New Delhi/Mumbai: India’s television distribution business, worth around Rs 19,400 crore, could see a major consolidation with Sun18 and MSM Discovery Pvt. Ltd in talks to jointly distribute channels.
The development comes after rival broadcasters Star India Pvt. Ltd and Zee Entertainment Enterprises Ltd shook hands in May to set up Media Pro Enterprise India, a TV distribution joint venture.
“The talks are on,” said a person aware of the development, who declined to be named as the matter is confidential.
Sun18 is a distribution venture of Kalanithi Maran’s Sun Network and Raghav Bahl’s Network18, the formation of which was announced in last July. MSM Discovery, branded as TheOneAlliance, is the distribution company of Multi Screen Media Pvt. Ltd (MSM, the owner of Sony bouquet of channels) and Discovery Communications.
A board member of MSM Discovery confirmed that the firm was in talks with Sun18 but added it was too early to say whether the discussions will translate into a partnership. “At this point, OneAlliance is speaking to everyone in the business,” the member said, requesting anonymity.
If the deal materializes, it could change the complexion of India’s TV distribution industry, as Media Pro and the proposed alliance will then between them distribute almost all the major TV channels in India.
Such alliances are taking place to restore balance to the value chain, says to Gurjeev Singh, chief operating officer of Media Pro. “Currently, 80-85% of subscription revenue resides with cable operators. There is a need to reset this as broadcasters aren’t getting their fair share.”
TV subscription revenue is expected to grow at 17% a year to reach Rs 41,600 crore by 2015 from Rs 19,400 crore in 2010, according to KPMG India. Only 20% of this amount goes to TV channels, although the share is expected to rise to 30% by 2015, it projected.
MSM Discovery president Rajesh Kaul said there have been several groups in talks with them on distribution alliances, but nothing was final. He did not name the groups.
Sun Network CEO Tony D’Silva declined to comment and so did a Sun18 spokesperson.
If an alliance is indeed formed, it would distribute well-known channels such as CNN-IBN, CNBC TV-18, MTV, Colors, Sony, SAB and SET Max, etc.
“From MSM’s point of view, the Star-Zee distribution joint venture means two things. One, its subscription revenue will go down, and two, its carriage fees would go up,” said an executive at a broadcaster, on condition that neither he nor his firm be named. “Everything starts and ends with negotiation in analogue systems,” he said, explaining the rationale behind the new alliance plans.
The consolidation will only work against the consumer as it amounts to cartelization, argued Roop Sharma, president, Cable Operators Federation of India, an industry lobby group.
“They (broadcasters) say the cable is a vastly under-declared market. We don’t think so,” he said. “Why are they not investing in digital platforms if they are so perturbed over under-declaration on the part of cable operators?” Digital platforms will arguably make it impossible to conceal subscription revenue from broadcasters, reflecting the actual number of subscribers.
The proposed alliance will invite scrutiny by the Competition Commission of India in line with new merger rules that became effective from 1 June.
“They will have to seek our permission,” said an official at the antitrust watchdog, referring to the possibility of a Sun18 and OneAlliance partnership. He, too, requested anonymity.
As broadcasters scramble to join forces, the scale could tilt in favour of the grouping that manages to sign up ESPN and Star Sports channels, said a former Sun18 employee, who wanted to remain unnamed.
“Sports channels offer better negotiating power with cable operators owing to cricket-crazy viewers,” he said.
ESPN Star Sports India currently distributes its own sports channels. Zee Sports and Ten Sports are distributed by Taj Television, a unit of Zee Entertainment Enterprises.
The industry may see more of such merged entities in distribution, said Rajesh Jain, head of media and entertainment, KPMG. “Such joint ventures give synergies in distribution and cost savings. It ensures compliance from the cable operator and hence better rates,” he said. “Such collaborations also ensure a wide consumer base.”