Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
"We are to the television world what Stardust or Cine Blitz or Cricket Week are to the print medium." - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 5, 2000

    "We are to the television world what Stardust or Cine Blitz or Cricket Week are to the print medium."

    With over 20 years of varied experience in the entertainment industry across the entire spectrum of creative, marketing and technology, Mr. Harish Thawani is a renowned figure in the media business. He started his career with stints in leading advertising agencies Lintas and Chaitra Leo Burnett and went on to set up Nimbus Communications in 1987. He is an elected Director on the Board of the Indian Broadcasting Foundation and has been the chairman of the FICCI sub-committee for 'television content'.

    His other personal interests include music, sports and reading. Not surprisingly, Subhash Chandra Goel of Zee TV, Kalanidhi Maran of Sun TV are the people whom he admires greatly.

    In an interview to equitymaster Mr. Thawani, CMD, Nimbus Communication, shared his thoughts about the key drivers of the media business, the changes that have taken place over the last three years and the effect of the changes in the regulatory framework on the industry.

    EQM: Three to four year's back the media sector was in the doldrums. Those companies, which were supposed to be bankrupt, are now the high flyers. What do you think has changed over this period, the business or the valuations?

    Mr. Thawani: I am not sure that I agree the bankrupt companies are the same companies that are now the high flyers. There were four major collapses in the electronic media sector Home TV, BITV, Plus Channel and ABCL. They are the four most high profile collapses. I don't think these are the high flyers today. That part of the question I don't agree.

    Where I do agree with you is that there are lots of companies that are emerging and there are various figures being touted of around 30 to 50 issues from media companies going to the market. The point is, are there 30 to 50 key players. The answer is No there aren't. But if you go back to the old adage that while the company managements may become irresponsible and reckless in their efforts to raise capital, at the end of the day if the investor is willing to give his/her money who's to blame?

    There are pitfalls in this industry as there are in any other industry but because the media controls the media not too much perception about the pitfalls get highlighted.

    EQM: The FICCI study has estimated the size of the entertainment industry at Rs 650,000 m. Three years ago also we were in a multi-channel era with the industry poised for a big growth. The market doesn't seem to have changed…

    Mr. Thawani: No, the market has changed. There are several significant changes that have taken place. In the last one year the regulatory framework has become a very encouraging one. The monopoly of the state on uplinking from India was dismantled. The monopoly of the state on radio broadcasting has been dismantled. The monopoly of the state on Internet access has been dismantled.

    The monopoly of the state on Internet gateways has been dismantled. Now that's four monopolies freed in the four subsectors of the industry. Private sector investments are happening here. Along with that the motion picture and television content industry was given industry status. That has become more organised than it was a year ago. Bank finance is available, insurance is available. Last but not least the big one is expected, the Broadcasting Bill. That is going to be such an enormous catalyst of change for the broadcasting business that it is difficult to forecast what might happen. But three years back the most significant thing that was not there was the possibility of converging your product across platforms. And convergence, while in India is still a valuation game, in the US we can see it becoming a reality from a consumer's point of view.

    As soon as products roll out which truly bring the benefits of convergence whether its streaming video over broadband on the Internet, or interactive moving content or moving content-cum data-cum e-comm applications I think things are going to be very different and I think smart companies are building in that direction. The dumb ones continue to say we are producers and I can't understand why producers need Rs 500-600 m.

    EQM: How would you describe your own core business?

    Mr. Thawani: Our core business has hitherto been content. We produce programming in eleven or twelve genres across twelve different networks. Currently we have 70 hours of original programming per month, which is being aired on various networks for most of which we continue to hold library rights ourselves. I don't think there is any content company that comes close to us in the number of genres we offer the volume of programming we generate and the number of customers we have. We also operate in seven different languages. We are ramping up our content at the rate of 10 additional hours per month. It may sound very small but to give you an example, at 100 hours per month, which we will hit by June, we would be the world's largest television company by content in volumes. In terms of value there is no comparison between the European, American and Indian markets since those values are hundred times bigger than ours. By sheer volumes currently, the largest company in the world in the production/distribution is King World, which has 75 hours of original programming per month.

    Obviously, the next focus is to improve the realisations. As a content company we have extended our skills now to the Internet. We've launched Nirvanazone.com, which will serve as a hub for our satellite portals, all of which will go up by June this year. Besides, we've also started producing motion pictures.

    Really the big move for us is that we are moving from content to delivery. Showbiz TV is our first launch, which will be in the second quarter of this fiscal. And will be followed two quarters later by women's focus channel the branding for which is not yet finalised. Showbiz TV is the brand and the trademark channel for our first offering. We've also secured letters of intent for the three biggest markets for the FM radio stations, Mumbai, Delhi, Chennai and we've got an option to pick up a stake in Bangalore, Hyderabad, and Pune in somebody else's stations. So we will control a group of stations which will work very closely with the Nirvanazone culture. So our content convergence largely is in the television, radio, Internet sectors. Our content on other platforms will however, not be in the convergence model. Showbiz TV will infact be beaten in its launch by our own portal with a focus on showbiz.

    EQM: Your company has graduated from being an air time seller to a content provider to a broadcaster. What is the key driver in each of these three businesses?

    Mr. Thawani: The key driver in the air time sales business is management, management and management. To articulate that in a more detailed manner, it's an analysis driven business. The ability to choose the right programmes, the channels, the time slots, and the deal structure determine the success in the air time sales business.

    In content the single biggest asset is the creative element. Then there comes the ability to access the talent. Brand equity is very important for these two. The third is to be able to market the product either through the air time route or through the syndication and distribution or licensing route where again brand equity and a successful track record plays an important role. (Syndication is the American business model where a content provider runs his content across different networks either by dubbing it and reselling it or by altering the format. It is the ability to create multiple windows for the same product.) In these three areas the entry barriers are tremendously high because acceptance of a product from a new producer is very low. The fourth factor is the cost management side. Costs depend how much on time can you deliver your product and how effective is your budgeting and reporting system. Most companies that have collapsed in this sector have done so either been due to underachieving on the revenue side like Plus Channel and ABCL and at the same time going overboard on the cost side. Both are the dangers. It sounds easy when you have one programme but when you do 100 hours of programming a month across four different production centres it requires an automated system. It took us two and a half years for building those systems.

    Broadcasting is really a combination of content aggregation, distribution and airtime skills. In the value chain of the television industry, there is a content company at the bottom; above content is the broadcaster. The content companies makes lot of money but the big money is always made by a broadcaster who aggregates content from various services both your own and from outside, brands it, creates a niche for himself and then ensures successful distribution on the ground and successful advertising and subscription sales. The next stage is to aggregate broadcast services and becoming a platform owner which is what News Corp (Star TV network) is and what Zee aims to be.

    We don't have a desire to be a platform owner. We are moving up the value chain from being a content provider to being a broadcaster. We will hitch our bandwagon to one of these platform owners. Our channels don't compete with any of these channels. Our Showbiz channel will be showing the news, features, personalities, and celebrities in the space of movies, television, fashion, cricket etc. We are to the television world what Stardust or Cine Blitz plus Cricket Week are to the print medium.

    EQM: Abroad almost 70% of the channel's revenue accrues from subscriber fees and only 30% from advertisements. In India the problem is that cable operators don't seem to pay the channel operators their dues despite collecting almost Rs 1200 from each subscriber annually. (This works out to Rs 20 bn for 20 m cable homes around the country.) How will you tackle this problem?

    Mr. Thawani: Two things are beginning to change, one is the under reporting of number of subscribers by cable operators has diminished. We have deep admiration for Modi Entertainment Television (the distributors for ESPN). They really founded the subscription TV model. They have now a declaration of 8 million homes from cable operators, the truth may be 14-15 million homes but to get it to 8 million is pretty good.

    The two things that are beginning to change from here onwards is that there is definitely DTH (Direct to Home) on the horizon. How close is that horizon we don't know. But we want to be the first of the blocks to try and grab the DTH opportunities.

    Second, the Broadcast bill is definitely very close on the horizon. Once the broadcast bill is in, then the regulatory framework will allow the installation the set top boxes, which means that your cable operator stops being a gatekeeper. Then the user addressability allows you to determine how many customers are buying your product. How much are they paying you. The broadcaster is doing the deal directly; the cable operator is a mere distributor who gets a commission out of that.

    I spoke about this at the FICCI conference that an industry that requires by the end of this year around Rs 40 bn to sustain itself, the revenue model currently yields Rs 23.60 bn, with Rs 20 bn coming from advertisement, the balance from subscription TV. The cable industry has got Rs 25 bn to Rs 30 bn but only Rs 3.60 bn comes into the hands of the channel owners. That share is beginning to change.

    Definitely, in a year's time we will find set top boxes in. Now theoretically, prices will move up. Practically, we don't know how much. But we've seen this time and time again that once set top boxes are in the broadcaster ramps up prices. And he deserves it. This is the only country in the world where a customer gets 80-90 channels and pays around Rs 150 as charges i.e. Rs 1.50 per channel. Zee in the UK retails at £ 11.99 per month i.e. Rs 900 per month. Obviously, the Rs 1.50 per channel per month will become Rs 10. What will the consumer do? Today he gets all 80-90 channels whether he wants them or not. Tomorrow he may opt for only 20 channels. So suddenly the pie becomes Rs 10 per channel.

    We are aiming at Rs 4, which is underwritten by Modi in their distribution contract with us. At three million homes. That's when we start making profits. We are forecasting a 50:50 split between advertising and subscription.



    Equitymaster requests your view! Post a comment on ""We are to the television world what Stardust or Cine Blitz or Cricket Week are to the print medium."". Click here!


    More Views on News

    Zee Ent: GST Short term Negative but Long term Positive (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The management believes that GST will aid the advertising spends in the long-run.

    GTPL Hathway Ltd. (IPO)

    Jun 21, 2017

    Should one subscribe to the IPO of GTPL Hathway Ltd?

    S Chand and Company Ltd. (IPO)

    Apr 26, 2017

    Should you subscribe to the IPO of S Chand and Company Limited?

    Zee Ent: Advertising drives revenues (Quarterly Results Update - Detailed)

    Aug 1, 2016

    Zee Entertainment has announced its results for the first quarter of the financial year 2016-17 (1QFY17). The company has reported 18.5% YoY growth in sales and a 13.7% YoY growth in profit after tax.

    Zee Ent: Operating Margins Continue Expansion (Quarterly Results Update - Detailed)

    Jun 9, 2016

    Zee Entertainment has announced its results for the fourth quarter of the financial year 2015-16 (4QFY16). The company has reported 14% YoY growth in sales and a 13% YoY growth in profit after tax.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


    • Track your investment in ZEE ENTERTAINMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts