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Balaji Telefilms: Porter's analysis - Views on News from Equitymaster
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  • Sep 21, 2007

    Balaji Telefilms: Porter's analysis

    In the previous article we had provided an overview of the business model of Balaji Telefilms. In this article we will analyse the company by applying the Michael Porter's model.

    Barriers to entry and exit: The barriers to entry in the television content genre are very low. Many production houses have mushroomed of late for producing Hindi serials. Also, the business is not very capital intensive and most of the production houses are producing only one to two serials at a time. The barriers to exit are also very low since there is hardly any investment in specialized equipment and the artists and technicians are hired on a contract basis.

    Bargaining power of buyers: The buyers are the broadcasters namely Star TV, Zee, Sony and Sun TV. Balaji Telefilms is the leader in the Hindi television entertainment content space. Balaji's serials accounted for 79% of the aggregate TRP of the weekday prime time shows featuring in the top 100 Hindi cable and satellite shows in FY07. Its programs accounted for more than 40 of the top 100 programmes in the Hindi mass entertainment. The telecast of some of the most popular mass entertainment programmes fetched Star huge advertisement revenues. Going forward, the Hindi general entertainment space will get more competitive with the entry of NDTV, UTV and INX Media. Thus, the broadcasters would try to maintain or increase their market share by improving their quality of content and the broadcasters expenditure on content would increase. Thus, we expect that the bargaining power of the broadcasters (buyers) would reduce leading to an increase in Balaji's realisations per hour (as seen in the past few quarters).

    Star TV holds a 26% stake in Balaji and is Balaji's biggest customer. It has also entered into a contract with Balaji under which Star has the right of first refusal on the content produced by Balaji and Balaji cannot provide content to Star's competitors during the time when Balaji's content is run on Star Plus. This essentially means that as Balaji's serials are telecast on most of the prime time slots of Star Plus, its serials cannot be telecast on the same prime time slots of the other channels. This hampers the revenue growth prospects of Balaji. Balaji would have to capture other afternoon and evening slots on rival channels in order to increase its programming hours. Though Star is paying more to Balaji over time its bargaining power with it is limited due to this contract. Balaji's bargaining power with other channels also reduces since it cannot provide content to them during the time when its content is run on Star Plus.

    Bargaining power of suppliers: The suppliers in this case are the actors. Balaji Telefilms, being the largest entertainment software provider, evinces a lot of interest from aspiring actors who are eager to work with it. Thus the bargaining power of the aspiring actors is very low. However, once these aspirants become household names their demands increase resulting in higher salary costs to the company. The popularity of the serial hinges on the performance and presence of these popular actors to some extent. However, in some cases the scripts are so powerful that the exit of the central character may not lead to a fall in the TRP's of the program. Eg: The recent exit of the very popular actor Smriti Irani (potraying the character 'Tulsi') in 'Kyunki Saas Bhi Kabhi Bahu Thi' and her consequent replacement has not lead to a decline in the TRP's of the programme.

    Rivalry between the existing players: The rivalry between the existing production houses is high. The rival producers poach each other's actors, creative personnel, technicians. However, Balaji is easily able to attract talent due to its leadership position. All the production houses whether they are producing soaps, comedy shows or reality shows try to get their serials telecast on the prime time slots of leading broadcasters. The prime time slot is from 8 pm to 11 pm (when television viewership is at its peak) and the broadcasters are able to garner higher advertisement revenues during this time frame. This enables the broadcasters to provide the content producers higher remuneration for the content telecast on prime time.

    Threat of Substitutes: Balaji's core competence is in mass programming and family-centric entertainment. Balaji has produced some comedy shows in the past but it concentrates mainly on soap operas. However, if other genres of programmes such as reality shows, music contests, sports, movies gain more viewership and revenues, then it could adversely affect Balaji's fortunes.



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