The Fine Print

There are many more who are toeing the path to becoming conglomerates. Th e biggest media company of the country, Bennet & Coleman Co. has made its footprint in the TV space by launching Zoom and Times Now, it is going great guns in the radio industry too through its Radio Mirchi brand. While it is on a continuous prowl for new opportunities in the new media space apart from already having some popular properties like Indiatimes, it continues to be the leader in the print genre with the Times of India brand and many popular magazine titles under its firm grip. Meanwhile, Times of India group’s arch rival Hindustan Times launched the nation’s fifth financial daily ‘Mint’ in partnership with the Wall Street Journal. “A business paper was on HT’s radar for a very long time, and looking at India’s upbeat economy, we realised that there is a very glaring opportunity of being a strong number 2 in this category as 65% of the market share is under’s ET’s control and the rest is divided among the other three players,” says Ranjan Bhalla, Publisher of Mint. One of the country’s oldest media houses, Hindustan Times has also forayed into the radio medium (Fever 104 FM). Its foray into television called Home TV (a JV with BBC) failed in the 1990s and new plans are in the back burner.

The year 2007 also saw the coming together of two rivals - HT and TOI to launch a morning tabloid - Metro Now in the national capital priced at Re.1. Says Rahul Kansal, Brand Director, Times of India, “While we were in the process of starting our tabloid, we came to know that HT also has similar plans. And had two new products competed in this nascent category, they would have driven each other into non-profitability.” While officials at HT and TOI may opine otherwise, it is largely believed that the move came across to fight the plans of Aroon Purie’s newspaper dreams which have begun to fructify now. The owner of India Today group and the TV Today Network recently forged a deal with the publishers of The Daily Mail, Associated Newspapers (ANL) to launch morning newspapers in India. The hiring process for the newspaper is at full blast and the new entity is expected to hit the stands very soon.

Meanwhile, DNA (in which Subhash Chandra’s Zee holds a 7% stake), only second to TOI in Mumbai is also planning to hit the capital sometime soon, challenging the stranglehold of TOI and HT. Th e print media sector which is expected to grow at a CAGR of 13% to the size of Rs.232 billion by 2011 is the favourite segment for global investors with maximum foreign investment. However, despite the double digit growth fi gure projected for the sector, there are many who are keeping away from it. Sony Entertainment Television (SET India) is one of them. While talking about the growth areas of SET, CEO Kunal Dasgupta told B&E, “We are not going to go be in radio and not defi nitely in print.” Kunal is of the opinion that these two mediums don’ have subscription revenues which is the key to the future. “Instead, we will go online, on demand and on the move (mobile),” he adds.

Even Zee which though has a pan-spectrum presence (in TV channels, print, DTH, Cable, et al) and does qualify for the conglomerate tag to a large extent is also not willing to tune into radio. Instead, the group which has recently restructured itself is concentrating its energies on other things. Top on the agenda is ensuring the success of the Indian Cricket League, the brain child of Chandra which will run parallel to BCCI. Also, maintaining Zee TV’s current position and taking it back to the position from where it started – No.1, features high on the list. Moreover, Zee’s DTH service Dish TV which is the market leader in the space is facing tough competition from the newly launched Tata Sky (a 80:20 JV between Tata and Star) and has posted huge loses of Rs 2.51 billion for the fiscal ended March 31, 2007. Moreover, competition in the DTH space is all set to go through the roof. Sun TV (along with Malaysia based Astro), Reliance (Bluemagic) and Bharti all have huge plans for this space which is considered to be the future of Indian television. “India, with over a billion souls is the largest market in the world and there is enough for every DTH player to survive and grow,” says Ashish Kaul, Executive Vice President, Essel Group. Even the Phase II of CAS is nearing and unlike 2003, things seem to be moving pretty smooth this time. “Generally, a GEC doesn’t get to monetise more than 35 odd percent of the total subscriber base due to non-declaration by the local cable operator. Which is where new technologies like CAS and DTH will help streamline market and also bring in transparency thus aiding higher yield in subscription revenues.” While CAS and DTH will definitely ensure more profitability for the broadcasters, media houses like Zee and Star have been smart enough to have a presence in both, DTH (through Dish TV and Tata Sky) and CAS (through cable operators – Siti Cable and Hathway). This way, they will get the best of both worlds.

Dancing With The Stars

(column by Surabhi Agarwal & Pallavi Srivastava)

Talk of conglomerates and the increasing interest of Anil Ambani in the Indian media and entertainment industry would be foolish to overlook. While the entrepreneur has upped his stake in the TV Today group, Adlabs (in which he has a 51% stake) is on its way to becoming an entertainment giant. From being a company which was into film post-production, the portfolio of the company has now expanded to film production, distribution, television content (through Siddharth Basu’s Synergy Communications), multiplexes and radio. For instance, a film produced by Adlbas is also distributed by it, is screened in its multiplexes (avoiding the hassles of finding distributors in areas where it’s present). Moreover, its radio brand – Big FM (one with the largest number of stations in the country) gets the exclusive music rights and its TV shows also promote the film in their own way. Now, that’s synergy, something that automatically comes with being a conglomerate!

Yash Raj Films, UTV are other entertainment conglomerates in the making. Yash Raj Films can be called the pioneers of promoting a corporate like structure of the Bollywood industry, which is today inching closer towards more professionalism and corporatisation. Movie marketing, selling of various rights, savvy promotions have become commonplace and even small-budget films are now making money. Thanks to production houses like Sahara One Motion Pictures, PNC, UTV et al which are ready to sponsor low-onbudget but high-on-quality films. Ronnie Swrewvala of UTV seems to have got the synergy funda pretty clear in his mind, he is producing and distributing Indian and foreign films, has plans to launch 8 TV channels and is also gung-ho about digital and mobile content. Meanwhile, Yash Raj has recently tied up with Microsoft to uplift its internet offerings and with Walt Disney to produce animated movies. Moreover, grapevine has it that Yash Raj is in advanced talks with Mukesh Ambani to set up a chain of multiplexes in the country. What is also seems to be evolving slowly is the studio model in Bollywood given the initiatives of Yash Raj Films, UTV Motion Pictures and Adlabs in signing stars and producers. Given all these recent changes, things have surely started looking up for Bollywood which was once in shambles.

Not just in tinsel town, the whole media and entertainment industry is going through a transition. Some of the challenges that face the industry are low internet connectivity and the spectrum crunch which might hinder its future growth. With so much happening, no one knows what model the industry will finally evolve itself into. However, rise of conglomerates seems inevitable and diversification and consolidation will be the way the go.

(End of Surabhi Agarwal & Pallavi Srivastava column)

Who said Dalal street feels media stocks are bitter?

While the Sensex continues to make and break records, media and entertainment stocks have not been far away from the limelight and at present offer good opportunities. At current levels, some of the media and entertainment stocks’ performance seem stupendous and have outperformed the index as well. Recently, stocks like Entertainment Network (India) Limited, UTV Software, Balaji Telefilms and HT Media have appreciated by 102.20%, 93.63%, 92.16% and 39.85% (January 1, 2007 to July 9, 2007) respectively. Due to the gradual liberalization by the government, the sector has seen considerable amount of foreign and domestic investments. Even increasing private equity investments, Initial Public Offerings (IPOs) and mergers and acquisitions are acting as catalysts and fuelling growth. For the first quarter of 2007 there has been investment worth $640 million already by private equity firms in this sector. There are certain segments like the radio and news that continue to be strictly regulated, which leaves enough scope for opening up, hence more investments. These investments will definitely give a fillip to marketing and new product development in these sectors fuelling overall growth. Radio and entertainment segments are expected to grow even faster at a CAGR of 20%-30%. Like cousins in the IT sector, some media companies too are getting listed in global markets. UTV and Indian Film Company of TV18 have been listed in London’s AIM. Who knows, we might see some global acquisitions too.

Piloting a low cost revolution

Once a Page 3 party-circuit regular, Jeh Wadia, the younger scion of the Wadia family has slowly but steadily transformed into an astute businessman & philanthropist today. While the credit for his philanthropic tryst can easily be given to RSS stalwart Nanaji Deshmukh; his sharp business sense can easily be traced back to legendary legacy that he was born with. Son of Nusli Wadia (of the Bombay Dyeing fame) & Maureen Wadia (a major force behind the Miss India beauty pageants), Jeh began his career by dabbling in the Wadia Group’s IT initiatives during the late ’90s dotcom boom. And when the boom went bust, he went on to conceive the low-cost airline GoAir, which was launched in November 2005. The ambition for Jeh was to make domestic air travel an “affordable commodity.” And while he has only tasted marginal success till now, with a negligible market share in the sector, his tryst with aviation, in his own words ‘is a marathon’, not to be dismissed easily.

It was an afternoon appointment – as we struggled through the routine traffic c woes on drenched Mumbai roads for the scheduled meeting with the MD of GoAir. Just a few minutes into the conversation, we realised that the sky was not enough for Jeh. And while we are at it, neither is the numbers of parking slots; nor the infrastructure management services made available at airports across the country. The question that immediately came to mind was that if he was so dissatisfi ed with the state of affairs in the aviation sector, then why did he enter the space at all?

Interestingly, the answer lies in his travels with his “leader & mentor” Nanaji Deshmukh, with whom Jeh is actively striving to uplift about 2,000 poor villages to become self-sustainable. In Chitrakoot, for example, this altruist businessman has helped set up seed banks, as also financed development of locally-produced organic fertilisers, besides developing a farming R&D centre in Chitrakoot called Krishi Vidya Kendra.

“A lot of traveling was required with Nanaji & my train journey experiences to Chitrakoot moved me to think in 2004 that if my brothers & sisters have to pay such a price to get such a bad service, where’s the service? You bring in your own food & water; it takes hours to reach, there would be a 5-6 hour delay, stops every 2-3 hours. It was ridiculous. So, I said, there is an opportunity,” explains the vibrant 33-year old Jeh, who is possibly one of the youngest business tycoons in the industry.

Presently, his airline operates 396 weekly flights to 11 airports across the country, boasting the highest load factors for the past 6 months (90%). The carrier also does not tire of peddling the fact that it has the highest market share per aircraft in the industry. Like other low cost airlines, Jeh is also focusing keenly on train passengers to boost the bottom line of GoAir. He points out that the cost structure of GoAir was specifically tailored to deliver a product & service to this target audience, “Initially, the torture test to this was ‘who was the customer, how much do they pay’? Then work out the cost structure backwards & understand whether you can make money with this cost structure. We decided to move forward based on the fact that this (GoAir) is a good financial investment.” Considering that most aviation players today are in the red & consolidation is the golden buzz word in the industry today, does Jeh have an action plan lined up for taking GoAir forward? Ask him & pat comes his reply, “Consolidation will benefit those who want to cover all points of travel: domestic full fare, low cost & international, covering the entire gamut of 1 billion potential fliers. Take Naresh Goyal, he consolidated in the domestic market first & is now leveraging the domestic market share to fl y international. Mallya is consolidating because he needs to come to the same size as Jet & Air India to go international. GoAir is only concerned with the domestic traveller & that too the ones minding their ‘budget’, so we are comfortable.”

Be that as it may, it cannot be denied that GoAir continues to bleed with heavy losses, as is true for every aircraft carrier in the country. The reason, according to Jeh, is the triumvirate of three – infrastructure, policies & taxes, all of which need to be bettered for the next big leap forward in Indian aviation. “Taxes are the first concern. If the barrel is costing about $73, then we pay 27% more than that as sales tax. I mean it is ridiculous & not heard of anywhere else in the world. Why don’t we incorporate corporate income tax? If this gets done, then I would get profitable overnight.” He laments how 60% of the airline income goes to the government & petroleum company, which the company can’t control. And the figure for that internationally is 27%. That’s one major reason for the failure to make profits yet, according to Jeh. In fact, raising a question on the aggressive expansion plans of his many competitors, Jeh is of the view that the more planes you have; the more losses one makes. In fact, he says that given the prevailing conditions in the aviation sector, GoAir has revised its earlier estimates of fleet expansion, & restricted them to 35 planes by 2011 (instead of 50 aircraft s).

Having completed his primary education at the St. Lawrence’s boarding school (Sanawar) in Shimla, Jeh enrolled for his Master’s into University of Warwick, London. After tasting the pleasant weather & infrastructure in England, the young Wadia came back to India to join the textile business of the family. He went on to become the founder of The Incubation Corporation, established primarily to invest in start-up enterprises in India & the United States. In October 2002, Jeh Wadia was appointed the Deputy Managing Director of the Mubai based Bombay Burmah Trading Corporation. “I did a lot of things at a younger age but when it comes to business, from 1998-99, I became much focused on my business development & this gives me the greaest joy today as I spend 14-16 hours a day working on it,” he reminiscences fondly.

Apart from trying his hand at myriad businesses & leading a life on a fast lane, Jeh Wadia is actually extremely process driven in his work life. While divulging his leadership style, he explicates, “I am very process driven & I drive my people by laying out the vision, & most of the time, they come up with their own strategies to achieve goals. I comment on the implementation & I give my opinion, but mainly leave the implementation plan to professionals.” A believer in giving freedom to professionals, he also has a firm sense of accountability. “If my people give me a promise & I pass these promises to my consumers, as the public face of the company, I expect my CEOs to deliver,” he opines.

The tough man at work, however, favours spending his leisure time with his beautiful wife Celina & son Jahangir, preferably holidaying in either Australia & Thailand. And how’d he describe himself in one word? “Enthusiastic,” quips Jeh decisively. And the word does him justice, as we observed in our over two-hour rendezvous with the man who has a dream to make the common man fl y smartly. “My friends & foes unfortunately focus only on the number of aircraft s in their fleet, maximum market share, & number of airports covered in a day. Good luck to them, I’ll see them at the finishing line… 250 years later!” he declares confidently, & in legendary Wadia style, defiant to the core. Rest assured that this ‘adventurous aviator’ is indeed here to run the marathon…