UTV brought the concept of daily soaps to Indian television with
Shanti. It launched the first Indian television channel aimed at children's entertainment, Hungama, and executed a successful exit by selling it to Walt Disney. The company also gave the motion picture industry in India a corporate face, producing blockbusters like
Rang De Basanti.
Over the years, UTV has added businesses to become an integrated media house. UTV's
Ronnie Screwvala shares his vision in this interview describing UTV's itinerary to success. The stock trades at about 37 times its trailing twelve months earnings.
What would be the key growth engines for UTV in the coming years?We have emerged into a diversified media model, from being a content provider for television broadcasters to an integrated model, with four verticals.
The four verticals are: television content production, film production and distribution, broadcasting and new media -- animation and games. We see three of these four verticals leading our growth in the next five years, namely, movies, new media and broadcasting.
Television content is always going to be our main business. It is safe and mature and we would nurture it as we have grown up with it. The other three are at the top end of the value chain with direct contact with our audience.
How does each of the four verticals contribute to the revenues at present?We have entered the new media and broadcasting segments recently. Today, a large part of our revenues come only from the movie production and distribution as well as television content production business -- revenues from big screen versus small screen.
The contribution is 45 per cent from the small screen and 55 per cent from the big screen. Two to three years down the line, as all four verticals mature, we expect all four verticals to have an equitable contribution -- in the range of 20 to 35 per cent each.
What is the time frame required for broadcasting and new media to mature?We expect the broadcasting and new media verticals to mature in the next two to three quarters, from which we can reap benefits for the following 16 to 24 quarters.
In broadcasting, once we cross the minimum threshold, the margins explode exponentially. In new media and gaming, once we have covered our set-up and fixed costs, the realisations are enormous. We've been in the film production and distribution business in only the last four years, while the film industry has been there for the last 110 years.
In that context, we have taken time to establish ourselves as a brand. But what we have taken four years to do, others have taken 40 years. This pace has come at some cost to our margins. But we have matured that industry vertical, found our niche and established a brand entity. We have a select group of directors we work with and invested heavily in a worldwide distribution model: all of this has already been expensed.
We, therefore, see our margins from the film business growing substantially in the coming years. Now it is the time for us to monetise that, with the right kind of content and the right kind of a revenue model.
Could you put a number to the margins from different verticals?From movies, our base margin starts from 20 per cent without any ceiling to the earnings, as a film can earn even 100 per cent margins and more. Television content production on the other hand is a stable margin business, ranging between 12 and 15 per cent.
In new media, because of our composition of our property and studios, the margins tend to be exponential. The broadcasting business has yet to go through its own gestation period, but when it arrives, it is again a high margin business. This gestation period is about 8 to 10
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