Broadbandindia Magazine

In what is considered a tough year for all broadcasters, STAR TV India, the media arm here of Rupert Murdoch’s News Corporation, is estimated to have made revenue of around Rs 2,200 crore in the 2008-09 financial year, says a report prepared by Media Partners Asia (MPA), the international media research agency. STAR India follows a July to June calender. This, according to industry sources gives STAR India a growth of 10% in 2008-09. In 2007-08, it is said to have registered over 20% growth. “MPA estimates indicate STAR India posted operating income of around $80 million (about Rs 400 crore) in the last fiscal year (2008-09) on sales of close to $440 million (about Rs 2,200 crore),” says the report.

The report terms STAR India’s growth as “disappointing” over the past year. “STAR’s India operations have been hit by intense competition in Hindi entertainment and an overall slowdown in the ad market, whose near-term recovery could be checked by a depressing monsoon season,” it says. According to MPA, STAR India’s operating income in 2007-08 was close to $95 million. When asked, Uday Shankar, the STAR India CEO, declined to comment on the   specific numbers. However, he said: “The year 2008-09 has been a tough year for everyone. There was negative subscription growth from analog cable, with the only silver lining coming in from the healthy growth of subscription revenue from the new Direct to Home platforms. However, even in a bad year we have seen growth.”

According to industry sources, the overall advertising revenue of STAR India may have declined by around 7- 8% in 2008-09. However, its subscription revenue registered a high double-digit growth. A STAR India insider says the company would have earned around Rs 850 crore-plus from subscription revenue in 2008-09, compared to around Rs 550 crore-plus in 2007-08, a jump of over 55%, while maintaining its overall ad revenue for the 2009 fiscal.

The subscription revenue of rival firm Zee Entertainment Enterprises (ZEEL) for 2008-09 stood at Rs 904 crore, while it earned Rs 1,059 crore from advertising revenue. ZEEL follows the April to March financial year. Overall, the total revenue for ZEEL in 2008-09 stood at Rs 2,177 crore, a 19% jump from 2007-08, thereby outperforming several media firms even in a tough year, says a media analyst. According to Vivek Couto of MPA, “STAR India remains a highly profitable business, with decent growth exposure as it secures a national footprint with the launch of new regional entertainment channels. MPA analysts suggest that STAR India could be worth more than 1.6 billion in Ebitda (earnings before interest, taxes, depreciation and amortisation) by the financial year ending June 2013.” This, according to Couto is based on more funding for its movie venture, Fox Star Studios, in India. MPA also predicts STAR India’s home shopping joint venture with Korea’s CJ Group will take shape, where both parties will invest $27.5 million each over three years.

Star Plus regains top slot

Television channel Star Plus has surged ahead of Colors to the top spot in the Hindi general entertainment channel for the week ended 15 August, television audience research agency TAM Media Research’s data shows. Star Plus recorded gross rating points, or GRPs, of 281.3 for the week to 15 August, up from 265.9 a week earlier. GRPs are a total of television rating points, or TRPs, over a period. TRPs are the total percentage of viewers watching a particular programme at a given time. Colors, owned by Viacom18 Media Pvt. Ltd, too improved its performance, but lagged Star Plus. Its GRPs increased to 278.6 from 268 earlier. Colors had been the top Hindi general entertainment channel for the previous two weeks. Star Plus is the flagship channel of News Corp.’s Indian subsidiary Star India Pvt. Ltd. Viacom18 is a venture of US-based Viacom Inc. and India media group Network18 Media and Investments Ltd. (Mint has a  content- sharing arrangement with CNBC-TV18 news channel, which is owned by Network18.). Retaining its No. 3 spot, the flagship channel Zee TV of Zee Entertainment Enterprises Ltd improved its ratings by nearly 11% to 265. Sony Entertainment overtook NDTV Imagine to come in at No. 4 in the category with GRPs of 130.4 against 115.7 in the preceding week. NDTV Imagine’s ratings slipped after the channel’s top show ’Rakhi Ka Swayamvar’ ended on 2 August, to GRPs of 104 from 141.1 a week ago.

Restructuring of Asia business

As part of an extensive restructuring exercise, Star TV Asia, the television operation under Rupert Murdoch’s News Corporation, has segregated into Star India, Star Greater China and Fox International Channels (FIC). In a major restructuring of its Asian broadcasting subsidiary, News Corp has allowed Star India to nurse its lucrative business while deciding to trim 30% of its Hong Kong headquarters staff. Doing away with the centralized structure, News Corp is splitting the Asian businesses into three units – Star India, Star Greater China and Fox International Channels (FIC). As part of the restructuring, Paul Aiello, CEO of Star TV   Asia, will be leaving the company by the year-end. Earlier, chief operating officer Laureen Ong had announced her departure. Following the shake-up, John Lau, Star’s president of China and Taiwan, and Uday Shankar, chief executive of the unlisted Star India, will both report to James Murdoch, said reports. Uday Shankar will be responsible for Star’s sales and distribution offices in West Asia, the UK and the US. He will also be responsible for managing the sales and distribution of all Fox branded channels in India.

India’s autonomy from Hong Kong is a significant development as it makes up around 75-80% of the $1 billion revenue that Star group generates a year. Star India, led by CEO Uday Shankar, will manage sales and distribution of News Corp channels in India – a total of 19 channels in eight languages. Additionally, Star India will manage News Corp’s interests in seven joint ventures including DTH company Tata Sky, cable firm Hathway Cable & Datacom, channel distributor Star Den, news channel operator MCCS, south Indian broadcast business of Asianet channels and Star Vijay, Fox Star Studios India and Star CJ Home Shopping. Shankar will now report directly to News Corp Europe and Asia chairman and CEO James Murdoch. He will oversee Star’s sales and distribution offices in the Middle East, UK and US. Shankar will also gain responsibility for managing the sales and distribution of all Fox-branded channels in India.

Star to uplink local channels from India

STAR TV will also soon shift a part of its uplinking operations to India. This includes those of all India feeds, from here instead of Hong Kong. This move will make STAR India responsible for uplink and downlink of all Indian channels instead of STAR’s Hong Kong office. So, STAR India will have to apply for an uplink licence for its channels to the ministry of information and broadcasting (I&B). More, experts say the move may lead to STAR India becoming the hub for a lot of back-office work for STAR’s Asian operations, which so far were being done from Hong Kong. These include research work for content and technical support, among others.

So far, STAR India has only got the landing rights (downlink permission) for its channels in India, as the uplinking happens from Hong Kong. For getting an uplink licence, STAR India will have to apply afresh for both uplinking and downlinking to the I&B ministry, a first for it since its inception in the early 90s. For STAR India, it means channels like STAR Plus, and the India feed of English channels like STAR Movies, STAR World and the various regional channels will be uplinked from within the country instead of Hong Kong. This may also result in an increase in local content on the English channels, thereby helping STAR India expand its revenue stream, sources say. Currently, STAR India is the most profitable arm among News Corp’s Asian operations, generating revenues of over $440 million (over Rs 2,200 crore).

So far, only India-centric channels will be shifted from Hong Kong to India for uplink, company sources say. However, once STAR India establishes an uplink hub in the country, it may be used for uplinking other channels too, sources say.

Uplink of television channels involves beaming these from an earth station to a satellite for distribution over a particular geographical area. Uplink involves seeking several permissions from the country of origin. In India, the various clauses laid down in the uplinking licensing conditions include maintaining the foreign investments in the local company under 49% for non-news channels, home ministry clearances for key executives on the board and maintaining minimum net worth criteria, among others.

For STAR, this move may lead to savings of 20-25% of the operational costs. STAR is estimated to spend over $20 million annually on uplink of over 35 channels from Hong Kong, including channels for China, India, Malaysia, Taiwan and Hong Kong, among other countries. “India will become a complete independent business entity, post the restructuring exercise. Subject to regulatory and government approvals, we will relocate uplinking of our channels to India from Hong Kong. This may lead to creation of some jobs, too,” Uday Shankar, chief executive of STAR India told Media. Industry sources say STAR TV India  may form a separate division to undertake the uplinking of channels, a move that could lead to additional creation of up to 200 jobs for STAR India, that currently employs around 800 people.

Murdoch said, “Since launching with only five channels in 1991, Star has grown in scale and made a valuable contribution to broadcasting in Asia. We are now reshaping a big, regional organization into three highly focused business units, each of which will be intensely competitive in its target marketplace. While it was once natural to have a larger, regional headquarters, the company has now reached a scale in its key local markets where we are ready to empower the teams on the ground and move a number of functions to be closer to viewers.” Meanwhile, as part of the restructuring, Star CEO Paul Aiello will leave the company by the end of December. Murdoch said: “It is with much regret that I accept Paul’s decision to leave the organization to pursue other interests and I wish him well. Paul has played an important leadership role in building local teams and driving Star’s growth, particularly in India where we have expanded our broadcast footprint nationally and launched new ventures including film production and distribution.

Among the other units, Star Greater China, the Chinese language content and broadcast businesses, will oversee a bouquet of Chinese language channels – Star Chinese Channel, Xing Kong, Star Chinese Movies, Star Chinese Movies 2 and Channel [V], the Fortune Star movie library and joint ventures Phoenix television and Fox Star Studios Chinese film production. Star China and Taiwan president John Lau will report directly to Murdoch. Star China CEO Jack Gao and Star Taiwan CEO Daniel Cheung will continue their operational leadership roles in their respective markets.

FIC, on the other hand, will combine Star World, Star Movies and Channel [V] International with channels under the Fox and National Geographic Channel brands, operating 37 channels under 17 channel brands. In addition, FIC will become responsible for the regional distribution of the Star India and Star Greater China channels outside their home markets in Asia and continue to distribute its channels in the Middle East. The business will be managed by FIC Asia  president Ward Platt, and COO Zubin Gandevia. Platt will report to FIC and NGC Worldwide CEO David Haslingden. “The combination of Star and Fox International Channels will create a streamlined structure, resulting in a more efficient cost base for the operation of regional channel distribution in the consolidated business. It also provides a platform for FIC to expand its high-definition portfolio in Asia from the current four brands to eight or more next year,” the company said in a statement.