Tuesday, June 9, 2009

Rising Star

Star TV's hoping to make it big in regional markets. Can it take on its well-entrenched rivals?

Even as it battles Colors on the national front, Star TV’s savouring some success in the states. For the last five weeks, Star Jalsha, launched in September last year, has been the most watched channel in West Bengal, overtaking Zee Bangla. According to TAM Peoplemeter, Star Jalsha’s been leading competitors by about 50 GRPs (gross rating points) on average over the past month or so. In Kerala, Asianet, in which Star holds the majority stake, is the market leader by a long shot. But the story in other regional markets hasn’t been quite as exciting — in the lucrative Tamil Nadu market, Star Vijay is way behind Sun TV with just a three per cent share (source TAM). In Karnataka, there’s a 400 GRP gap between Star’s Suvarna and the market leader Udaya, while Star Pravah, launched late last year in Maharashtra, hasn’t really taken off.

But Jagdish Kumar, president, South India, Star, isn’t disheartened. Kumar is convinced that advertising revenues from these markets could grow at around 15 per cent compounded annually in the next few years and that there’s money to be made. That could be true. After all, nearly 45 per cent — or 34 million — of India’s estimated 75 million cable and satellite households are reported to be in the south. And with purchasing power on the rise, marketers simply can’t afford to ignore these markets. Says Rajni Menon, business director, Zenith Optimedia, a media planning agency and part of the Publicis Group, “The south is a critical market for advertisers because the viewership levels are high. Also, states such as Tamil Nadu contribute heavily to volumes and have a high growth potential.”

Disparity and potential

It’s also true that the cost of advertising as measured by the CPRP (cost per rating point) is lower in regional markets than it is for the Hindi general entertainment channels (GECs). As Menon points out, even the cost of advertising on Sun TV, which is the market leader in three out of four states, would be about one-fifth of what it is for the Hindi GECs if you compare rates and half if you compare CPRPs.

Indeed, there is tremendous disparity even within the regional markets. Nitin Vaidya, COO, Zee Entertainment, reckons that, on average, a 10-second spot in Tamil Nadu would fetch a premium of about 40 per cent over Maharashtra and around 50 per cent over West Bengal. Taken together, advertising spends in the six main regional markets — the four southern states, Maharashtra and West Bengal — today account for an estimated Rs 1,700-2,000 crore.

Kumar believes that marketers are waking up to the potential of regional markets and that it will be possible to monetise the GRPs. That’s why Star continues to invest in the Rs 500-600 crore Tamil Nadu market, where its Star Vijay notches up GRPs of just 150 compared with 1,500 for Kalanidhi Maran’s Sun TV (source: TAM). So far, Star Vijay has been something of a niche channel — more urban-centric and targetted at a slightly younger audience. But Kumar realises that the strategy needs to be revisited. “There’s a limitation being a niche channel because it’s mainly fiction or soaps that audiences want and which bring in the GRPs,” he concedes, adding that while it wants to crack the serials piece, Star doesn’t also want to be seen as simply copying Sun.

Short on demand

Star is at a huge disadvantage because in a market in which audiences breathe films, it doesn’t have a film library, whereas Sun has the rights to some 7,000 plus films. Kumar defends the strategy. “Movies cost way too much so we’re not buying too many. Our average GRPs, which were around 150, are now closer to 200 possibly because we’re on air for a longer time and show more original content. And every cable operator has to show Vijay TV,” he says, adding that Star is buying some Kannada films.

Even Eenadu, a strong number two in its home market Andhra Pradesh after Sun’s Gemini, saw the potential of regional television years back but didn’t cash in because it didn’t have a big enough library.

Films in themselves may not be a paying proposition, but they help push up GRPs which can then influence advertisers. Says an industry insider, “Films today cost Rs 2-3 crore and can be broadcast just a few times, so there’s no way these can be monetised. But they do pull in GRPs and Andhra is one of the biggest movie markets in the country.”

Not surprisingly, Star is lying low in the Rs 300-350 crore Andhra market — after all Zee has been in the state since May 2005 and is barely among the top five. Star’s Sitara ranks almost at the bottom of the heap but Kumar believes it’s necessary to hang in. He may have a point. Zenith Optimedia’s Menon believes that advertising revenues in regional markets could grow faster than the Hindi GECs, though growth would not be disproportionately high. “After all, given the historical skew to Hindi-speaking markets and the population there, it’s hard for regional broadcasters to up their rack rates disproportionately, advertisers simply won’t bite. But they would look at markets like Andhra for products like shampoos and foods,” she points out.

Fast-growing markets

Markets like West Bengal and Maharashtra, estimated at between Rs 200-250 crore and Rs 250-300 crore respectively, may grow faster. And that’s where Star Jalsha’s conquest of the West Bengal market, with GRPs of 300 plus, is creditable because Zee Bangla has had a remarkable reign at the top.” We’ve upgraded the quality of content, tried to make the storylines more contemporary and of course made sure the channel is reached,” says JC Giri, executive vice-president, Star. Both Zee and Eenadu, a strong number two before Star arrived on the scene, are fighting back. fEenadu, which is watched widely across Bengal, is believed to be revamping content across regions and has an edge because it’s venture in the state is a profitable one. Zee’s Vaidya admits it became a little complacent but says it is making amends with a new comedy serial and a blockbuster show with cricketer Sourav Ganguly. Since it’s local fare that audiences want, Zee has built up a film library — as has Star which now has over a hundred Bengali films in its kitty.

Star will perhaps need to do the same in Maharashtra where Star Pravah, launched in November last year, ranks a lowly 15th (source TAM) behind Zee Talkies — Zee’s movie channel. The Maharashtra market is attracting a lot of advertising — revenues have grown four-fold from around Rs 70 crore way back in 2003 to around Rs 300 crore in 2008. But broadcasters need to focus on local content. In 2003, for instance, the channel share for all Marathi channels was less than 10 per cent compared with around 34 per cent for Hindi GECs. Last year, Zee Marathi alone commanded a 20 per cent share of the Maharashtra market with the share of Hindi GECs slipping to 24 per cent. Before it takes on Zee Marathi though, Star will need to fight eMarathi whose business in the state is close to breaking even.

As of now, it would appear that Star makes money only in Kerala where it has a 1,000-strong film library and where it pulls in an estimated 70 per cent of the ad spends. However, it’s also a fact that regional channels can be profitable because content costs are far lower. For example, a single Hindi GEC episode could cost Rs 10-12 lakh, whereas an episode for a Bengali or Marathi channel would cost barely a lakh. Even if distribution costs — carriage charges — are high, operating profit margins for regional channels, says Star’s Kumar, could be higher by as much as 1,500 basis points.

Also, all broadcasters are eyeing subscription revenues, which today may account for less than 20 per cent, but in three years could fetch as much as 40 per cent of revenues, especially in states where satellite penetration is high. And overseas markets are another potential revenue stream. Also, Kumar’s hoping to gradually leverage Star’s national footprint and bundle advertising inventory, making it cost-effective for advertisers. Media buyers, however, say it’s not always easy to bundle advertising inventory in television like it is in the print media.” Even a strong player like Sun sells its channels separately,” they point out. And Star, of course, is no Sun. At least not yet.

Shobhana Subramanian | Business Standard | Mumbai, June 09, 2009

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