'Once digitalisation happens, let a thousand channels come' - Sameer Nair

Concluding our three-part series of interviews looking at the year that was and on into 2008, we turn the spotlight on NDTV Imagine CEO Sameer Nair.  In a candid chat with, the former Star Entertainment India CEO offers his take on the entertainment industry, why he feels the TV industry needs a kick up, the importance of not just ambling along, and the potential that 2008 offers.

What were the key points of reference which defined 2007? One would be for you personally and also if you could offer a sense of where the industry is in general?

Well, I left Star TV, in which I was working for about 13 years. But I think 2007 opened on a good note because we did KBC with Shah Rukh Khan and so I thought that was a good swansong of sorts for me. We also got Gajendra Singh from Zee to Star. He was with Zee for I think 16 years and so this was something equally dramatic.

So those were the last good things to do at Star. On a personal level it was of course moving on and setting up a whole new company, a whole new business and preparing for the launch of a new channel.

2007 basically marked preparation for 2008?

Yes! As you can see, it's been all the pre-production and production. And now we get ready for release. So it's been a lot of that kind of hard work. It's been about team building… It's been about company building. It was about resource building and also financial resource building and putting it all together.

I think by the time puts up this interview we will have over 132 people, which is I think a good collection of people across all disciplines.

What were the positives that came out of this year?

One positive of course is there seems to be a lot of interest in all things media, in all things entertainment. So there have obviously been so many more players entering the market, so much more money being put into the market.

So that's obviously a good thing, industry per se. I think a lot of people have announced or started new ventures, which shows that there is obviously place for growth and a place for new players to get into.

There is some level of consolidation, there is some increased activity of international participation in local business. The movie business has gone through the roof.

But was it a good year for the business?

2007 was an interesting year because it, in my mind, remains a sort of a question mark. It will get resolved in years to come as to whether it was a good year or not. But right now everything is too close, so I mean this was the year where millions of dollars were pumped into the system. You know prices went through the roof, newer and newer players getting into it, each man with bigger and bigger claims and promises. Nobody talks the normal figures anymore.

Everything is in a super inflated scenario. It's like the wire where the string is really stretched. So whether it will be good or bad, it is hard to say now. Currently, everyone is into this valuation zone and everyone seems to be so rich.

The rollout of digital cable, which was supposed to proceed in a particular manner, did not go the way it ideally should have. Your views on this?

That is hardly a surprise. There was always this issue about how it would roll out and if it would be mandatory or voluntary. How does it all work? It didn't really come as a surprise that it didn't happen in A or B or C manner.

So effectively nothing of any real note happened?

No! There was no landmark legislation that occurred, there was no landmark regulation that occurred, there was no landmark activity. I don't really think that there has been any major change. The world has not undergone a digital revolution, nor a mobile one. On television, some shows are doing better than others. The gap between Star and Zee narrowed, Zee came within a whisker of Star, than it again fell back. Now it is again coming back pretty much as per calculations. But there was nothing outstanding. It was straightforward.

But for the industry in terms of sports, a lot happened.

Sports was an interesting thing that happened. That was pretty good if you look at the high priced acquisition of the ICC rights (by ESPN Star for $ 1.1 billion).

It is not looking so high-priced now because T-20 was not a factor in that purchase and now it's there as a very high value part of the ICC rights.

T-20 is the best thing that happened to Indian cricket. It completely re-energised sport and completely reignited interest in it. Now between ICL and IPL, it has really brought the sport back. But the price points, because there is no distribution revenue in this model of note, is not robust at all.

The lament is that distribution channels are clogged and yet we have all these channels launching? Isn't that a big contradiction?

Well distribution and then everything that will happen as a result. Some people look at this business and they say that, 'Oh so many new players are launching, there is no space.' On the one hand we talk about how the market is growing, the media sector is growing. The other version is that it is growing but there is no space for new players, which is actually the exact opposite of growth. You know its like saying that the movie industry is growing but let's any not make any more movies.

They are completely contradictory terms. So once digitalisation happens, whichever version they choose to refer it by, I'd say let a thousand channels come. Because water finds it own level, and people decide what they want to see, when they want to see, how they want to see and what they want to pay for and it all sorts out in the end.

But saying let not a thousand channels come, is not progress at all. It does not mark progress for consumers, or for operators. or for anyone as a matter of fact.

What the TV business needs is one nice kick in the butt, like the telecom business got. This is what will help it really surge forward. So far it has been sort of ambling along.

Everybody is expecting that Reliance will give that kick. Reliance is launching DTH this year, Bharti is launching.

This is why 2008 will be a year to write home about. We hope that 2008 will be the year for the industry to really surge forward and make that big leap forward.

Each year we talk of the big leap forward, but it's not happened. 2004, 2005, 2006. You know few things occurred here and there, like suddenly in 2006 the cricket purchase was big. But the rest of the industry didn't keep up. The whole $ 612 million price point (by Nimbus) was based on some assumptions, and those assumptions didn't really come through.

The fact is that all of business is predicated over some basic parameters, which is that people will go to movies, people will buy movie tickets. People will pay their cable bills. Advertisers do need to reach to consumers and they will buy advertising. That's basic, and our problem is that we don't have this in the TV part of the business. We don't have this one little basic matter about people will pay their cable bills which will then be passed on. So it leaves a lot of things in the air when you talk about the television business.

You are talking about pricing, subscription?

It is already priced. Subscription is priced. But when you try and compare talk time, in the telecom context to TV, that doesn't really work. Because the input cost on TV for example is not talk, it is real cash. If people play cricket, make movies, shows, that is like a real cost. It is not talk time. So when you say that every home will pay Rs 5 per month for a channel to see movies and serials, at some point the mathematics are not going to add up. So it is just that these things will get sorted out as it goes along. As more players get into it I think that the industry itself will sort it out.

But there is also the theory that the government will not allow the market to determine costs of TV (and cricket) because other forms of entertainment are becoming too expensive for too many. Multiplexes for example are out of reach for many. So there is only TV. This would mean that tomorrow the IPL will be termed as being of national importance and will become free to view.

You must note that there is no such thing as a free lunch ever, so somebody has to pay the bill. What's been happening in the last so many years is that the advertisers have been paying the bill. The advertiser is the ultimate God who is paying for everybody's lunch.

Currently there is a combination of private equity money and advertisers who are footing the bill. But eventually, the bill will have to be paid by the consumers, who consume content in whatever manner or the price points will have to come down. So either all the price points return to normalcy by which the market settles and everything will sort, or you will have to pay the bill.

Anywhere in the world in a mature TV / entertainment business, you have the twin model (advertising / subscription). That's the way the business works. For us, it's always been immature, fully lopsided towards the one side. Do you know any other market which boasts of 300-400 channels which are all essentially ad supported because distribution as a model is all over the place.

You go to any other country where it is supported this way, you will find 5-10-15 channels. So that's something which has to be sorted. It is not like players have to think that India is unique. And I think this has to happen.

It is just a functional evaluation. This is what it needs, that leap forward. The input cost is going through the roof, return is coming down, and for the majors it is flattening their margins.

For others what would the plan be then? So that, I think that has to happen and as they see that as the defining moment. Whether you define a moment or the moment defines you, in any case the industry will have to define the way forward. Whether it is collective or individual, something has to happen.

That is exactly the contradiction in this. But it needs resolution. Otherwise a lot of these contradictions can co-exist for a long time. Things can go round and round and circle and circle without imploding or exploding.

Something has to give?

Over the last 6-8 months, and with the spate of these new announcements, there has been more addition into the TV space. This is obviously going to create an enormous amount of pressure on the current infrastructure. Obviously we are all new, we wish to make a mark for ourselves, so everyone will do things to try and make a good impression. There will be the existing players, who will obviously look to protect their turf.

But it is at an interesting point because there is pressure on the system. Now this has never happened before, that there have suddenly been so much, forget new channels, so many new platforms that are all coming at the same time. There is this huge interest in the movie business all of a sudden. In the last year and a half all that has happened.

Screens are opening up…

Screens are opening up, It's happening. So, as the pressure increases, obviously people will find newer and newer ways to do things. New minds enter into it, lots of different people, younger people, coming out with even cleverer ideas. It has to go through a change.

So 2008 has a lot of potential?

We hope, though these predictions have been made many times in the past and have sorely let you down. But 2008 seems to have a better chance than most years to make a real impact.

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