV properties like Bigg Boss which are moving across regional channels.
Q. How much is Viacom18 investing on its movie production business and what is the plan to scale up?
For us the issue in the film production business is not funding but profitability. The risk-reward ratio today is heavily skewed towards the stars than the studios.
The peak funding requirement for our movie business is Rs 1 billion. We have a slate across small, medium and big-budget movies. We have decided to do more co-productions and to get early involvement into the project. This will allow us to have control on costs, influence to some extent the creativity of the product, understand the movie better and, hence, be able to market it better.
We are also looking at entering into regional film production. For starters, we will be doing a few Punjabi and Bengali movies.
