Television

'We are targeting a 50% growth in 2006-07 on the back of the Fifa World Cup' : Sricharan Iyengar - ESPN Software India Ltd vice president sales and marketing

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ESPN Star Sports (ESS), a monopoly in satellite sports broadcasting for years, has found challengers like Ten Sports, Max and Zee Sports with cricket content being fragmented. The latest thorn in the playing field is Harish Thawani who walked away with the coveted four-year India cricket rights from BCCI (Board of Control for Cricket in India) for a humungous $612 million.

For ESPN and Star Sports, the running in the current fiscal has been particularly tough. India-Zimbabwe series was the only India-playing cricket property ESS had. Market observers say subscription revenues from cable TV have seen a substantial dip, with various estimates putting the fall in the region between Rs 1.3 billion to Rs 1.7 billion.

But ESPN Software India Pvt Ltd vice-president, sales and marketing Sricharan Iyengar has strongly dismissed these as "baseless rumours" in the market. According to him, the two sports channels have become strong brands which consumers want because of their all-round sports content. The company has managed to sustain its subscription revenues from cable TV operators, he says. Besides, direct-to-home (DTH) has thrown up an added opportunity even as Dish TV has managed to gather close to one million subscribers.

In an interview with Indiantelevision.com's Sibabrata Das, Iyengar talks about the important properties that ESS has for the next two years including the Fifa football World Cup. Responsible for overseeing the marketing and distribution functions of ESPN and Star Sports across South Asia, he says ESS has a target of 50 per cent growth in revenues for the 2006-07 fiscal. He also elaborates on how ESS has created a wholesome sports network while pursuing with aggressive buying of cricket rights.

Excerpts.

Having lost sizeable amount of India-playing cricket, has ESPN Star Sports (ESS) entered into a phase of de-growth in subscription revenues?

We have been able to sustain our revenues in the current fiscal (ended June, 2006) on the back of other sports like football and hockey. We have achieved this despite the absence of key driver programming. The only India-playing cricket property we had was the India-Zimbabwe series, but we had to share it with Doordarshan. This shows that the ESS brand stands for delivering all-round sports. And it is this that makes us optimistic about the future.

Does this mean that you will return to the growth path in the coming year?

There is no reason for us to feel that the business is unhealthy. We are, in fact, targeting a 50 per cent growth next year on the back of the Fifa World Cup and two India-playing cricket series. Actually, for the next two years, we have 9-10 driver events one behind the other (including India-South Africa, India-England, Natwest, Asia Cup, India-Australia, VB series and Euro Cup). We see healthy growth from the hotel business as well which we started two years ago. The peripheral markets like Pakistan, Bangladesh and Sri Lanka are also expected to grow. Significant contributions will come from direct-to-home (DTH) with the new operator, Tata Sky, preparing for launch by the middle of the year.

But isn't it hurting to be off several cable networks like ICC in Pune?

The de-activation rate is just 7-8 per cent. The fact is that the viewer wants our channels because we have a spread of content across sports. Which is why in DTH, we are charging Rs 40 per month on a 100 per cent declaration. That is the power of the brand. As for our contract with ICC, we had certain commercial demands which were not agreed upon. We have consciously sold DTH in Pune. There are 20,000 people who have bought DTH in that market. For all the hoopla about we not having cricket content, all this seems to be negotiating talk. There are short term bottlenecks, but these are taken care of by total market economics.

So what are the goals you have set to achieve with the World Cup?

We expect the strong content will provide us the handle to get our channels back on some of the cable networks where we were off and drive in higher revenues. Besides, it will help us reduce the average credit period in the market. With the World Cup, we will also start focusing in rural markets. We have packages for these operators - starting from Rs 3,000 per month. What we need to do now is sell them.

How will you use the World Cup to drive your other football properties?

We plan to make the World Cup bigger than India cricket. That, at least, is what we will strive for. The frenzy has to flow into the rest of the football properties that we have and drive in more viewership for the English Premier League (EPL) and Spanish League. The World Cup will create a bunch of new superstars who audiences will follow even after the event is over. Undoubtedly, the two leagues where these superstars will play are the EPL and the Spanish League. We hope to improve the stickiness for that kind of football as well. The big challenge for us is to exploit the World Cup in driving a new spike for football in future.

'We should have marketed EPL and PHL five years back when we dominated cricket content. As market leaders, we should have used the opportunity to popularise multiple sports as drivers'

How are you promoting and marketing the World Cup?



Consumer interest levels are high and the World Cup offers us a brilliant marketing opportunity. On the content front, we have designed special line of programming as a build up to the event. We have already started from 13 April a 13-episode series that will bring alive the magical moments from World Cup performances of Pele, Maradona, Platini and others. Starting from 22 April, we have Fifa Marathon which profiles the past and the present stars, the teams who have and will make a difference at the World Cup.

And from 3rd-24 May, we will show Fifa Preview, a series that will profile stars, coaches and also analyse each nation's prospects against teams within their groups. Then there is a series of six half-hour programmes that will feature stories on the most surprising and shocking results in the World Cup. (Fifa Stories from 25 May-1 June).

We are also doing contests around the World Cup. We have a tie up with Adidas for identifying nine kids who will be sent from India to carry the Fifa flag. We will invest heavily in hyping up the World Cup - even in pubs and public screenings. It is a big bang product for us and we will do extensive marketing around it.

Is ESS's entire focus now on shifting from a cricket-led to a wholesome sports network?





A very large part of our focus is on how to develop alternative sports and generate viewership for properties like football and Premier Hockey League (PHL). The challenge is to diversify into more driver sports. Like in the US which has a love for baseball, basketball, American football and ice hockey. As our content has a wide spread of leading sports events, we have to create value for the entire network. While we are broadbasing our channels in other sports as well, we recognise the value India-playing cricket has in this country. We will continue to follow an aggressive policy of buying this cricket so that we can drive our channels to greater growth in future.

Does that explain why ESS made a desperate bid to grab the India cricket rights from the Board of Control for Cricket in India (BCCI)?





There was no desperate bid from us. We are not in investment mode. We made our calculations and believed we would have made a profit on the amount that we bid had we bought it at that price. Perhaps, startups like Zee Sports have their own strategies and feel that they need to be in investment phase.

Why then did you revise your bid from $230 million (global rights including India) to $308 million and subsequently to $400 million (just for India territory)?





Since our first bid, the rates have gone up and new revenue streams of DTH have emerged which was not there two years back when we made our estimate. Even IPTV is emerging on the horizon.

How big is DTH today?



With Tata Sky coming in, we will see quicker absorption of new technologies. This will expand the market size for addressability. Already, we have Dish TV claiming close to one million DTH subscribers.

Have you concluded deals with any IPTV players?



We are in talks with Reliance Infocomm, Bharti, MTNL and BSNL. We expect some form of IPTV to launch by the year-end.

'The Chennai experiment has killed the market with just five per cent of TV homes watching pay channels. Given our Pune experience, it is ridiculous to believe that such a small TV viewing population is wanting to watch sports'

Why do you think no headway is being made on the conditional access system (CAS) front which will speed up the rollout of digital cable TV?





The CAS meetings have become shouting matches with the main aim being to paint the other side black. All are bothered about their own selfish interests. Nobody has a genuine industry perspective.

What is the perspective you have?



Unless each value chain works, the system will crumble. There is no joint interest in pushing the technology. As long as the transition is seamless, we do not have a problem. But it should not become a fiasco like in Chennai. DTH is not mandated. So why have a mandated CAS? The way we see it is that a vast majority of consumers in these CAS cities are happy in paying their cable bills for the services that they currently enjoy. There is only a small minority who want to buy less channels and reduce their cable bills. Let these customers be given a choice of migrating to CAS and buying set-top boxes to pay for the channels they want to watch. Why disturb the entire city and create blackouts?

Aren't broadcasters unnecessarily worried about the lack of infrastructure for the smooth rollout of CAS?





The Chennai experiment has killed the pay-TV market. I don't want to get into who is responsible but the fact is that we have just five per cent of TV homes watching pay channels. And given our Pune experience, it is ridiculous to believe that such a small TV viewing population is wanting to watch sports.

Aren't the cable operators better prepared this time for CAS rollout than in 2003?





Well, the last mile operators are certainly more open about CAS this time because of impending threat from new technologies like DTH and IPTV. But there are other issues and the entire industry has to get together.

Are you in support of the downlink policy?



It is the government of India who decides the policy for the country. All we are saying is that we should know in advance what events are going to be shared with the national broadcaster so that we can work out our business model accordingly.

Wouldn't you prefer exclusive content which you needn't share with Doordarshan?





Yes, exclusivity would help drive our affiliate revenues better.

But doesn't it compensate with the advantage that you would have by selling advertisements for DD as well?





The incremental ad revenue from DD may not be enough to offset the subscription revenue downside that we would have to suffer throughout the year if we are to lose exclusivity. Yes, downlinking policy is going to limit my business. But we are willing to live with it, no issue on that. All that we want is more clarity and we don't want it with retrospective but prospective effect.

Have you worked on minimum guarantee (MG) as a model to ramp up subscribers from cable operators?





We have not used it as a business model across the country except in a few markets like Bihar.

Would you support cable networks in markets where your signals have been de-activated or is this weapon blunted by the truce on the ground among the operators?



We will definitely do all that is possible to remain the most widely distributed channel. This includes supporting new technologies, providing decoder boxes to new operators wherever we can, and funding free-to-air (FTA) headends.

Is ESPN Plus ready for a commercial launch?





We are toying with the idea of a third channel but have put it on experimental mode. We are yet to decide on what final shape it should take.

What are the lessons ESS has learnt over the last few years which has seen the fragmentation of sports properties like cricket?





We feel that we should have marketed EPL and PHL five years back when we dominated cricket content. As market leaders, we should have used the opportunity to popularise multiple sports as drivers.

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