Senior media honchos speak with BestMediaInfo.com on STAR’s aggressive expansion plans and what this means for its immediate competitors
Sarmistha Neogy | Mumbai | February 18, 2015
Star India recently entered the Telugu TV market with the acquisition of Hyderabad-based channel Maa TV. The network already has good presence in other important regional belts, and adding Telugu, which is the second largest regional market in terms of market potential and viewership, will add to its existing strength. Also, on February 11, the network was awarded the global Internet and mobile rights for the Indian Premier League (through Novi Digital Entertainment) for Rs 302.2 crore for a three-year period till 2017. It has also recently launched its new app, Hotstar, which offers over 35,000 hours of content in seven languages across movies, live sports and TV shows. BestMediaInfo.com spoke to senior media honchos to understand Star’s aggressive expansion plans and what this means for its immediate competitors such as Zee, Viacom 18 and Sony.
Is Star on the right track?
Commenting on the strategy, Ashish Bhasin, Chairman & CEO, South Asia, Dentsu Aegis Network, said, “The importance of regional media is increasing, and it will continue to rise as we see more growth in Tier II and Tier III areas. Therefore, Star’s acquisition of Maa TV is a strategic step. Going forward, in these areas the distribution will go deeper and with the introduction of the new BARC system, the measurement of viewership will become clearer. Also, one must understand that in regional belts, there is strong presence of national and regional channels. So, here competition is not only from the established players like Zee, Sony and Viacom, but also from the other regional channels.”
Speaking of the competition angle, Anita Nayyar, CEO, Havas Media Group, India & South Asia, highlighted that Zee had set its own brand with Zee Telugu, Kannada, Tamil, Bangla, Marathi, etc. Viacom with ETV has its presence in the regional markets. Sony has Sony Aath, the Bangla entertainment channel, for its regional presence. Therefore, Zee and Viacom have some good properties and Sony, too, has the potential to build its content line-up.
Akshay Vyas, Senior Investment Director, Maxus Global, noted, “The key broadcasters have always wanted to leverage the growth of regional markets and consolidate position. STAR, as the leader, has widened the viewership and revenue gap with acquisitions of regional networks and, therefore, competitors will have to struggle very hard to reduce this gap. STAR also has the advantage of scale across divisions and also gets an edge in distribution. What also needs to be understood here is that STAR is well placed for convergence, which has been spoken for a long time, while the others are not so well prepared, namely, Sony.”
Sundeep Nagpal, Founder & Director, Stratagem Media, an independent media specialist firm that specialises in media analytics, commented, “We have already seen and known that in recent years it has been the endeavour of every network to become ‘truly national’ by foraying into regional markets. And this acquisition for the Star TV network strengthens their foothold in the South and particularly in Andhra, where their presence was hardly felt, relatively, through its Hindi and English channels.”
According to a quick preliminary analysis done by Stratagem Media, Star TV’s gain in viewership (even at a national level) can be estimated to be more than 10 per cent. Also, among the universe of five national / regional satellite networks (of Star, Zee, Viacom18, Sony and Sun), the relative share of Star TV is estimated to increase from 30 per cent to 32 per cent for this universe. And if Sun is not included in this, then the relative share of the Star Network among the ‘National’ networks increases from 38 per cent to 41 per cent. If the filter of GEC is applied to this universe (of five networks, including Sun), then after this acquisition, the relative share of the Star Network GECs increases from 24 per cent to 28 per cent.
Elaborating on this, Sudha Natrajan, Founder-Director, TMC, said, “The Andhra regional market is the second largest regional market in the country, both in terms of share of viewership and media spends. Zee and Star Network are the only two networks in the country that have presence across genres and states. Sony and Viacom are not in the same league as Zee and Star in terms of footprint and number of channels. So, as far as Sony and Viacom 18 are concerned, it does not affect their life in the short and medium term, but in the long run, this consolidation will hurt them in terms of the overall share of revenue. However, this kind of market expansion is not everybody’s cup of tea as it is investment heavy because of acquisition costs. Star is a leader by far in terms of viewership; however, its share of spends ratio is lower than other networks. This is because of its absence in key regional geographies such as Andhra.”
Will Star increase prices and is the market ready?
Star’s growth gives it massive network strength and marketing muscle. Which means it can also move towards making more network deals for its bigger properties. On whether it will increase prices and if the market is ready to pay a higher rate, Vyas commented, “In my opinion, no rate is high or low, it is all about the right price. Rate justified with efficiency, both relative and absolute will be accepted by the market. STAR is expanding networks, building HD and digital platform, which enable them to create, acquire and market big properties which are game changers. Simply put, you sometimes need to change the playground to change the game.”
Nayyar, on the other hand, is of the opinion that the market will not pay unless there is extra viewership or presence. “If more properties are in the package, then there is a cost where the price increase is justified. But it depends on how the properties are bundled and also what mix the advertiser is ready to take to meet its objective. The channel will have to be flexible to the advertiser. Properties like the World Cup attract big ticket advertisers, who might not necessarily be interested in the regional markets; so, there will be no fixed rules and it is a question of demand and supply,” she highlighted.
The pricing conundrum
Nagpal is of the view that increasing rates is the most obvious implication, but it would be incorrect to presume that prices would also increase in proportion to eyeballs. “There are many technical aspects to this, but apart from these, it must be pointed out that even after the acquisition, the Star network would be far from being a monopoly. The idea of bringing down prices for non-marquee properties is strategically a prudent idea and it will continue to make sense for the marketers as long as it delivers value,” he added.
Echoing similar thoughts, Natrajan elaborated, “All the four important networks have enough financial muscle to manage big ticket properties across platforms and regions. If we were to map the share of viewership of these networks, you can see that there is no clear monopoly which exists, so the conclusion of higher prices being floated for big properties is a little premature right now. The TV market has not reached that stage of monopoly yet. Besides, Star gets 15 per cent of revenue for 24 per cent of viewership, whereas a Viacom has 12 per cent share of revenue for 8 per cent share of viewership. So, pricing is not a very linear thing. Colors, as part of Viacom, has been consistently increasing rates on big properties such as ‘Bigg Boss’ and ‘Khatron Ke Khiladi’. So, Star’s move to acquire Maa TV does not immediately mean higher rates for the channel itself. General entertainment channels across the country have been looking to hiking rates for over a couple of years now across large advertisers. Right now, it is status quo. Having said that, yes, if these marquee properties were to be dubbed or shown in a new market for Star, like Andhra, then it could mean more monetisation of these high cost properties.”
Natrajan further said, “The new Hotstar app will increase the network’s reach by at least 6-7 million; Star has also seen good traction for its regional sports feed, ISL has performed very well in the regional markets. Regional feeds of ICC World Cup are also expected to perform well. Star’s multi-pronged eyeball and content aggregation strategy has begun to pay them back in both the short and medium term, with them being in a better position to amortise content acquisition and production costs of big ticket properties. As far as pricing goes, Star will follow the same strategy for both marquee and non-marquee properties. Overall, this strategy of Star’s is good for the top 10-15 advertisers in the country as they can consolidate their investments with the network and get long term value and ROI. Fragmentation of media consumption is the biggest problem today; any media company with an aggregated viewership and readership base will only be welcomed and supported. This way it is win-win for all stakeholders.”