Will Reliance Industries push change the pecking order for Viacom18?
Last week, TV18 Broadcast Ltd announced that it has taken operational control of Viacom18 Media Pvt. Ltd, an equal joint venture (JV) between TV18 and US-based media firm Viacom Inc. TV18 said it has increased its stake in the company to 51% by acquiring 1% of Viacom18’s equity from Viacom for a cash consideration of $20 million. That is not all. Viacom and Viacom18 have also extended their brand and content licence agreement by 10 years after the original 10-year agreement expired this year.
Currently, Viacom18 runs 42 channels in seven languages and has interests in television broadcasting, films, digital, merchandising and live events. In India, TV18 and Viacom18 also have a JV called IndiaCast for distribution of TV channels.
In 2016-17, Viacom18 had reported a revenue of Rs3,040.7 crore. Network18 Media and Investments Ltd-owned TV18, which operates news channels CNN-News18 and CNBC-TV18, had recorded a revenue of Rs277.3 crore in the December quarter, up from Rs254.7 crore in the year-ago period, according to a 31 January Mint report.
Interestingly, even senior executives at Viacom18 privately admit that the news of TV18’s stake increase came as a surprise. It was a sudden, albeit pleasant, development as it will have far-reaching implications on the day-to-day operations of Viacom18. An executive at Viacom18, on condition of anonymity, said that the step was a big deal for Mukesh Ambani’s Reliance Industries Ltd (RIL), which owns TV18. RIL now has a majority stake in the venture.
For starters, this means that decision-making at Viacom18 will be speedier. Earlier, for any decision taken by Viacom18, Viacom needed to be consulted as it was an equal JV partner. “Now there is only one driver in the driving seat,” said the Viacom18 executive. Quicker decision-making may translate into greater efficiency. While TV18 is in the driver’s seat as the majority shareholder, it enjoys the benefits of Viacom’s pedigree, which continues to stay invested as a 49% shareholder and has agreed to share content for another 10 years.
Top Viacom18 officials refuse to share details on how the deal may have come about. However, it is possible that RIL may have asked for a controlling stake as it understands the Indian media and entertainment market better than its American JV partner. In any case, the Indian television channels in the JV, namely Colors, Rishtey, Cineplex and the Colors regional bouquet are outperforming the international brands such as MTV, Nickelodeon and VH1. According to media industry estimates, the Indian channels contribute between 75% and 80% of the total revenue of Viacom18.
As a controlling partner, RIL can fully exploit the synergy with its telecom brand Jio, which will have more content than any other telco. Media experts say that Jio and Viacom18 could script a very successful convergence story. “The two businesses complement each other and offer a strategic advantage. For RIL it is a fantastic decision,” said the Viacom18 executive quoted above.
Since RIL likes to be a big player in everything it does, it may invest in and scale up the media and entertainment business, too.
In fact, Viacom18’s expansion plans could get a boost. In an earlier interview, Sudhanshu Vats, group CEO of Viacom18, had said that it will launch a Tamil entertainment channel in the March quarter. Besides it had plans to move some part of its over-the-top video streaming platform Voot behind a paywall. “We will have a dedicated offering for kids—with more content, e-books and light gaming. That will be behind a paywall,” Vats had said.
Viacom18 is not present in sports broadcasting. Although Vats had said that in India sports is largely cricket and cricket is a very high-investment, long-gestation game, last week he announced a tie-up with DSport, the sports channel of Discovery Communications, whereby it will telecast the Nidahas Trophy 2018 on two of its Hindi entertainment channels—Rishtey Cineplex and Cineplex HD. While DSport will telecast the cricket tri-series between India, Bangladesh and Sri Lanka with English commentary, the Viacom18 channels will have the commentary in Hindi. Explaining the rationale behind the partnership, Vats said in a statement: “Sports…represents a sizeable opportunity, but the cost of entry tends to be prohibitive. It has been a white space that we have continuously been evaluating and this association with DSport to air the Nidahas tri-series provides us with a fertile testing ground. As we endeavour to test waters with our very first broadcast of an international sporting property, what better than a cricket tri-series involving the national team.”
With the 51% stake in Viacom18, RIL is now a serious contender in media and entertainment. Currently, among the major TV broadcasters in India such as Star, Zee and Sony, Viacom is last in the pecking order as far as revenue is concerned. But that may soon change.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.