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Media: Early diversification - Views on News from Equitymaster
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Media: Early diversification
Feb 9, 2009

In an earlier article, we highlighted how the conglomerate structure is the central theme in the US media industry. In this article, we shall study how the structure of the Indian media industry is evolving to look a lot like its US counterpart. *Also read - Media companies: Fingers in many pies

Indian media industry: Rapidly diversifying
Star: Star India Pvt. Ltd. caters to general entertainment (Star Plus, Star One, Star Utsav, Star World), movies (Star Gold, Star Movies), music (Channel [v]), sports (Star Cricket, Star Sports), regional entertainment (Star Vijay, Star Jalsha, Star Pravah) and news (Star News, Star Ananda, Star Majha).

Zee: Zee Entertainment caters to general entertainment (Zee TV, Zee Next, Zee Smile, Zee Cafe), movies (Zee Cinema, Zee Studio, Zee Premier, Zee Classic, Zee Action), music (ETC, ECT-Punjabi, Zee Music), sports (Ten Sports, Zee Sports), religious (Zee Jagran) and movie production (Zee motion pictures, Zee Limelight). A group company, Zee News, caters to news (Zee News, Zee Business) and regional entertainment (Zee Punjabi, Zee Marathi, Zee Bangla, Zee Gujarati, Zee Telugu, Zee Kannada).

Sony: Multi Screen Media Pvt. Ltd. caters to general entertainment (SETIndia, SABtv, AXN), movies and sports (MAX, PIX).

Network 18: The company caters to several segments as shown in the table below:

Network 18 – Complex structure for a complex business
HomeShop18 Subsidiary (75%) Virtual retail
Setpro18 Subsidiary (67%) -
Events18 Division   Events management
Sport 18 Division   Sports management & representation
The Indian Film Company Affiliate -
Capital18 Affiliate -
Through TV 18 (listed)   Subsidiary (51%)  
CNBC TV18, CNBC Awaaz Divisions of TV18 Business news
Newswire18 Division of TV18 (70%) Data Services
Web18  Subsidiary of TV18 (85%) Online content, transaction & subscription
Infomedia India Subsidiary of TV18 (53%)- listed Publishing
Through IBN 18 (listed) Subsidiary (51%)  
IBN lokmat 50:50 JV with lokmat group Marathi news
IBN 7 50:50 JV with Jagran group Hindi news
CNN IBN 100% owned English news
Viacom 18 50% JV with Viacom Music - MTV, VH1;GEC - Colors;
Kids - Nickelodeon; Movies - Studio 18

NDTV: NDTV caters to news (NDTV 24X7, NDTV India, NDTV Profit). Its subsidiary, NDTV Networks Plc, caters to general entertainment (NDTV Imagine), lifestyle (NDTV Good Times). The company also has interests in the internet and mobile space (NDTV Convergence), media software and technology (NDTV Labs), outsourcing of media post-production services (NGEN Media Services) and launching channels in Indonesia, Malaysia and the Middle East (Emerging Markets BV).

UTV: UTV Software Communications caters to TV (content, airtime sales, dubbing, syndication), movies (production, distribution, marketing), broadcasting (Bindaas, Bindaas Movies, UTV Movies, World Movies, UTVi), games content (online, mobile, console) and new media (internet portals).

Sun: SUN TV networks caters to broadcasting (20 channels in the 4 South Indian languages including Surya TV, Gemini TV and Udaya TV) and FM radio (43 stations). A group company, Sun Direct Pvt. Ltd., provides pan India DTH service.

International media giants: Foot in the door
An interesting feature of the Indian media industry is that many of the major global media companies have now secured a foothold in the market.

Star: It is part of the NewsCorp empire.

Zee: Time Warner has an association with the ZEE.

UTV: Disney holds a 60% stake in UTV.

NDTV: NBC Universal has a 26% share in NDTV’s subsidiary NDTV Networks.

Sony: Sony Pictures Entertainment holds 61% equity in Multi Screen Media.

Network 18: Viacom has a 50% JV with IBN 18, a subsidiary of Network 18.

Reason for diversification
In the previous article, we mentioned that conglomerates diversify in order to benefit from 3 types of synergies between the different segments. Tangible interrelationships – when activities are shared to generate economies of scale; intangible interrelationships – when management knowhow is shared and competitor interrelationships - when there are ‘multipoint competitors’.

Indian media houses are diversifying to secure all the 3 types of synergies. However, unlike global media houses, they are diversifying at a very early stage. In the US, the media industry developed sequentially – growth was witnessed first in newspapers, then in radio, then TV and then online. As a result, US media companies diversified gradually. The various segments of the Indian media industry are taking off simultaneously. Hence, we are witnessing diversification at an early stage of the industry.

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