Gupta fired the katta in the air (for the first and only time) and managed to break the fight. While that day, in end February of 1991, is etched in his memory for the wrong reasons, Gupta swears by his learnings in Etah. It made him live the life of his consumers and soak it in. Today, Gupta, who has just been elevated as managing director of media giant Star India, makes sure that his team members spend a lot of time in the homes of their audience. A Star India team is scheduled to fan out a across Uttar Pradesh next month. Gupta recalls how, after joining Star in 2009, he did his own bit of such touring.
In Surat, he met one Mrs Shah who helped her husband in his diamond business. She was well known in her locality. But he realised that she wanted to be more than Mrs Shah; she wanted to be known as Minal Shah, a jewellery designer. Gupta explains how aspirations for such transformations are part of his target audience’s lives, and have inspired Star to build their soaps around women who come from humble beginnings and want to make it big time. A transformation along similar lines was celebrated in the recently concluded Star soap Diya Aur Baati Hum , about a girl, married young, who becomes an IPS officer. Transformation is also the reigning buzzword in Star India.
Chairman on his feet
It starts in the corner office. On the 37th floor of Urmi Estate in Mumbai’s Lower Parel commercial district, Gupta’s boss and Star India chief Uday Shankar works standing at his workstation, which is a raised table without a chair around. The room, with glass walls on two sides, looking over central Mumbai’s concrete jungle, has three separate seating areas and a large television screen. Shankar, who has just been elevated as chairman and CEO of the company has his own storyline for transformation. He tells ET Magazine: “The company was started and designed as a small operation.
It was not created to handle the growth we are seeing now.” He started off last week by carving up the company into five business verticals and elevating the business heads as CEOs of those businesses. There is a lot to keep Shankar on his feet — mainly the financial goals set by his boss James Murdoch, CEO of Star India’s parent 21st century Fox. Shankar has to take the company from a negative operating profit position in 2014-15 to deliver half a billion dollars of profit by 2018 and then double it by 2020. Shankar has to make good on a Rs 20,000 crore bet that sports will be profitable, and make money out of a digital platform, Hotstar, that Star India has pioneered.
The good news
Growth is a great place to begin with. In the last two years, Star India has doubled its turnover. From Rs 5,204 crore in 2013-14, it went up to Rs 7,164 crore in 2014-15 and now is at Rs 10,800 crore for 2015-16 (around 65 per cent of Star’s revenues come from advertising). Star India has been valued at $14.3 billion (a little over Rs 91,000 crore) by Edelweiss in January 2016, putting it way ahead of its rival Zee Entertainment (See How it Compares With Listed Entertainment Companies ).
With 51 channels in eight languages, Star’s overall network share among Indian broadcasters is 22-23 per cent, making it the king of the hill. Star has a deep presence in general entertainment channels (GECs) and is among the top three in Hindi, Bengali, Malayalam, Tamil, Telugu, Kannada and Marathi. It leads in sports, with Star Sports owning the rights to BCCI and ICC events up to 2018 and 2023, respectively. It has the rights to Wimbledon and two European football leagues and also coowns Indian leagues in kabaddi, hockey and football.
The bad news
While that is the good news, here is the bad. Year 2014-15 produced Star India’s biggest ever net loss — Rs 1,273.88 crore as a standalone entity and Rs 1,467.35 crore when consolidated with its subsidiaries. The sports model still revolves around cricket, which may be high on visibility but not on profits, not yet. Last August, Star India paid $420 million to get out of a contract with the BCCI to broadcast the Champions League T20.
This will hurt the profit and loss account for 201516. In other words, the company will again be in the red. Hotstar, the digital platform, is still hungry for investments. Star is facing a tough challenge in Hindi GEC space, with Colors from Viacom’s stable often outdoing it in weekly ratings from BARC. In late 2015, its major gambit, Amitabh Bachchan hosted Aaj Ki Raat Hai Zindagi gathered low ratings and was later taken off air.
The game plan
Shankar points out that Star India is in a unique position as it is unlisted and has a parent that is ready to pump in cash whenever needed — as it did for Star India’s acquisition of Telugu broadcaster Maa TV in February 2015. Also, the company barely has any loans. The acquisitions of Vijay Television and Asianet provided Star with a strong footing in southern India, and Fox was happy to invest through separate subsidiaries, keeping it out of Star India’s balance sheet. CFO Sanjay Jain points out that the two companies, Vijay Television and Asianet, are profitable (a combined net profit of around Rs 450 crore) but are not consolidated with Star India.
For any plan to succeed, Star’s sports business must turn around by 2018. Shankar admits that the sports broadcasting model in India is broke and that broadcasting top cricket events is not profitable. He sees a turnaround of the sports business by pushing sports programming into regional channels and markets. To realise this vision, Star India has invested in a sports studio in Mumbai in the same building that houses its headquarters.
The recent World T20 had multiple commentary teams in different languages, creating regional language feeds. In search of profitability, Star also wants a flotilla around cricket and to look beyond urban audiences. That explains investments in different sports leagues like football, hockey and kabaddi.
To garner a larger viewership, kabaddi was also put on Star Gold. Star India has eight sports channels, with a clear focus on separating the audience that wants English content from the one that Shankar is seeking out. “The focus is to make sports available to a larger number of people, in local languages, Hindi as well as others,” says Shankar.
Is Star India’s bid to create new sports media properties sustainable? There are a few sceptics. Ronnie Screwvala, owner of U Mumbai kabaddi team, lauds Star for promoting kabaddi, but adds: “I have a mixed view, as media companies cannot use media expertise to build a sport, because then the DNA and the thinking will always be from the ratings, viewership /audience and advertising points of view. While there may be nothing wrong with any of that, just those can’t be the objectives because then we will not build a long-term sport but a long-term media property.”
Take football. Star India created the Indian Super League (ISL) in a joint venture with Mukesh Ambani’s Reliance. The assessment within Star itself is that running two national football leagues, the ISL and the I-League, is not viable in the long run.
The digital design
Star also has to turn around Hotstar, its digital platform that has seen 58 million app downloads in 14 months — a record of sorts. Hotstar can be accessed through an app or directly on the web through mobile web and website. Star expects 100 million unique views for the 2016 IPL season, for which it has the digital rights. Ad revenues on digital for this IPL are expected to touch 12-14 per cent (3 per cent in 2014). Also, more people today watch the English Premier League on Hotstar in India than they do on television. Star India is planning a paid version of Hotstar.
Streaming video is not cheap, and Star’s MD Gupta figures that anyone who is able to watch videos can also afford to pay more for premium content — for shows like Game of Thrones or even the English Premier League. Gupta says: “We expect an overall explosion of television-watching time in India and we want to grab the new advertising and subscription opportunities.” The search for audiences has taken wings, with the Star soap Iss Pyaar ko Kya Naam Doon? becoming a rage in Turkey.
The digital platform allows Star India to seek subscribers outside India, wherever the diaspora is spread out. As a relief to the company, the film business has seen two successes in 2016, with both Neerja and Kapoor & Sons promising good returns. Shankar says Star India is changing gears in films.
The profit and loss statement of Star India for 2014-15 shows that the company has upped its spending on programming and programme rights by more than Rs 2,500 crore to Rs 5,597 crore. So profitability will only come via greater revenues. Edelweiss analysts Abneesh Roy and Rajiv Berlia wrote in their report in January: “Star is best placed to charge premium ad rates due to a higher demand for prime-time slots. Zee TV’s ad rates are 0.75 x Star Plus rates, which shows the premium commanded by Star.”
Closer to the audience
Shankar, doubtless, sees an opportunity for closing the gap between expenses and revenues. The regional thrust is a push for profitability as these channels often enjoy a 30-40 per cent margin. The South is clearly a focus area. In the shakeup last week, managing director of Asianet, K Madhavan, has been elevated as managing director (South) for Star India. Madhavan says, “The South is a very profitable unit.
About 30 per cent of the television population resides in the four southern states and most of these markets are priority for advertisers.” Shankar wants to ride on the top line growth to a healthy bottom line and has decided to pump prime the content pipeline and create content ahead of its time. “I want our teams to work on at least 100 projects in Hindi and another 100 in other languages simultaneously,” he says. One of the initiative she has taken has been to diversify recruitment.
“We hire from the top management and engineering colleges but now we have started going to universities in places like Allahabad and Benaras,” he says, stressing on the need to avoid sameness in hiring and the key role that diversity plays in keeping alive a content-generating company like Star India. So to find Bengali writers, a Star team went to Santiniketan. To help bring in more creative people on board, Star has introduced flexible contracts that do not tie professionals to the company in the manner of a job. To retain women employees, the company introduced flexible maternity leave—six months of paid leave and then another six months of leave at half the pay, or full pay for half the working hours. In various ways, through programming and hiring and the changes initiated last week that drive the decision-making powers down the line, Star is trying to get closer to its audience, deep inside India, in tier-2 and tier-3 towns and villages. These are places like Etah where Gupta started his career. Television today ensures that in these towns, no one needs to wait for a film screening on special days like Holi. For Star, this audience can be key.