In order to acquire scale, a host of news and current affairs broadcasters are looking at starting even entertainment channels.
The entertainment bug seems to have bitten India's news and current affairs broadcasters. ABP Ltd, the owners of Star News, and TV18 (of CNBC and CNN-IBN fame) are getting into the filmed entertainment space.
While TV18 plans to enter the motion picture business, ABP acquired a stake in a Delhi-based film production company, Kaleidoscope Entertainment, a few months ago. News broadcast company NDTV will launch its entertainment channel in July, and Sri Adhikari Brothers is coming a full circle, having dabbled in entertainment through SAB TV, selling it off, launching Janmat in the current affairs genre in Hindi, it now plans to start a Marathi entertainment channel next month.
Entertainment, the logic goes, is these companies route to diversifying and acquiring scale. Says NDTV's director KVL Narayan Rao: "If you have to become a network, you need to get into other entertainment genres." Agrees ABP's managing director Pramath Sinha: "If you want to be a large player in this space, you need to straddle news and entertainment." TV18 CEO Haresh Chawla looks at it a bit differently, and says since the news business has acquired size, scale and momentum, the company is ready to diversify.
There are, of course, other reasons for diversifying as well, but these pale into insignificance when compared to the returns in the entertainment space -- news channels are allowed FDI levels of only up to 26 per cent versus 100 per cent in the entertainment space, and they also have other restrictions in terms of appointment of personnel, and so on. "Within the existing structure, big buck investment is not possible," is how NDTV's Rao puts it.
Programming costs in entertainment are quite high, but the content is monetised through repeat shows. News content turns stales the very next day. While returns through advertising revenue are healthy (news channels have a 7 per cent share of all TV viewership, but a 12 per cent share of all ad spend on TV), they are miniscule compared to what the entertainment channels earn. For a 10 second spot, an advertiser pays between Rs 5,000 and Rs 6,000 on prime time news, but this jumps up to around Rs 60,000 on a general entertainment channel.
Says ABP's Sinha: "News is a limited Rs 1,000-crore (Rs 10 billion) pie, entertainment is Rs 10,000 crore (Rs 100 billion)." Dentsu India chairman Sandeep Goyal adds: "Mass audience deliveries come from general entertainment. Hindi general entertainment has a channel share of 63 per cent compared to Hindi films at 24 per cent and Hindi news at 12 per cent ... And in today's money markets, market valuations get better with larger audiences in the net."
To launch its entertainment channel, NDTV has set up a 100 per cent subsidiary NDTV Networks "that is on a fast route to an IPO", says Rao. The company, that will go public and list on the AIM stock exchange in London, will raise money for the entertainment channel to be launched in collaboration with Karan Johar's company.
Rao feels NDTV has the capability to run a successful entertainment channel based on its experience in entertainment programming. "We've done shows like Chhupa Rustom, Jeena Isi Ka Naam Hai and Ji Mantriji, besides thousands of hours of weekend programming for our news channels," says Rao. His vision for the next five years: get into triple play of TV, Net and mobile content and make NDTV a $500-million company.
TV18, meanwhile, is focusing on making and distributing films through Studio 18. Says Chawla: "Films may be a high-risk business but you de-risk it by adopting the portfolio approach. Besides the upsides of the business cannot be ignored. It is an IPR business. Films will fetch good returns from varied platform rights -- mobile, DTH, satellite, video-on-demand and much else. Don't forget that the multiplex ticket prices are also rising."
ABP cites numbers to back its point about the critical importance of entertainment. A PricewaterhouseCoopers' report says that filmed entertainment industry was Rs 68 billion in 2005 and is projected to grow to Rs 153 billion by 2010. To be a part of this growth, ABP bought a stake in film production company Kaleidoscope Entertainment. "It is making films and creating high quality video content for us to distribute via TV, Net and mobile," explains Sinha, adding that the company is tapping the regional entertainment content market as well. Will ABP launch an entertainment channel? "Not till I have a surplus of TV content which others can't absorb," says Sinha.
Sceptics, however, say that entertainment is not an easy business to crack. Says Starcom's Ravi Kiran: "The entertainment market is cluttered. What will an NDTV do which, say, a Sahara One has not been able to crack in the last five years? A new entertainment channel can succeed if it has a distinct proposition for its viewer."
Probably, that's the reason why a news broadcaster like TV Today continues to focus on news. Says TV Today's executive director G Krishnan: "We will continue exploring profitable niché spaces to grow and diversify. As of now, our focus is on news, and we would prefer to grow vertically in the area before looking at growing horizontally."
Indeed, even those looking at an entertainment play say they are not abandoning news. "You will see many more local and regional news channels come up," says TV18's Chawla. Adds ad agency Percept Holdings' joint MD Shailendra Singh: "News is adding viewers. More women (45 per cent in 2005 compared to 40 per cent in 2002) are watching it. The SEC B segment, too, has added 4 per cent more news watchers between 2002 and 2005."
While growth in news may not be tapering off in a hurry, Percept's (the agency also makes feature films) Singh says: "With growth in GDP and people's spending power and with 58 per cent of the population under 20, the need for entertainment is increasing. Thus, the business of entertainment is the business to be in now and in the future."