The Viacom18 story: From Rs110 crore to Rs1100 crore. What’s next?
The Indian media industry has many success stories to boast of in the last few years. Whether it was the fall and rise of heroes like STAR or the Zee story that always kept the company on top if not ahead of competition or the Sony saga of survive and grow with strong second brands such as SAB and Max or the Viacom18 story, Indian broadcasting has many interesting tales. The Viacom18 story specifically, which began as a challenger brand’s journey, has become a favourite for many. When two media entities – Viacom and Network18 – joined hands in 2007 to create this Group, the industry preferred staying in the ‘wait and watch’ mode.
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One year later, all conversations were about whether Hindi GEC Colors would be able to survive the competition of the space. 2009 turned out to be about the unbelievable rise and rise of Colors. But that story changed in 2010, when the channel lost its top spot and the long-held label of an expensive proposition almost came back to haunt Colors. But that is not how Viacom18 is viewing it. For Haresh Chawla, CEO, Viacom18, the company has achieved its targets for Phase One. He pointed out, “Not many people understand what we have done here. In 2007, we had MTV, VH1 and Nick and total turnover of Rs 110 crore. Cut to 2010 end: we got Colors in the mix, the films business in Viacom18 Motion Pictures, Sun18, Digital business and Consumer Products (CP) – and this is around Rs 1100-1200 crore. When we began back in 2007, we were clear we wanted to be in the top three media networks in the country and we have achieved that today.”
While each brand of the group had a certain strategic direction, at a broad level, Viacom18 took a two-pronged approach to meet with competition – work with a challenger’s mindset and create a sizeable business in the shortest time possible. The challenger approach was a need of the moment. The company had come in significantly late into the game – players like Zee Entertainment and STAR India have had stints long enough to be credited with building the television domain in India. Chawla agreed and added, “All of our other competitors have built their business over 10-15 years, which is why we had the mindset that we would challenge every rule of the game. And we were very aware of the fact that the other key challenge for us was time because this is the youngest business of its size and stature.”
The Internal Focus
And hence came the “internal focus”. The industry takes various yardsticks to measure how well Viacom18 was performing – in some occasions it is ratings and some others it is ad rates and revenues. But for Viacom18, the measurement was the Group’s ability to create challenger brands and the timeframe in which it managed it. Chawla stressed, “That is the context one should examine Viacom18 in. Each of these brands is amongst top one or two in its area of business. I am sure you hear of MTV’s competitors and how they have entered the market in the last three or four years. The fact is MTV revenue is two and half times its nearest competitor. Colors makes more money than its nearest competitor if you compare on an equal basis. It is a much more efficient service right now. From the number five position, Nick disrupted and created its own niche and now has been leading for two and half years now. It has contributed immensely to our CP business.”
In addition to the television “services” (as Chawla puts it), Viacom18 has kept itself busy with the digital business, the motion pictures business, consumer products and also its distribution set-up, Sun18. These together form Viacom18 at the end of Phase One. Irrespective of how much ever Viacom18 houses, the key talking point of the company is, and for some time would continue to be, Colors.
Colors: The War is Not Over...
Colors has to be one of the most talked about channels in the last three years. The reason was single and simple – an unbelievable growth story that took it to the top of the GEC charts and kept it there for almost a year. But those who know Hindi GEC, know that the story only begins once the channel is on top. Whether Viacom18 admits it or not, Colors left the “challenger” status nearly two years earier, when it became the genre leader. And because at the end of the day, the industry plays the perception game, the drop to number two was not an easy one for Viacom18, especially given the view that Colors outlay was more expensive than any of its competitors – a point that Viacom18 has never agreed to. Speaking on how much of a worry was the change in this leadership position for Viacom18, Chawla said, “We are in a tough market, and we have worthy competitors. But you have to realise we are a young brand and Colors more so. I say it with all humility, but resilience was something we needed to learn, and we have.
But it is not as if the war is over or the battle is won. We were different when we launched, whether it was the number of programming hours or the cost structure and we have to stay that course.”
That course includes the channel’s approach towards programming, scheduling and the attempt to bring disruption and innovation in time bands that are yet under-tapped. For many, the channel had a setback of sorts when Rajesh Kamat, who had earned a new-found prominence in the industry for the launch and growth of Colors, exited the company in April 2011. This was soon followed by conversations on how Haresh Chawla would now run the show. But even before one could register all this, Viacom18 announced the appointment of industry veteran Raj Nayak as the CEO of the channel, and Chawla made it very clear that his role remains to give strategic direction to the channel – not interfere in the everyday operations.
And Another Interesting Game Begins
Those who know this business know that the return of Nayak to mainline broadcasting will only make the game more interesting, and hence up go the industry expectation from Colors once again. Drawing the roadmap ahead, Chawla informed that the first thing on Colors’ agenda was to increase programming hours. He said, “In the core primetime, we are slot leaders. The hit is coming due to the amount of content that competitors have put out in time bands, beyond primetime. It was a smart move to add content but there is a cost factor associated with it. We will gradually up the number of hours – we won’t go to the extent other people have gone to but clearly we will have to increase the number of content on our service because that is the only way to address the gap.”
For starters, Colors is adding content hours to its evening time band. The channel has already launched a show in the 7.30 pm slot and according to Chawla, more such announcements are on the way. “There is no panic,” Chawla said, and added, “There is cause of concern but that happens every day when you are running any of these channels. Once we ramp up our programming, we would be in the leadership position again.”
Afternoon and weekends have been a sore point for most channels and Colors is not in a hurry to challenge that space yet. “People have tried weekend fiction but that has really not given them results. Afternoon is also not giving returns if you do a cost-benefit analysis. After we expand evening primetime, we would think of innovations that can challenge the afternoon and weekend paradigm.”
Big Revenues, Big Spends
Industry figures showed that for the last three reported quarters (April 2010 to December 2010), Viacom18 made a revenue figure of Rs 833 crore. This included all channels – the film business or the subscription business has not contributed to this in any real sense, yet. Nearly 90 per cent of this revenue number has come from Colors. Impressive as the number is, since it brings the channel in league with Zee TV, and close to Star Plus, for many, Viacom18 was hoping for more. But the only comment Chawla had to give on that was, “We had set very aggressive targets internally and we are performing very close to them.”
He explained that since Sun18 was only six months old, and the company has only just started closing all contracts, the real numbers for Sun18 would start coming in from next year. The corresponding expenditure for these three quarters is Rs 764 crore including the core and non-core expenses. That brings the operating margin of three quarters numbers to Rs 69 crore only. From an industry standpoint, for the success that Viacom18 channels had managed, the number is on the lower side.
Chawla however put these numbers in perspective and said, “Our focus is to build each of our brands to a position where they are impregnable. As we move forward, we hope that the margins will also grow because subscription revenues grow and that would go to our bottom line. But that said, we would continue to make sure that our decisions are measured so we don’t starve any brand at any point in time.”
Chawla noted that the Viacom18 JV had begun seeing profits within the first seven to eight quarters of the formation of the company. Viacom18 had launched with MTV, Nick, VH1 and Studio18 that saw many avatars and ownership patterns before it came back in the Viacom18 fold as Viacom18 Motion Pictures in late 2010.
Kids’ Channel On The Anvil
In MTV, Viacom18 had a genre leader and the challenger DNA would not fit the bill. Chawla asserted that for MTV, “we had to challenge ourselves on how to grow the business”. Yet MTV has seen some tough competition in the space in the last two years coming from channels such as Bindass. For Viacom18, the benchmark for a channel like MTV is not just ratings. While ratings was one of the metric on which Viacom18 measured MTV, two other metrics were to build a brand that influenced the youth and to be able to engage MTV audiences on more platforms than TV such as through digital, products and on-ground events.
Chawla explained, “All research continues to show that MTV is loved and respected amongst the youth and that is not the position that our competition enjoys. MTV was to be built as a cool brand, but more importantly as a brand that the youth respects. We had to ensure that the values that MTV stood for is not diluted. Youth wants to wear MTV on their sleeves, which is not the case for our competitors. War of ratings is very different. If the content is tantalising, it would get ratings but what does it do for the brand? Why do you think MTV is getting two and half times the revenues of its competitor?”
In the last two years, MTV revisited its positioning and added reality content in a big way to the channel – a move soon seen by other music channels too. But in the process, channels like 9XM managed to corner ratings and industry conversations began on MTV launching another music-only channel. Even if that was the intention at one point, it is not on the immediate agenda anymore. Chawla informed, “Music is the staple of youth channels currently. The genre has a cap on the growth it can achieve because music is available across the board. Therefore, there is a natural restraint to give standalone music service. This is our view at the moment but we are examining. Our focus is to grow MTV, as there is a lot we can do there. As we go deeper, we need to be on the path of being the most respected and loved brand in the youth TG.”
In 2009, Nick too broke out of its “challenger” shackle, when the kids’ genre saw a tough fight on the top spot. For Viacom18, ratings is one factor, the other for Nick too is about being able to engage audiences beyond TV. For ‘Let’s Just Play’ or ‘Young Astronaut’ were some initiatives in that direction that engaged young kids and their families in a positive way. “Plus we have been able to do a lot of consumer products around Nick properties. We have in fact taken that a step ahead and we have for the first time rolled out a range of products called ‘Pick a Trick’ in the market, and around this we would launch a show,” said Chawla.
Even as Nick and related consumer products are Viacom18’s presence in the kids’ genre, this is one area where the company has more planned in terms of new services. “Our competitors have more than one service in the space. One of the focus areas for us is to examine how we move forward by increasing our level of engagement or by increasing our services – both on analogue or digital depending on what would make sense,” said Chawla.
Viacom18 may not have brands that are in the challenger space anymore but the company has worked on building the DNA of a challenger. The company’s real fight is against time and Haresh Chawla has ensured that the company operates fundamentally different from other companies. He said, “Three years ago the target was to build something different, and at end of phase one, we have achieved it. We have seen early fruits and now we are ready to go much deeper, to become a much stronger entity with many more channels. Our focus would still be to have leading brands, and not one leading channel and nine flagging, as you will find in other media companies today. Each of our brands is run as a full unit and has an owner who speaks on this brand. This will not change.”
The Next Big Push
The road ahead would continue to see Viacom18 grow its franchise. The company will add to each of its verticals of mass entertainment, specialised channels, consumer products, films business, digital offering and distribution network. Immediately on the cards is the Hindi movies channel launch.
Regional is on the company’s agenda both in terms of channels and films, though for films, the target window is by 2014. In addition, the films business that has finally settled as Viacom18 Motion Pictures is another big area for the Group. The films business was integrated in Viacom18 in the last four months. “And in that much time, we have lined up productions in the space that will squarely take us in the top two players in the space. We are hoping this would be a fairly sizeable business shortly. We have made huge progress in the last few months. We have movies with Abhinav Kashyap, Anurag Kashyap, David Dhawan, Abbas-Mustan, Amitabh Bachchan. We have already launched a specialised division called ‘Tipping Point’. We are in project development stage with several makers, so we are very confident of the growth in this sphere.”
Digital has been high on Viacom18’s agenda. Through its brands like MTV, the company has built communities and online properties, “silently and organically grown such as In.com or our social media following” as Chawla puts it. In the next wave, this would again be an area of focus for the company. Does Network18’s investment in AETN18 limit the kind of specialist channels Viacom18 can launch? Chawla replied, “No, Viacom18’s focus is entertainment. History or any other of AETN18 channels is a specialised niche channel and Viacom would be specialised entertainment channels - there is no overlap of any form.”
The big push for the group however will come from subscription revenue. Right now, around 12 per cent of Viacom18 revenues are coming from subscription and it has very little international subscriptions to speak of. For companies such as Zee and Star, 38-45 per cent of revenues can come from subscription. Zee TV recorded Rs 1127 crore of subscription revenue in the three quarters of April 2010 to December 2010.
“We currently lag behind our peers because we are late entrants. Time, as I said, is our first challenge. We entered as a bouquet much later and therefore the challenge ahead is catch up and how soon we do it. Catch up we definitely will, but how soon we do it, is the question. It is like Colors – people have been able to hit this kind of revenue in nine to 10 years but we managed it in two and half years. On subscription revenues too, our focus is to catch up as soon as we can and the whole digitisation of the market is helping us. We are hoping to close the gap b y 2014. We have to find a way as quickly as possible.”
By 2014 in fact, Viacom18 is hoping to add channels or partner channels in each of its verticals. “But we won’t add anything for the heck of it, we would do it only when we are sure that it fits our DNA of creating leading brands,” stated Chawla.
