New Delhi: Two days before News Corp. chairman Rupert Murdoch announced in Mumbai his company’s plans to invest $100 million (Rs424 crore) in launching six regional channels in India, his India executives reached an agreement to end its partnership with leading television content production company Balaji Telefilms Ltd.
The partnership helped Star India Pvt. Ltd, the News Corp. subsidiary that runs a network of television channels, become the market leader in the most lucrative and fiercely competitive segment of the television business—the Hindi general entertainment genre.
According to a person familiar with the development, Balaji, the Bombay Stock Exchange (BSE)-listed firm that produces some of India’s most successful soaps, has reached an agreement to buy back the 25.99% stake it sold in 2004 to Asian Broadcasting FZ-Llc., a Dubai-based affiliate of Star India’s Hong Kong-based parent Star Group Ltd in 2004. Star paid Rs123 crore for this stake. The person did not disclose the price at which Balaji would buy back this stake.
According to this person, who spoke on the condition of anonymity, Balaji is talking to a consortium of investors to buy Star’s stake in the company and will float another joint venture company with these investors to launch a bouquet of regional television channels. The person said the consortium includes at least one media company and some private equity investors.
Balaji’s move will make it one of Star’s rivals in the regional language television market.
Mint first reported on 14 March that serious differences had risen between the two partners. On 7 June, it reported that Star could sell its stake in Balaji.
A Star executive, however, said that while the company was “very close” to ending its relationship with Balaji, the formalities were yet to be completed. The executive spoke on the condition of anonymity.
The first signs that all was not well between the two partners came when a joint venture, formed in April 2007 to launch a network of general entertainment channels in regional languages, failed to take off.
The relationship between Star and Balaji goes back to 2000 when Star Plus, the network’s flagship entertainment channel, became a Hindi general entertainment channel. While the game show Kaun Banega Crorepati, the Indian version of Who Wants to be a Millionaire, turned out to be a massive hit and helped the channel climb up the ratings chart, Balaji soaps such as Kyunki Saas Bhi Kabhi Bahu Thi and Kahaani Ghar Ghar Ki helped it consolidate its leadership.
According to people in both the companies, Star and Balaji had an exclusive arrangement under which a Balaji show could not run on another channel during a time slot when Star was running a Balaji soap. This, combined with the declining ratings of Balaji soaps also contributed to a deterioration in relations as there was now more demand in the market from new general entertainment channels that wanted Balaji shows during prime time.
A Star spokesperson declined to comment. Balaji CEO R. Karthik couldn’t be reached for comment.
Last year, News Corp. acquired Dow Jones and Co. Inc., which publishes The Wall Street Journal. Mint is an exclusive content partner of WSJ in India.
On Monday, the Balaji scrip closed at Rs177.75, up 0.37% from its previous close on the BSE on a day when the exchange’s benchmark Sensex index fell 0.54% to 14,577.87.
The Star executive said the company is talking to Kerala-based Asianet Communications Ltd.
“We are in talks with several potential partners, and Star is one of them,” said K. Sanjay Prabhu, chief operating officer, Asianet Suvarna, the network’s general entertainment channel in Kannada.