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Television media companies- Rivals or partners? - Views on News from Equitymaster
 
 
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  • Sep 9, 2011

    Television media companies- Rivals or partners?

    Once a new business finds a strong footing, several players who find the opportunity lucrative get into it. With that the scene gets competitive. More and more players come into the picture and consolidation starts to take place. What this means is that not all players survive in the long run. It is about the survival of the fittest. The usual trend is that one company overtakes another.

    However, in the Indian television media space things seem to be working out differently. Instead of competing head on rivals have decided to join hands for a particular part of operations and work for mutual benefit. The latest deal between the two media giants Zee and Star seems to reflect this appropriately. Earlier Sun Network too signed such a deal with Network 18 group.

    The technicalities of the deal

    Zee Entertainment and Star TV recently got into a 50:50 distribution joint venture (JV) with an agreement to jointly distribute all their channels. The joint venture is called Media Pro Enterprises. The JV however is actually between Star Den Media Services (50:50 JV of Star and Den Networks) and Zee Turner (74:26 JV of Zee and Turner International). Although such a deal happened earlier as well between Sun Network and Network 18 , the Zee-Star deal will be game changer on account of both TV media giants being the participants to it.

    Life post the deal

    • For the media industry

      Media industry is presently plagued by issues of piracy, under reporting of subscriptions by Multi System Operators (MSOs). The JV is expected to curb these issues as well as aid in the process of digitization. Digitization through Direct to Home (DTH), Internet Protocol TV (IPTV) or digital cable would all provide the same desired result. We are all aware that the complete digitization of the television content would still take some time because of infrastructure issues. In such a scenario, any step that aids timely and efficient implementation of digitization is welcome by the industry at large and all the players. Also, with an alliance these companies will be able to negotiate better ad rates thereby impacting the advertising rates in the entire industry.

    • For Zee and Star

      Both the media companies will distribute their offerings jointly. However, on the content front they would still be competing with each other. This would ensure that viewers continue to watch the best of the content being produced by them. With this alliance, Star and Zee will both be able to negotiate towards better advertising rates. This is expected to help both the companies earn better margins. Although, all this might not happen immediately, the companies will surely reap the mutual benefits in times to come.

    Conclusion

    The television media space has seen fierce competition in the last few years. Earlier, most of the popular shows especially the daily soaps either belonged to Zee or Star. With the coming of Sony, things changed to an extent. But, Colors redefined the way television is viewed. With this new alliance, Zee-Star aim to create a tie-up that can command advertising rates. The coming together of two behemoths will ensure that they get bargaining power to deal with cable operators, advertisers and other parties concerned. This in effect will help the industry too.

     

     

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