On 18 June, India’s first-ever film fund, The Indian Film Company (IFC), will start trading at the London Stock Exchange’s Alternative Investment Markets (AIM) Exchange. IFC, which recently raised Rs450 crore at AIM, is a unique initiative. Its sole mandate is to fund film projects conceived and executed by third parties. In return, it will get the intellectual property rights (IPRs) to these projects and the revenues realized by exploiting these IPRs will accrue to the company. So far, it has only one client, a Mumbai-based motion picture company, Studio18, which is just about a year old.
Studio18 is an interesting business venture. The company plans to produce, acquire, promote, market, syndicate and distribute its own, as well as third-party, films across the domestic and global markets. It has also set up its own home video and music divisions to exploit the revenue potential across these two platforms.
The company has already produced five films, including Honeymoon Travels Pvt. Ltd, Kya Love Story Hai and 1971: Prisoners of War, in the past year and has 14 new projects on the floor. This, effectively, means IFC has hit the ground running, with several projects waiting for funding.
Interestingly, IFC also has the wherewithal to exploit these films’ properties across the Internet and other new media platforms such as mobile phones. The company has access to some of the unique Internet platforms owned by Web18, an entity in which Television18 India Ltd (TV18), India’s leading business news broadcast company, has an 85% stake. While it already has a small mobile entertainment service, TV18 is also keen on identifying new opportunities in the mobile and digital space. One of its affiliate companies, Capital18, in fact, has raised Rs100 crore to fund new initiatives in the new media and mobile consumer services space. And if it finds some interesting services there, the filmed content produced by Studio18 and funded by IFC will be exploited on those platforms, too.
“It’s a seamless business model,” says Sandeep Bhargava, who is leading the initiative for IFC. “While IFC will fund the projects and retain their IPRs, Studio18 will be the servicing company for these projects.”
Interestingly, all these businesses, including IFC, have a common parent—Network18, the holding company for all these ventures.
Network18 has been promoted by Raghav Bahl, a first-generation entrepreneur and a leading player in the news broadcast business. The company is ready for the future.
“It is already future ready. In fact, Network18 is the only future-ready media and entertainment company in the country as of now,” says Lakshmi Narsimhan, business head, new ventures, TV18. Till four months ago, Narsimhan headed the central media buying unit of Group M, owned by Sir Martin Sorrell’s marketing communications and media network, WPP. “I quit the profession I had spent 12 years in because I wanted to do something more challenging. TV18 provided that platform. The company is doing pioneering work in the new media space,” he adds.
TV18 today has the most diversified new media business portfolio. Web18, the division that houses all Internet properties, is already a leading player in the Internet consumer services and content space. Its financial, business and investor platform, moneycontrol.com, has more than five million registered users, according to Haresh Chawla, group CEO, TV18. “This user base is more than the readership of any business newspaper in the country,” he adds.
Besides more than half-a-dozen content-based services, Web18 also has significant stakes in consumer services portals such as yatra.com, a leading online travel services provider, JobStreet.com, an online recruitment portal and bigtreeentertainment.com, an e-movie and entertainment ticketing service. It continues to look at the space aggressively to augment its strengths. In fact, there are quite a few individual players in each of these spaces who remain focused exclusively on their respective domains, expecting them to grow into big businesses in the near future.
Makemytrip.com and Cleartrip.com, for instance, are large online travel service providers whereas naukri.com and monsterindia.com are leading e-recruitment portals.
Market analysts feel TV18 could unlock a lot of value off Web18 in future. “InfoEdge India Pvt. Ltd, which runs naukri.com and jeevansathi.com, a portal, is currently valued at around Rs2,000 crore,” says a stock analyst working with a leading Mumbai-based broking firm (he requested anonymity citing company policies).
“TV18 could also unlock similar or higher value in future from its Web18 properties,” he adds. Bahl, indeed, is quite upbeat about the new media opportunity. “Today, we are one of the largest players in the Internet content space, thanks to our strong backward linkages to media properties such as CNBC-TV18, CNBC Awaaz and CNN-IBN. We aim to have a large stake in the consumer services segment as well. We will continue to look at the scope of expanding our services and footprint through all new media platforms,” he adds.
Market observers see a lot of growth potential in the Studio18 venture as well. With the consumers’ appetite for leisure and entertainment going up, they feel the demand for films and filmed content is only going to grow in future. “Studio18’s unique business proposition, wherein it will provide the entire gamut of motion picture services, is quite unique and gives it the ability to exploit the full economic value of filmed products,” says the stock analyst.
On its part, the company has set up its own in-house production and marketing capabilities and distribution network across Delhi, Mumbai, Chennai for domestic distribution and in New York and London for distribution into overseas markets.
In yet another new move, the company is also planning to launch a fully-integrated home shopping network. It has already got all clearances to launch a 24x7 channel dedicated to home shopping and has set up a distribution and franchisee network. Like other big businesses, this one has also been set up in a joint venture—with private equity group SAIF Partners. The latter has a stake in China’s largest home shopping business. “With Indian consumers going up the consumption ladder, such alternate distribution channels will have huge potential for growth,” says Bahl. “China and Korea are good examples of this,” he adds.
Big getting bigger
Despite their huge potential, the new ventures are too small as of now. Home Shopping Network and Studio18 have not taken off fully. Hence, their real revenue-generation potential is not known as yet. Web revenues have grown almost 100% in the past two years, yet these contribute less than 10% to the overall group top line. In 2006-07, it stood at around Rs25 crore on a group turnover of Rs330 crore.
As of now, advertising contributes a major chunk to the Web operations and subscription and transaction based revenues from operations such as yatra.com or JobStreet.com are too small. But then, the group is bracing for aggressive play in its bread and butter broadcast business as well.
TV18 recently tied up with US-based media and entertainment conglomerate, Viacom Inc, to launch a general entertainment channel. The deal has given it a head start into the non-news space, hitherto its core area of expertise, via strong Viacom brands such as MTV, VH1 and Nickelodeon. The mass entertainment space, already a bit too crowded, is likely to get even more challenging with at least half-a-dozen new and strong players such as UTV Software Communications, Inx Media, New Delhi Television Ltd and BAG Films Ltd planning to take the plunge. But Bahl argues that “if any company wants to have meaningful play in the broadcast and entertainment space, it has to have a presence in the general entertainment space”.
Similarly, the business and general news space, its area of dominance so far, is also likely to become more challenging with these players planning to make strong bids. It is a challenge that the company is taking quite seriously.
“We are paranoid about the emerging situation. We do take competition quite seriously. But having said that, we are quite confident of sailing through victoriously because of our unmatched talent pool, solid business partnerships and a strong salience that we have built with consumers in the past,” says Chawla.
Analysts agree that despite increasing competition, serious players will flourish because of a strong advertising revenue flow and the likelihood of the subscription revenue stream gradually opening up. “The television distribution landscape is set for a rapid makeover and we expect 37 million digital homes by 2010. Niche broadcasters like TV18 will benefit the most from this. Even if it reaches only 40% of the digital homes, TV18 can potentially add Rs80 crore of incremental pay revenue, which will flow down to the bottom line,” says a recent stock report by SSKI on TV18.
The company, interestingly, is planning to get into the business newspaper segment as well, seemingly a saturated space. It is keenly looking at an acquisition possibility.
Bahl and his team are, indeed, taking big strides. Going by their past successes, they are confident of a happier future. They aren’t oblivious to the fact that the rapid expansion into new areas might dent their growth or profits in the near future, but they are ready to take this bet. Bahl says: “We are bracing for much larger play in the broadcast and entertainment space. At this point in time, expansion is crucial. We have had profitable growth in the past and there is no reason why we will not have it in the future, too.”
Surprisingly, his rivals agree with him. “TV18 has built an impressive media business. Its biggest strength is the management bandwidth it has built over a period of time. At present, it is sitting on various growth avenues and its strong partnerships and management expertise should help it in exploiting these,” says the CEO of a top media company—who did not wish to be identified—bracing for similar action as well.
Bahl and his team couldn’t ask for a better compliment.