Sun TV Network plans to invest Rs 150 crore into OTT content platform

Expects market slowdown to impact advertisement revenue

Sun TV Network is planning to invest around Rs 150 crore in over-the-top (OTT) content over the next 18 months and is likely to announce a tie-up with a telecom major. 

The company is expecting its advertisement revenue growth to be in the mid single digits during this year owing to a downturn in the industry.

The company has started making money from its OTT platform Sun NXT, which has been used as another platform to put on its regular content. However, this has started making revenues and no the company want to invest back into the platform for original content targeting the youth and that would be the plan for the next 18 months, said S L Narayanan, Group CFO of Sun TV Group.

"The strategy is to position something unique to the south Indian audience. We have great understanding on what would sell among the youth in this region," he told analysts in the company's earnings call. 

It could also address the South Indian diaspora who are living across the world, who want to know what is happening back in home. It would not be big-budget programmes or with high expense, but more of short format content that could be consumed on mobile or smaller screens on the go. Besides, the movies that the company purchasing satellite rights for, also have an agreement for the digital platform. The company has a budget of around Rs 300-325 crore for movie purchases during this year and this might go up if there are any big movies coming up in the second half of the year.

The company will also announce a deal with a large telecom service provider and another with a major OTT platform supported by a media house to offer Sun NXT as an add-on in their platform. Options are also there to live stream its channels with these service providers. 

It may be noted that the company has been in talks with Reliance Jio to offer its content in the telecom major's streaming app. It has already tied up with some of the other telecom service providers and has been receiving revenue from these models, added Narayanan. However, he refused to divulge more on how much is the revenue from the tie up with telecom companies.

The digital revenue is currently part of its subscription revenue. In March, this year, the company has said that Sun NXT app is seeing over 20,000 downloads per day and has been bringing in monthly subscription revenues of Rs 5 crore then, without infusing much into exclusive content, which means a revenue of Rs 60 crore from the platform a year. 

This, it said, is expected to go up during the financial year 2019-20 with the investments into the platform. The initiative has been headed by Kaviya Kalanithi Maran, daughter of Sun TV Group promoter Kalanithi Maran and also a board member in Sun TV Network, according to earlier reports. 

The company said that the outlook for advertising revenue is challenging at least for the rest of the calender year. There has been a deceleration in sectors including auto, real estate, and others which has a multiplier effect as it is pulling down the economy. The whole country is going through a bearish phase for a variety of reasons owing to the macro headwinds. The 12 automobile companies in Delhi has cut down the advertising spend significantly and similar is the sentiment in the FMCG and others. Advertisement revenue for the quarter ended June 30, 2019 was at Rs 368 crore.

"We shouldnt expect anything spectacular during this calander year at least," said Narayanan. If the monsoon turns better, things will pick up with better spending from rural economy. The outlook for advertising is challenging and the company is expecting mid-single digit growth this year, given the current situation in the market. Retail trade in Tamil Nadu has been very cautious, generally there is a big push of advertisement this month, Aadi.