Mumbai: Bennett, Coleman and Co. Ltd (BCCL), India’s largest media house that publishes The Times of India and The Economic Times, is set to sell a 25% stake of Zoom Entertainment Network (ZEN), which telecasts the Zoom entertainment and lifestyle channel, to a private equity fund owned by the US-based Merrill Lynch and Co. for Rs120 crore.
The deal, if consummated, will put the valuation of Zoom at Rs480 crore. A senior ZEN official confirmed BCCL’s plan to sell 25% equity.
The fund infusion will help ZEN strengthen its content and retain key executives by offering stock options as, at a later stage, it plans to list on the bourses. That will likely be the future exit route for the new investor, a person familiar with the development said. He didn’t want to be named.
“The deal is at a preliminary stage,” said the same senior ZEN official who spoke on the condition of not being named. Suresh Bala, ZEN’s chief executive officer, declined to comment for this story.
ZEN, a zero-debt company, had invested close to Rs100 crore in past two years. The new cash infusion will be used to create a stronger video library, a media consultant familiar with the deal said.
According to this consultant, who also didn’t want to be identified, the success of any television distribution business depends on how quickly one accesses the content—either through in-house creation or acquisition. The content will bring in revenues from multiple streams, including advertisements and selling it to cellular service operators.
BCCL has to move fast to catch up with peers. Rival Network18, which owns business news channel CNBC TV18, has joined hands with media conglomerate Viacom Inc. and floated an equal joint venture, Viacom18, to operate the channels managed by MTV India. The venture also plans to launch lifestyle and entertainment channels and produce films. New Delhi Television Ltd (NDTV), a dominant player in the news broadcasting space, has recently launched a general entertainment channel, NDTV Imagine; a lifestyle channel, NDTV Good Times; and a city-centric channel, NDTV MetroNation.
“Zoom is a bit of mix of everything in its positioning as it falls between various stools. Advertisement rates for channels like Zoom would be lower than a Hindi general entertainment channel (GEC) but higher than an English GEC. I think that it’s not doing very well as it does have a floating viewership but not much of sticky viewership,” said a media buyer who didn’t want to be named.
Despite a global slowdown in deals and deal-making that has also hit Indian stocks, the country’s media sector remains attractive because of rather bullish market growth expectations. A PricewaterhouseCoopers-Ficci study on entertainment and media, released in February, said the industry has grown by 17% in 2007 to Rs51,300 crore against a projection of 15%. In 2006, the industry size was pegged at Rs43,800 crore.
In the media industry, the TV segment recorded 18% growth to Rs22,600 crore from Rs19,100 crore. Higher growth in literacy rates, better growth in the number of females working and moving towards smaller households are the driving forces behind this growth, the report said.
But some media buyers have apprehensions about Zoom’s revenues. According to a media buyer, who does not want to be named, Zoom is estimated to generate about Rs30 crore in advertising revenues annually. Star World, a lifestyle and entertainment channel owned by a division of News Corp., also generates approximately Rs30-40 crore ad revenues each year, but the difference lies in the operational costs. While Star World uses a full-fledged, already established network and sources all international content from existing markets, Zoom has to create content in-house, which drives up its production costs.
“There is also the pressure of acquiring big-ticket movie titles to attract viewers. A media buyer has no idea where to slot it. The channel garners lesser ratings than a GEC like Star and better ratings than other niche channels like Discovery,” he said.
Chandradeep Mitra, president, Mudra Max, an umbrella brand that holds together media buying agencies Mudra Connext and Mudra Radar, said Zoom is not a GEC, but falls between a lifestyle and an entertainment news channel. This has its advantages and disadvantages. “Who do you benchmark against, the Hindi GECs which would have better TRPs (television rating points or viewership points), or English GECs and lifestyle channels which would have relatively lower TRPs such as Star World, Zee Café or Discovery, Travel and Living, and NDTV Good Life,” Mitra asked.
Besides the lifestyle channel Zoom, BCCL also runs news channel Times Now. Reuters Singapore Pte Ltd had invested Rs88.56 crore in Times Global Broadcasting, the company that owns the channel, but they parted ways recently. Now, BCCL is preparing to launch a business channel to compete with TV18 and NDTV Profit.
Of all the channels, GECs recorded the maximum launch of new programmes in 2007 to hold on to viewers as more and more new brands are advertised on television. The number of advertisers on TV grew by 29% in the last five years while the number of brands advertised grew by 23% in the last four years.
The growth is driving foreign direct investment in the sector. In 2007, Temasek Holdings Pte, a private equity fund promoted by the Singapore government, invested Rs1,100 crore in INX Media and billionaire investor George Soros pumped in Rs400 crore in Anil Dhirubhai Ambani group-promoted Reliance Entertainment Ltd for 3% equity.
HT Media Ltd, the parent of Mint, competes with BCCL’s print offerings in several markets.