It is a domestic war with international ramifications. As every major broadcaster from India seeks growth in the overseas market, a price-cutting slugfest promises to leave most of them bloodied.
From about $5-7, the average that an Indian channel takes home is already down to $2-5 over the past two years. This is taking its toll on business plans that had built in pay revenues from the lucrative markets abroad, especially the US, UK and West Asia.
The total annual revenue that Indian broadcasters make in the foreign market is estimated at just under Rs 1,000 crore by Media Partners Asia (MPA). Zee got in about half of that or Rs 500 crore from 167 markets. It has been joined by several others in recent years.
Colors launched in the US and UK in January this year. It is currently in 30 countries and spreading fast. NDTV started venturing out in 2004, within a year of its India launch and is now in 70 countries. Sun TV, Sony and STAR have been around from earlier. Their overseas revenues would range from $16 million for Sun to $40-odd million for STAR, according to MPA. These would include syndication, channel sales and content sales.
Competition
The trouble, now, is that there are too many of them, in the same geographies and genres. “In many cases, one ethnic channel is being substituted for another the moment a competitor comes in,” says Rahul Sood, head, affiliate sales, business development and network distribution, NDTV.
“Most of these (low price) deals are for 5-10 years, so they (new players) are signing up on lower revenues for a long time,” says Bharat Ranga, COO, international business, Zee Entertainment Enterprises.
His concern is natural. International markets brought in 24 per cent of Zee’s Rs 2,200-crore top line in 2009-10. More important, they were why it could withstand the pummelling that the slowdown and hyper-competition brought upon advertising revenues over the past two years.
Most other broadcasters want to ‘do a Zee’, to bring a little more stability to the revenue pie, not to mention the money. Sood reckons 65-70 per cent of revenues from abroad usually go straight to the bottom line. That is because there is no major cost except distribution. This is usually a revenue share of 50:50 with the direct-to-home (DTH) or cable operator distributing the channel. The other major cost, content, is usually recovered in the first airing in India.
Currently, the average contribution of overseas revenues to top line for other broadcasters ranges between three and 10 per cent. To take it to even 10-15 per cent looks difficult, given the undercutting, says one. Much may depend on how well they mine the potential.
Market shape
There are about 30 million people of Indian origin living abroad. However, the total addressable market for local television content from India is closer to 1.5 billion people. These would include, say, Mauritians who watch a lot of Hindi television. Or, people in Saudi Arabia, which doesn’t have a local media industry. These are markets with cultural affinity to Indian content. The actual revenue potential could be anything in multiples of a hundred million, given that the average per capita income and leisure spending is way above the averages in India.
For instance, the total international revenue (pay and advertising) potential for a front-runner Hindi general entertainment channel (GEC) is in the range of $40-50 million (Rs 175-225 crore) reckons Gaurav Gandhi, head, international business, Viacom18.
“The potential is very significant. However, given the challenges in the market, it could take us anywhere between two and three years to get close to the potential,” he says.
Area issues
These challenges are the one any non-local channel faces because of the idiosyncrasies of market ignorance or lack of bandwidth. For instance the BskyB DTH operation in the UK offers a Viewasia pack with eight channels, which include Sony and Colors. If Imagine comes in and offers a better rate, either Colors or Sony could be replaced. Especially because the UK is a very price-sensitive market. In the US, a similar thing would happen, “because some white guy sitting in Denver has no idea how Colors is different from Imagine or STAR,” says one broadcaster.
That is why Zee’s bid for mainstream ad revenues in the US will be interesting to watch. Earlier this year, it managed what for most ‘ethnic’ channels is impossibility in the US – a place on the Nielsen sample that rates TV programmes in the US. That makes it, arguably, the first South Asian network to be rated by Nielsen in the US.
