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(Written By Sibabrata Das in 2012. He continues to write on the cable TV industry)
Subhash Chandra could end his long wait to expand his television news empire in the two main language segments of the business. After slimming Zee News Ltd’s (ZNL) balance sheet by demerging the regional-language entertainment channels from the bouquet in 2010, he is now planning to launch an English general news channel towards the exit quarter of the fiscal.
The main reason behind the timing: digitisation in the four metros by 1 November. ZNL, which runs a clutch of seven news channels, has also grown to a turnover of Rs 3 billion while its Ebitda stands at Rs Rs 533.5 million for FY’12.
Shepherding ZNL’s growth has been Barun Das, the chief executive of the company. His key strategy: staying profitable while being true to the identity of the fourth estate.
Das, thus, took the bold step of cutting ad cut the commercial time of ZNL‘s flagship Hindi news channel, Zee News, by 30 per cent from April while upping the ad rates by 40 per cent. The move followed the change in positioning of Zee News as it shed trivial news content to differentiate itself. His belief: viewership for serious news and ad rates will rise in tandem.
Das could possibly follow the Zee News model for the English news channel. He believes there is space for a less opinionated and more research-driven kind of reportage.
He is optimistic about the future of TV news in India but cautions that “it is bright only for the right players”. He warns news broadcasters of not repeating the mistake of paying unrealistic carriage by masking it under placement fees in a digital environment.
In an interview with Indiantelevision.com’s Sibabrata Das, the ZNL CEO also talks about the growth of regional news markets and the challenges that they face in each language space.
Excerpts:
Q. Will TV news broadcasters have to expand their bouquet to scale up revenues as growth engines of flagship news channels are aging across the sector?
Yes, flagship channels are maturing in revenues. And it is difficult for established existing channels to post ad revenue growth beyond 10 per cent unless there is a repositioning or reinvention of the brand. Expanding the bouquet and strengthening it is key to a TV news broadcaster’s growth strategy.
Q. Sources say ZNL is planning to launch an English-language general news channel towards the exit quarter of the fiscal. Are you waiting for digitisation to come into force in the four metros before you join the ring?
We have been planning to launch an English general news channel for some time. The approval process is not yet formalised. Any launch plan will, however, be linked to digitisation as distribution cost will ease to a large extent with there being no capacity constraint on digital cable networks.
Q. So ZNL is now in a position to take the load of a new channel that would consume large capital in the gestation period?
After demerging the regional general entertainment channels from ZNL in 2010, we decided to consolidate before firming up big expansion plans. We did launch a few regional news channels just before the demerger, but then slowdown started biting the industry. Our focus was to stay profitable rather than build scale. Now that our balance sheet has grown in size and our turnover has touched Rs 3 billion, we are in a position to make heavy investments.
Q. In the past interactions, you have always maintained that the prime business model that you follow is protecting the Ebitda margins. Will the English channel not erode the margins and make ZNL operate in the red for at least some years?
We want to maintain the 18-20 per cent Ebitda margins. While growing in size, we have a guiding time target to return to those margins.
‘There are three-and-a-half English news channels. People may think it is a crowded space to be in, but we see it as an opportunity. With the kind of content that is being currently broadcast, we feel there is a lacuna and void for us to fill the gap and exist profitably. There is space for a less opinionated and more research-driven kind of reportage‘
Q. But wouldn’t you require to make investments of Rs 3 billion over three years and wait for a longer break-even period?
I wouldn’t like to comment on how much we plan to invest. But yes, the break even period of an English news channel is normally 4-5 years. But there is cash flow coming in before that. So it is not like we have to wait for that long to correct the Ebitda erosion. It is too early, though, for me to give a target date when we have not even launched. But there will be a significant drop in distribution payouts for all TV news broadcasters in a digitised environment. The other channels in the bouquet will also post growth. So it’s not red ink all over.
Q. How much would you expect distribution expenses to fall for news broadcasters in a digitised environment?
There is nothing set as a rule. But as per the former Trai chairman (JS Sarma), carriage should fall by 90 per cent. We are expecting a formalisation of that in a digitised environment.
Q. That is a figure hard to digest. But when you launch your English channel, it is only the four metros (Delhi, Mumbai, Kolkata and Chennai) that would have digitised if the government sticks to the 31 October sunset deadline for analogue cable. How much of carriage payout is doled out by English news broadcasters to cable networks in these metros?
It is tough to guess but it should be around 60-70 per cent of their distribution budgets. The focus of the English channels is the metros. Distribution expenses are bound to fall for these channels.
Q. There are five English news channels jostling for a share in the Rs 5.5-6 billion ad market. So will it be a market share fight for you or there is scope for expanding the ad revenue size substantially?
I don‘t know how you are coming to five English news channels. To my mind, there are three-and-a-half of them.
People may think it is a crowded space to be in, but we see it as an opportunity. With the kind of content that is being currently broadcast, we feel there is a lacuna and void for us to fill the gap and exist profitably. The thumb rule in media, and even in TV news in every genre, is that the top three channels can be profitable. Even the fourth player can make money if run and managed efficiently.
Q. ZNL weighed the option of consolidating the English TV news market and even looked at swallowing NewsX. Why did the deal fall through during the due diligence process?
The buyout would have given us a lead time of at least six months as it is a running channel. But we did not find it a viable proposition.
Q. ZNL cut the commercial time of its flagship Hindi news channel, Zee News, by 30 per cent from April while upping the ad rates by 40 per cent. The move followed the change in positioning of Zee News as it shed trivial news content to differentiate itself. So will the English channel follow the Zee News model of serious news?
Most definitely. However, I can’t talk about the positioning and other specific details now. We will work out those operational details when we have finalised the launch plan. But from a personal point view, I think there is space for a less opinionated and more research-driven kind of reportage. There is scope for significant differentiation to model upon and we hope that will make an impact in the marketplace.
Q. Flagship channel Zee News is not in the top three even after changing its positioning to a serious Hindi general news channel. Now that you have also reduced the ad time, how long do you think it will take to drive in more viewership?
The success criteria for a media product should not be the viewership rankings. The business of TV news is primarily about profitability while being true to the identity of the fourth estate. I am sure that in both these counts Zee News channel has significant lead over its nearest competitors.
However, viewership raking numbers is also important which I believe we should be able to improve in the near future. We have also started rolling out content initiatives. The strategy seems to be working for us at this stage, albeit a bit slower than what we had expected.
Q. Will you also scale back on commercial time for your other six channels?
There is no such plan. The other channels are not under so much of inventory pressure.
Q. Are you revamping Zee Business and isn’t slowdown in the financial services sector going to affect the Hindi business news channel?
Zee Business is one channel with which we have never stopped our revamping work. I think that our content team will come out with at least one game changing idea in every 15 days. It is possibly the most dynamic news channel.
There is undoubtedly a pressure on airtime advertising. But we are doing events and sponsorship programmes to tide over this tight situation. Besides, it is a strong subscription-driven channel.
Q. Akash Bangla, the Bengali infotainment channel where ZNL holds 18 per cent stake, is loss-making and you had to provide for Rs 166.7 million. Will ZNL exit from the JV as it runs a successful channel, 24 Ghanta, in that market?
Akash Bangla channel and our joint venture for 24 Ghanta are two different arrangements. We made strategic investment in Akash Bangla channel in 2009 and given the current circumstances, we decided to provide for that funding. 24 Ghanta is a strong No. 1 Bengali news channel with strong financial performance as well.
Bengal, after all, is a news hungry market. The advertising size for TV news is around Rs 1.20 billion, and growing.
Q. Isn’t the Marathi TV news market a sharp contrast?
Unlike the GEC space, the Marathi news market has not yet not grown as per its potential. There is a lot of news consumption happening in English and Hindi. In fact, the Marathi TV news market is half the size of the Bengali market. The potential, though, is very high and it should catch up to the Bengal market sooner or later. We have Zee 24 Taas and are pushing it aggressively.
Q. Won’t the Andhra market be the toughest for ZNL to crack as it is flooded with news channels?
While it is the largest TV news market in terms of ad revenue, it is a weird market too. There are many politically motivated channels in that market and are, therefore, not run as typical business outfits. Thus, it is a difficult market, but we do have specific plans for that too.
The advertising size is pegged at Rs 1.40 billion, and growing. Zee 24 Ghantalu has not yet steadied in that market but we hope that our positioning as a non politically aligned channel should work .
Q. How is Zee News UP faring?
It is the No 1 channel there, though it is a small market with combined ad revenues of around Rs 300 million. However, we are on course with our break-even target.
Covering social issues of the area is important. Being close to Delhi, national news channels are an important part of television viewing in that region. So there is need for content differentiation.
Q. When will ZNL’s new channels turn profitable?
There are only two of them under the new channels category. We expect them to turnaround next year.
Q. What is the future of TV news channels in India?
Extremely bright, but for the right players.
Q. What do you mean by right players?
One thing which had ailed news channels to my mind is that we have consistently converted potential revenue sources into our cost heads. That is one of the first mistakes to be classified and corrected if you want to be the right player in the market. As an example, carriage is one of the largest cost heads for TV news operations while subscription is a miniscule part of that.
Q. Aren‘t the news channels themselves to blame for burdening themselves with such high carriage costs?
Possibly, I tend to agree with that. However, it is a long discussion that we can have later. Bye!
Q. Just one last related question. Won‘t news channels replace carriage with what can be termed as placement fee in an addressable digital environment?
I wouldn‘t like to answer this question. However, in general at a philosophical level, repetition of any mistake is an offence.
