July 28, 2020
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Star's Final Assault

As a waning blue glow surrounds his Indian empire, Rupert Murdoch falls back on the most potent weapon in his fast-depleting armoury—direct-to-home television.

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Star's Final Assault

A slightly underfed calico cat approaches diagonally across the terrace garden outside the French windows. This grungy feline pauses to peer briefly at the two humans inside the airconditioned glass box. They're Rathikant Basu and Peter Mukherjea, chairman and CEO of Star TV, two of the biggest cats in the satellite television business, lions of this digital jungle. But the tom doesn't look impressed. He simply yawns, flicks his tail and slinks on by. Billa-bhai's casual disdain of the affairs of these movers and shakers might reflect the attitude of tens of millions of television viewers across the country. Seated in the comfort of their homes, unwinding before the idiot box, they don't give a damn about the plans and dreams of tycoons. One flick of that tail, or that remote, and they're on their way to another world, not necessarily a Star World. And there's no guarantee they'll ever be back.

Belling that couch cat hasn't been easy, as Star Network owner Rupert Murdoch has discovered. Even after three hundred million dollars of investment over five years, a bold change in management, and dramatic shifts in channel content, the frontline soldier of his Asian television empire is still scrabbling for a foothold in the region. The general picture is gloomy: and no amount of fiddling with the controls has helped in the past few years. The recession has hit channels, software houses and even the CTV market hard. Wannabe channels have come and gone without making a dent on viewership, ad revenues or ground distribution.

Surfing the third wave

Into this scenario, enter Murdoch. The world's most charismatic media magnate seems finally set to move into the next phase of his plans for the subcontinent. And perhaps the old dog has learned some new tricks. After all, he's fresh from the phenomenal success of BSkyB in the UK, the pioneering pay television network that critics once predicted would sink the NewsCorp ship—and which did indeed bring losses way up above the waterline before the venture rose up triumphantly into the black. He's in negotiations to tie up similar pay projects in Europe, one perhaps with Canal Plus, the French media giant. If that partnership comes through, it would result in the world's largest television conglomerate. And he's just had a great first year with JSkyB, the pay-TV channel in Japan, a joint venture project with Sony which has achieved a subscription base of 6,00,000 subscribers in the first year, about six times the projected target. He's also expected to go back to his native Australia and attempt to replicate the success.

AND here, in India, Murdoch is probably banking on pay TV, or Direct To Home (DTH), to play saviour to the beleaguered Star TV network. ISkyB, when it comes through probably by the end of 1999, will be the Third Wave in the Indian television industry. The first was terrestrial television, marked by the national broadcaster DD, or Dinosaur Darshan as it's sometimes dubbed. The second was C&S, or cable and satellite, which changed not just the design of living rooms across the country, but buying habits, morality, political reactions and consumer marketing. DTH will be the third and perhaps the most dramatic wave yet.

The industry's expectations of DTH range from wildly optimistic to coldly dismissive (see box). But it was DTH which brought Zee and Star to the negotiation table to discuss a merger that fell through only because Zee's asking price was too high. Still, as and when the Broadcasting Bill is passed and the official position on the quantum of foreign equity holding changes, it's more than likely that the two will reopen talks. Neither Basu nor Zee CEO Vijay Jindal deny this possibility. After all, Star is already a 50 per cent partner in Zee, and they're both partners in ATL (Asia Today Limited) and Siticable. But if Star decides to go ahead with DTH on its own, it will be first out of the box and will dominate the market in the future. Also, without Star's much larger bouquet of channels, especially its strong presence in sports (ESPN-Star Sports) and Star News, Zee will be at a further disadvantage. Sources within and outside the channel say that Zee is nowhere near ready to launch its own DTH and is only waiting for official permission to come through before renegotiating with Star. "Subhash [Chandra] doesn't have the satellite," as Sony Entertainment Television (SET) CEO Kunal Dasgupta puts it. Meanwhile, Zee is fighting hard to revamp its news and current affairs channel, which has gone nowhere but down since the name and image change from El TV to India TV. They're also trying to optimise their music channel, Music Asia, which hasn't lived up to its potential. At a recent powwow at The Retreat in Mumbai, chairman Subhash Chandra is said to have ordered India TV executives to shape up or ship out. But even if India TV can get its act together effectively enough to give Star News a run for its money—which seems unlikely—there's not much expected from Music Asia. And with Star's own Channel V said to be losing an alleged $6 million against an investment of $15 million last year, music doesn't seem to be where the money is. So if and when Zee and Star do sit down to negotiate again, someone is going to have to blink. It's not likely to be Murdoch.

The colour of money

Meanwhile, Star is optimistically looking forward to launching in the third quarter of 1999 (see interview on page 66-67). The digital encryption of all its channels was a crucial step in taking the network out of free-to-air cable access. Around $18 million is said to be parked in the project, with the total investment over five years possibly rising to as much as $150 million. Perhaps that's small change for someone with pockets as deep as Murdoch's. After all, a single film like Titanic (produced by Fox, his US film production wing) garnered more than 10 times that sum last year.

Much of the investment in DTH is likely to be the cost of subsi-dising the set-top boxes. Imported at around $550 each, these high-tech marvels are dearer thanks to the rupee's fall against the US currency. Originally pegged at around Rs 20,000, they're now closer to Rs 30,000. Clearly, that's too much to expect even afflu-ent couch potatoes to shell out. The question is: even if Star sub-sidises the boxes, how low can the price go? Rs 15,000? Rs 10,000? The other crucial factor is the subscription fee per month. In the UK, Zee's DTH service sells at £1.29 (approximately Rs 100) per month. At that price, ISkyB would be a steal. But Basu firmly rules out such a low pricing: "At Rs 100, DTH is not viable." Besides, Star's intention is to price ISkyB at a premium level, a value-enriched service that's clearly out of competition or comparison with cable. Sceptics feel that this is precisely the mistake that could turn Star into a plummeting meteor. But Dasgupta, clearly a Murdoch fan, believes: "He might just surprise you. I think he will price it very competitively, maybe even as low Rs 150 per month." Industry guru Amit Khanna, CEO of Plus Channel, feels the equation ought to be "a refundable deposit of Rs 5,000 for the box and a subscription fee of Rs 500 per month for the first 50 channels, with a nominal surcharge per extra channel." Star will decide on the perfect pricing over the next month or so.

Give 'em what they want

Murdoch's approach to film buying is certain to be a key strategy in this battle for Indian eyeballs. The world over, he has elbowed cable aside in the tussle for airing blockbuster movies first and fast. With the prices of satellite rights for Hindi films already hitting the stratosphere, this may well create an inflated price war. Zee's recent acquisition of Dil Se at Rs 1.75 crore is said to be too high to be profitable. "We did the math and found that even selling the maximum number of advertising spots for the maximum ad tariff, we could still earn only Rs 1.70 crore, so naturally we passed," says Dasgupta. He compares the purchase with SET's prize catch of Hum Aapke Hain Kaun, a far bigger film, for around Rs 1.25 crore. With DTH coming in, a whole new market opens up for Hindi film producers and rights-owners.

Murdoch's approach is typically to pay huge sums to ensure that the biggest films air first on his DTH platform. Producers should have few complaints: a typical blockbuster will be able to earn, say, Rs 2 crore for DTH rights, then later earn Rs 1 crore for satellite rights and still more for cable rights! Even if SET CEO Dasgupta's prediction that "Hindi movies will start being made for television" doesn't materialise, there's no doubt that it will change the way television is distributed in the country, and perhaps even leverage DTH to a much bigger start than even Star's cautious expectations.

STILL, there are those who disagree. Sam Balsara, whose firm handles over Rs 200 crore of adspend for clients like Coke, BPL, Godrej and Tata Tea, simply doesn't understand the whole fuss over DTH. But Meenakshi Madhwani, whose firm Karat is the first media specialist in the country, welcomes more options: "Ten years ago, with one channel I could have reached 80 per cent of my target audience. Today, I have to use 12 channels to do the same. Customers are customising their viewing, zapping from one programme to another programme on another channel." Star hopes that getting the best films first will be enough to lure viewers in, while the charms of DTH will keep them there. It's true that running blockbuster movies like Yes Boss, Gharwali Baharwali and Satya did bring in huge viewerships. Shrewdly, Star ran promos during that peak to expose new Star viewers to its new desi programmes. The results were visible: in the week or so following each film, viewership for shows like Saans and Tu Tu Main Main doubled. So films are a surefire lure Murdoch will dangle before subscribers.

ISkyB will probably have another carrot for viewers—big sports events. With ESPN and Star Sports already merged and running now as pay channels, all they have to do is buy, say, exclusive live telecast rights to the World Cup and offer it only to DTH subscribers. If only for the duration of that tournament, every cricket watcher in the country will subscribe to DTH. Those who can't will pile onto their neigh-bour's couches. And hopefully, once exposed to DTH, a large number will upgrade.

But the real ace up Murdoch's sleeve is something that's totally unique to India: regional channels. Star has already signed an exclusive contract with Sun TV, the "Zee TV of the South Belt". And has a whole range of language channels in the works. Star Bengali is said to be already ready with its initial programming line-up. Ronnie Screwvala, CEO of United Television as well as a partner in the newly acquired Vijay TV which is being relaunched on 14 April, feels that "the revenue could be substantial". But on the whole, he feels that Star's expectations of DTH are overrated. "It will be a niche, that's all. It can't possibly match cable."

Finally, it's Murdoch

To Amit Khanna, DTH looms large as the first milestone in a process of change that he believes will peak far sooner than most people expect. It's likely to change not just the way satellite television is distributed but also the CTV market. "There are around 2 million multiple-TV households right now; with DTH, that number could easily double. India is poised to enter the digital domain faster than people think. In another two years, I see the whole scenario changing. With technology like MMDS (Multipoint Microwave Distribution System), Net Television, the whole digital domain is going to open up very fast."

 Whether DTH revolutionises Indian television or not, one thing everyone agrees on unequivocally is Murdoch's ability to prevail. Khanna insists: "Anyone who wants to be in the media has to be in India. This is the next battleground, even bigger than China. Murdoch knows this." Dasgupta agrees: "With one stroke he will turn the whole Star Network around. He has showed time and time again that he can do it. That's why people are scared, that's why this backlash against DTH. It will take about two years; programming, pricing and marketing will be the key, but he will do it."

Screwvala, CEO of UTV, which formerly shared equity with NTVI, agrees: "Murdoch has already paid his entrance fee. He's very well positioned now to move ahead. And there's no reason why he shouldn't make it in the next two to three years. In fact, if you add Zee's success to his record, he's already made it."

Murdoch's larger-than-life robber baron mystique, says Screwvala, is perhaps why there has been political resistance to the DTH project until now: "The problem is that he has this image. People expect him to want to control everything. That's absurd. He's a businessman. I don't think he has any control agenda in India. In any case, do you really think one man, no matter how powerful, can control the mind of the Indian consumer? Give us more credit."

That calico cat settles down on the garden terrace outside Basu's cabin, licking its paws in the light of the setting sun. Try to catch it, and it'll probably leap out of sight in a flash. For Rupert Murdoch, with all his myriad resources, his cash-rich corporation, his dazzling technology, grasping the Indian television's attention may still prove just as slippery a  task . Then again, may be it just takes one smart cat to catch another.

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