Sony TV's Dasgupta: Happy to be #2?

Even by the entertainment industry standards, Sony Entertainment Television's (SET) 10th anniversary bash on October 22 in Mumbai was a spectacle to watch. Stars from its popular shows such as Jassi Jaissi Koi Nahin, Yeh Meri Life Hai and CID walked the ramp, contestants from its reality shows Indian Idol and Fame Gurukul belted out numbers, as did Canadian-born, UK-based rapper Raghav, who was flown in especially for the occasion. Kunal Dasgupta, SET's CEO, was of course happy at his television company completing 10 years in India, but he was possibly happier for the chief guest he had managed to rope in-Sony Corporation's worldwide CEO of six months, Sir Howard Stringer. The significance of his visit wasn't lost on anyone. Not only was Stringer the first Sony CEO to visit India in 10 years, but he was also the man who headed Sony's movie business in the US prior to his elevation and, therefore, very interested in entertainment business. "It feels like an orphan has finally been adopted," a jubilant SET executive told this writer, summing up the mood within the company, which is the only TV network Sony operates anywhere in the world.

It's easy to see why the SET honchos are on a high. Finding an ally as powerful as the CEO apart, the network's weekly gross rating points (that is, total television rating points, or TRPs) are up at 100-120 versus 70-80 a year ago, thanks to new shows such as Indian Idol and Fame Gurukul. Better still for SET, the gains in viewership seem to have come at the cost of leader star TV, whose GRPs have slipped to 280-300 from 380-400. That means its #2 position, held for the last four years, is under no immediate threat from Zee Telefilms. What's more, SET's GRP gains are showing up on its books. Its advertising revenue, which accounts for 70 per cent of its total earnings, jumped 40 per cent last year after clipping at 30 per cent the previous three.

So Dasgupta, CEO of 10 years, should be sitting pretty, right? Well, not quite. He's got issues to deal with, the most pressing of which is the possible coming on board of new financial or strategic investors. A group of shareholders-including actor Jackie Shroff, World Media Group's Sudesh Iyer and Raman Maroo of Shemaroo Film-that owns 32 per cent stake in SET wants out. The network won't buy them out and it won't make a public offering either (there's been talk of one for the last five years), leaving the investors with little choice. "We invested in SET 10 years ago hoping to reap a rich dividend eventually. Since the IPO doesn't seem to be happening, we are looking at other options," Shroff told BT over the phone during a shooting break in London.

Among the buyers being talked to is Anil Dhirubhai Ambani of the eponymous enterprise. Both SET and ADAE have rubbished the reports as tittle-tattle (however, Stringer did make time to meet with Ambani during his visit), but Ambani's interest in media and entertainment is obvious. Soon after he split from his elder brother Mukesh in June this year, he acquired stakes in entertainment companies like Adlabs Films and Prime Focus. He also plans to launch a direct-to-home network and may well fancy the idea of landing a significant position in the #2 television network.

The only hitch could be SET's valuation. According to Shroff & Co's own valuation of $1 billion or Rs 4,500 crore, a 32 per cent stake may cost Ambani $320 million or Rs 1,440 crore. (Some analysts, however, believe that SET is worth at least $2 billion.) From the initial talks with Ambani, it seems he is unwilling to cough up that sort of money. "The stake might (then) have to be picked up by some institutional investors and, meanwhile, if the perception about Sony improves, we may think of an IPO in the next 12 to 18 months," says a member of the Shroff camp.

What the entry of Ambani or any other investor will mean to SET is hard to say at this point, but industry analysts are agreed on one thing: "There are quite a few chinks in SET's armour that need to be plugged," says Sunir Kheterpal, Head (Media and Entertainment), Yes Bank. Adds Vivek Couto, Head of Research, Media Partners Asia, a Hong Kong-based firm that tracks media companies across Asia-Pacific: "(Unless it addresses those chinks) it could be bought by some other corporate group that focusses on a more rounded growth."

INTERVIEW HOWARD STRINGER/CEO/SONY CORPORATION "Entertainment is a Core Business for Sony"

Sony Corporation's worldwide CEO Sir Howard Stringer was in India recently to celebrate Sony Entertainment Television's 10 years in the country. BT's R. Sridharan and Archna Shukla caught up with him to know about his plans for different businesses of Sony in India. Excerpts: Is SET turning 10 a big enough occasion for the worldwide CEO to drop by, or is there more to it? It is a big enough occasion for us because SET India team has put us on the entertainment map in ways we are not present anywhere in the world. SET versus SET may have done well in the last 10 years, but when compared with other competitors, it lags behind on many fronts. I don't agree with that. We are very competitive in India. With star it has just been a difference of one show (Kaun Banega Crorepati). If we had bought the Millionaire title like we bought Idol and Fame, we would have remained the number one network as we were before. Are there any specific goals you have set your team here in India? All I can see right now is that our content here is very strong and it can drive our hardware sales. But we do have some plans for our films business. We are looking at opportunities of co-production with Bollywood directors. We feel that Indian creative content is really world-class and it's time it got its due in international markets. Talking about hardware, India doesn't seem to be a big focus for Sony, especially after you discontinued manufacturing here some lines of consumer electronics. Closing down of factories and laying people off is not something that has happened only in India. We have done it in many other markets. And that essentially has got to do with the shift in our focus from analog to digital business. Digital strategy is the high-end strategy for Sony. There have been talks of Sony wanting to spin off some of its non-core businesses. We have made it very clear that entertainment and games are core business for us and consumer electronics is our basic strength. These are the three strong pillars of Sony Corp and there is no question of phasing out any of these businesses. We are promoting a better coordination between all the three and trying to put across a United Front of Sony, where the entertainment business will be used to push the sales of hardware.

Chinks in the Bouquet

SET's come a long way since 1995. It beat Subhash Chandra's Zee with its stupendous programming and targeted marketing and built on the success of shows like Jassi Jaissi Koi Nahin by purchasing (for $5 million or Rs 22.5 crore) rights to international titles such as American Idol and Fame. It then spent a whopping Rs 50 crore on just promoting the clones Indian Idol and Fame Gurukul. As it turned out, the money was well spent. "Unique, compelling and variety entertainment...and 360-degree marketing are the cornerstones of our growth," says Tarun Katial, Business Head of SET's flagship channel. "It's not easy for a challenger to induce new consumption habits among viewers," adds Sandip Tarkas, CEO, Media Direction.

So what's the problem? Despite Indian Idol and Fame Gurukul, none of SET's shows figures in the top 50 programmes on cable and satellite channels. While, like

OneAlliance (SET's distribution arm) President Anuj Gandhi argues, the SET bouquet is quite wholesome, the fact is nine of the 12 channels (including three ndtv channels) don't belong to SET.

Despite being #2, Dasgupta has issues to deal with. The most pressing being the possible coming on board of new financial or strategic investors

No doubt, SET's recent acquisition of comedy channel sab tv has been a shot in the arm, but it still doesn't have any news or music or English movie channels (like Star and Zee have), and SET max remains a hybrid between Hindi movies and sports. Its kids channel Animax has remained a non-starter, and its action channel AXN has a limited viewership. Result: the flagship channel fetches more than half of SET's revenues, unless max has some high-profile cricket matches on air. Also, although Zee is #3 in the GRP sweepstakes, it pulls in almost as much as star's $302 million or Rs 1,359 crore in revenues; SET, by contrast, logged $220 million or Rs 990 crore last year. It is also less profitable than either star or Zee (see Low Prime Time Ad Rates...).

SET is said to be in talks with Taj TV to buy Ten Sports, which has quite a few lucrative sports properties under its belt, but until the deal comes through, its second-biggest money spinner, MAX, will continue to have a splintered viewership for movies and sports. "SET is losing out on a big opportunity, as viewership in all these genres is growing fast," says a former SET executive, currently running a high-profile TV network. "(SET) doesn't have a clear strategy for growth," he adds.

MPA's Couto points out another gap in the network's strategy: No stake in last-mile distribution. SET doesn't have any interests in cable and satellite (C&S) distribution like star (it owns 20 per of Hathway) and Zee (owns Siti Cable). It has no intentions of launching an alternative distribution platform like DTH (direct to home) either. Both star and Subhash Chandra own Tata-Sky (20 per cent) and Dish TV (100 per cent), respectively.

Dasgupta, however, claims that these seeming breaches are part of a conscious business strategy. "We see no logic in getting into news and DTH because of the 26 per cent and 20 per cent foreign equity restrictions," he says. "As for the English movie channel, we are looking at launching one soon," he adds. Not having a distribution business, Dasgupta says, actually helps SET, since there is no conflict of interest with competitors. "Moreover, there is no bandwidth available with existing operators to accommodate new channels," he justifies.

SET also denies the industry buzz that Sony may be contemplating hiving off the broadcast business. "SET, in fact, has been identified as the cornerstone of Sony Corp's overall growth in the country," claims N. P. Singh, SET's Chief Operating Officer. Stringer has been talking of getting the diverse Sony businesses to present a "united front" in all markets. Yet, it is early days to predict how successful the strategy will be, and whether a better coalition within the group can compensate for the weak links in SET's broadcast strategy. For the moment, SET seems happy being the #2. But Stringer may want to take a call on it while the going is good.