Television

'With the launch of the kids channel, we are ready to scale up the verticals' : Rajiv Sangari- Spacetoon India MD & CEO

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It has been a long wait outside the ring. After building up verticals in the licensing, publishing and merchandising space, Spacetoon has launched its kids channel to combat against multinationals like Turner, Walt Disney and Viacom in the tough Indian market.

A licensing and merchandising deal with Emerging Media, owner of the IPL winning team Rajasthan Royals, has put the company on a totally different pedestal. Talks are also on with a few other sporting goliaths to expand the L&M portfolio.

Spacetoon Kids TV, however, will evolve as the prime property and will guzzle over 50 per cent of the company's Rs 1 billion investment plan.

In India, the group has floated Kids Media India (KMI), a company that will take care of the TV and licensing business. Kids Animation India is the other arm that will look after the publishing activities.

The shareholding has also been restructured with Japanese firm Animation International holding 51 per cent stake in KMI. Dubai-based Spacetoon Media Group holds the remaining with a small stake as sweat equity resting with Spacetoon India managing director and CEO Rajiv Sangari.

In an interview with Indiantelevision.com's Anindita Sarkar, Sangari talks about the company's growth plans across the verticals.

Excerpts:

What took you so long to launch in India?

Since the germination of the idea way back in 2004-end, we have spent a long time testing the market. As the Indian economy and the TV industry went on a zoom and prices skyrocketed, we had to rethink our strategies as we were going to occupy a niche space. With distribution, marketing and all kinds of operational spends going beserk as Hindi general entertainment channels got launched, it would have made no business sense to launch a kids channel. Frankly, it would have been a business hara-kiri. Now the prices have corrected and things are much more in control. Despite an overall bleak scenario and a tough advertising market, launching at this moment definitely makes more business sense.

The shareholding for the Indian venture has changed with Japanese firm Animation International (AI) holding 51% stake in Kids Media India. Was the delay partly caused by this?

Both Spacetoon and AI have relations since the last 25 years and they have been partnering and co-operating with each other on many businesses together. Hence, changing of the hands in shareholding doesn't have much to do with any kind of interest level subsiding or increasing. It is a strategic move by both partners of re-strategising and restructuring their operations amongst themselves. Most of the East and South East Asian operations, for example, will be monitored by AI, while most of the Western Asian, European and Eastern European operations will come directly under Spacetoon. I would term this as strategic restructuring.

Spacetoon was in talks with investors to raise money. Is that plan still on?

Spacetoon was in talks with a few players and we had already determined 3-4 of them at various stages of our discussions. But most of them wanted to basically take advantage of the position of our fund raising, rather than sharing our passion. Either they wanted majority stake or at some point they wanted us to exit. This did not go with our strategy for India.

Though we realise that for taking our verticals to the next level we require some support, we are equipped as of now to handle it on our own. But if we get an extra push in terms of a partner who can value our strength, experience and hard work which has gone behind making the company and the brand what it is today, we will definitely look at the possibility. India's economy and retail can only grow and we have 360 million kids. We require a partner who thinks and aligns with us for long term.

Did you first focus on developing the licensing, publishing and merchandising platform before stepping into the kids broadcasting space?

That is the business model Spacetoon has followed in other markets. We are doing the same thing here. For over a period of 3 years now, other than TV launch, we have successfully launched our licensing, publishing and merchandising divisions and are very soon launching our own IP programmes.

We are glad that we did not divest then. We have done the tough job of laying out a platform for licensing and merchandising. After the launch of the kids channel, the time has come for us to scale up the verticals.

How much is Spacetoon investing in India?

We plan to invest Rs 1 billion over three years. Out of this, about 50 per cent upwards will be consumed by the TV operations.

Why did KMI decide to launch a kids channel when the genre has actually shrunk a bit last year and the revenue size at Rs 150 crore is still too small to take in so many players?

We need to realise that kids business is not driven completely by TV broadcasting. Unlike general entertainment channels, ad revenue is important but not the only source of income in the kids genre. It's always the ancillary units like merchandising, publishing, etc. which will help it take to the next level. And TV business is a long term game.

'Kids business is not driven completely by TV broadcasting. Ad revenue is important but not the only source of income in the kids genre. It's always the ancillary units like merchandising and publishing which will help it take to the next level'

Earlier, Spacetoon Kids TV was looking at investing Rs 250 million for carriage in delivery platforms such as cable TV networks and DTH. However, that number has been scaled down. Why?

Haven't others too? It's simple, the market today doesn't allow us or anyone to do so. I hear from some sources that most of the top to small TV channels have slashed down their distribution disbursements. And, especially in kids genre, you just can't support such a large distribution budget.

The channel is still not well distributed. How are you planning to tackle this and by when do we see it more visible?

Our focus is not only to tap the Tam cities but also other markets. As of today, our estimates are that we have penetrated over 10 million homes and we expect to do over 15 million by the middle of this year. By year-end, we should be touching 25 million homes. And, don't forget, it's only four weeks since we launched. We realise it will take minumum 3-4 months before we start getting visible across all markets.

What are the distribution deals you with stitched with the MSOs and the DTH operators?

We are in talks with the direct-to-home operators. As far as cable goes, we are available in some Hathway Cable & Datacom networks. We have also signed up other cable operators, particularly for their digital viewers. Distribution is a gradual build-up.

Spacetoon Kids TV will have to jostle with seven existing channels to tap into 360 million kids in India. How do you find space in this tough market?

Each one of us has a different style, programming methodologies, and formats. Our channel will be focusing a lot on moral and social values, packaged with lots of entertainment content.

What is the different positioning you are taking?

Spacetoon will divide the day into 10 planets. Unlike running half-hour episodes back to back, we will be giving the kids a mix of several things. There will be fillers which are moral based, messages, ads, packaging, promos, etc. This will ensure a different look during the whole day.

Do we also get to see localised content as part of the programming mix?

We definitely are looking towards creating localised programming very soon. This will be mostly live action-based programming. There are discussions going on with various producers to this effect.

What are your other marketing plans and spends for the channel?

We will be creating a touch base by tapping thousands of schools in India. We realise that if we have to tap the minds of the kids, there is no better place than their learning ground - school. We are creating a very good value-based school-contact programme, a key area where most of our energy is going to be focused in the first year.

We will also be having events from April onwards in high public areas like malls.

What is the revenue Spacetoon is projecting and how does it break up in terms of the channel and other verticals?

I would not want to put across numbers now. Nobody can predict the forthcoming financials in today's market. But our major revenue driver will be merchandising, which is in full throttle. Following that are our publishing and licensing activities. As for TV revenue, we are expecting it to start from the later part of the year. It will take us some time to penetrate the market and grab space in the minds of the kids.

What are your expansion plans in terms of licensing and merchandising?

We have tapped over 69 licensees in the last 14 months. These are translating into products that will get into the market during the course of this year. We already represent some top companies in the world for licensing and there are few more coming our way in the next few months to make our portfolio more robust and meaningful.

We observed that our portfolio was tilted more towards the boy category. But now with Hello Kitty and Garfield coming our way, I think we have one of the best characters in the girls genre.

What are your plans with Rajasthan Royals?

We are in hot pursuit to come out with products before the first week of April when the IPL kicks off. We have already worked out our strategies to tap the right licensees who will be able to add value to this fantastic brand on the ground level through merchandising.

We have a three-year deal with Emerging Media and are targeting Rs 200 million of retail business in the first year. Since the time is very short, we are channelising all our resources towards this.

We are also in discussions with few more goliaths from other sports, especially big international clubs. We hope to stitch deals with some of them soon.

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