Broadcasting business has become unviable

Broadcasting business has become unviable

New Delhi: It might not be easy for Subhash Chandra, chairman of the Essel Group that operates its media business under the Zee brand, to admit that his wife watches a couple of shows on Colors, the Hindi entertainment channel of his rival Viacom 18 Media Pvt. Ltd. But he quickly adds that she watches serials on Zee as well. With Colors having beaten Star Plus to the top slot, Zee is now fighting hard to edge out News Corp.’s entertainment channel from the second position as well. As Time Warner Inc. enters the Hindi GEC (general entertainment channel) segment through NDTV Imagine, Chandra shares his views on India’s broadcasting industry and his plans for other businesses. Edited excerpts:

Zee’s ratings went ahead of Star Plus a couple of times recently. Who is behind the channel’s improved performance?

It is a team led by Punit (Goenka). Zee’s strength is in its being completely Indian. Others have adapted international programming formats for Indian audiences. We also tried, but gave up. Dance India Dance is our own format. Sa Re Ga Ma Pa is also our own hugely popular show that will air its 1,000th episode soon.

But the battle will intensify with Time Warner entering the Hindi GEC space.

Nothing changed when Time Warner’s Turner Broadcasting came to India through Alva Brothers and launched Real. In India, Zee and Turner are joint venture partners in cable distribution. Turner has now approached us to carry NDTV Imagine in the Zee-Turner bouquet. So it is very early to say how this battle will pan out.

How do you view the TV industry today with falling yields?

The number of players in broadcasting has increased but the business hasn’t grown. Yields have declined. In that sense, the broadcasting industry has become unviable. If you get to look at the balance sheets of all the broadcasters in India and sort out profitable and unprofitable companies under different heads, you’ll see that broadcast (in) India is in the red at least by about Rs500 crore.

The industry is bleeding because we deliver (to) 90 million homes, but we get paid only for 40 million. The rating system does not cover all the TV viewing homes, affecting advertising rates. Also, cable operators under-declare their subscribers and pay less. But the programming and human resource cost has shot up. We pay carriage fees through our nose. The broadcasting business has become unviable because of the structural deficiencies in the industry.

But isn’t Zee a low-cost operator?

Call us what you may, but in the year 2000, human resource was 5% of our total cost. Today it is 9%, though probably still lower than other channels. I have a thumb rule for programming cost—it should be one third of the advertising revenue it can make. If the advertising revenue is Rs100, programming cost should be Rs33. Another 33% is for other expenses and 33% is the Ebitda (earnings before interest, taxes, depreciation and amortization) margin. So, after paying taxes, you save 15-20%.

It’s been drilled into the company that if you are spending Rs20 lakh on a programme, you have to earn Rs60 lakh in advertising. Even today, my best-performing serial is 30-40% cheaper than serials on other channels.

Why did you launch an English language wellness channel in the US?

We soft-launched Veria in the US four weeks ago. We are serving the South Asian diaspora very well through Zee and are actively marketed in about 80 countries. The idea was to do something for the mainstream global population. We couldn’t have fought Hollywood in entertainment. But we know how to live in harmony with nature. So that’s the theme for Veria—how to live healthy and happy without consuming or using chemicals.

How’s the experience been?

America is a very difficult broadcast market. Even for a cookery show on the channel we need the recipes to be cleared, signed and sealed by the lawyers. All the staff and anchors are American.

But it’s moved beyond television.

Yes, we have the website where you can interact with doctors. Cosmetics based on ayurveda have been launched. Medicinal products will follow. Our research and development is in Lucknow and the products are being manufactured in and around Delhi. The cosmetics part is not very big. But if it succeeds, the television venture will be big. We have already sunk in about $140 million (around Rs651 crore).

But Zee already makes money in the overseas market.

We are watched in 20 million homes outside India. Of these, the seven million in Pakistan pay us nothing as the signals are pirated. ARPUs (average revenue per user) are very low in the Middle East but we’re okay in the US and the UK.

What are the plans for ‘DNA’? Your presence in the ‘DNA’ office in Mumbai sparked a rumour about the newspaper joint venture with DB Corp. Ltd. Are you increasing your stake in ‘DNA’?

We are okay as equal partners. Actually, we were equal partners and then we gave Bhaskar 3% for management, ESOP (employee stock options) kind of thing. So, currently the ratio is 47:50 with Zee at 47%. At best, we will go back to the 50:50 scenario.

The problem with DNA is that there is no single management. Sometimes Sudhir (Agarwal) would take a call on editorial aspects. Then there’s a CEO K.U. Rao. Girish Agarwal, who was handling marketing, was pulled out for Bhaskar’s own power projects. So I said that I will look after the paper for a while.

You are said to be taking editorial decisions at ‘DNA’ and pushing the Bharatiya Janata Party (BJP) agenda.

People can say anything they want. But first the BJP has to adopt me. The BJP government didn’t spare us… (when the party was in power)

How much money has been lost in ‘DNA’?

We have invested Rs600 crore already—Rs300 crore each. But now, as of November-December, we have stopped making losses.

So it’s time to come to Delhi?

Not yet. Delhi is a very difficult newspaper market. But to be a national daily, we will eventually launch there.

Any progress on your SEZ (special economic zone) plan and infrastructure projects?

In infrastructure, Essel Infravest already has an order book of about Rs8,000 crore. We are largely making sports complexes and roads.

We are working on an SEZ for entertainment. The SEZ land is next to our amusement park. Today Esselworld is a one-day affair. We need to make it a destination where people come and stay for 2-3 days like they do at all Disneyland properties. We are looking at a theme park and residential facilities at these places.

Is your online lottery business growing?

It made a profit of about Rs20-30 crore but the business has now shrunk. Online lottery has been banned in many Congress states. It is running only in Maharashtra and (West) Bengal. But paper lottery continues. There is so much hera-pheri in paper lottery, some operators print duplicate tickets, others do not deposit remaining tickets in the treasury after the close of the day’s sale. It is a huge scam. Hope it gets exposed some day.