Star, Zee merge distribution biz in equal JV

Star, Zee merge distribution biz in equal JV

MUMBAI: The broadcasting industry is edging towards consolidation as Rupert Murdoch‘s Star and Subhash Chandra‘s Zee end their 12-year divorce to create a distribution company in India that is also going to house old partners Turner and Den.

Broadcasters and cable TV operators are weighing the impact of an elephant that is being created by the alliance that has the power to marginalise the smaller players.

Star Den Media Services and Zee Turner have floated a new distribution company, Media Pro Enterprise India, that will have 68 channels, including flagship Hindi general entertainment channels Star Plus and Zee TV. Both will have equal stake in the new entity, which will be led by Arun Kapoor as CEO and Star Den CEO Gurjeev Singh Kapoor as COO.

In the old outfits, Star and Den each had 50 per cent stake in Star Den while Zee held 74 per cent and Turner 26 per cent in Zee Turner. 

Calling it a "milestone initiative", Star India CEO Uday Shankar said this will redefine the Indian distribution landscape and lead to a content revolution in the country by creating efficiencies in the value chain. "In the past, there was a lack of shared perspective among broadcasters; the coming together of the two leaders will lead to a larger consensus around a growth blueprint for the Indian electronic media industry."

Broadcasters have been struggling to stay profitable in a bandwidth choked environment where they have had to pay higher carriage fees while subscription revenues from analogue cable have been growing at a snail‘s pace.

"The industry could gain if there is consolidation across the value chain and the consumers are enticed to pay more for watching their television content. There will be pressure to consolidate," a media analyst said on condition of anonymity.

Industry estimates put Star‘s annual subscription revenues at around Rs 9.5 billion. Zee Entertainment Enterprises Ltd made around Rs 7 billion from domestic subscription in FY‘11. 

"There will be no major revenue upside in the short run. But the deal will have a deeper impact after 18 months," said Zee Entertainment Enterprises Ltd MD and CEO Punit Goenka.

The deal aims to create efficiencies in the distribution sector, incentivise digitisation, address piracy issues and enable a content revolution in India.

Said Goenka, "The long-term vision of this venture is to pool together the resources of both the partners so as to address various anomalies of the present analogue market, curb piracy, and introduce transparency by accelerating pace of digitisation in India which would result in benefit to all the stakeholders in the value chain.?

Will more broadcasters find entry? "We are not in talks with anyone, but are open to others. However, the strategic fit is quite complete with the formation of this JV," Shankar said.

The challenge for the new company will be to drive growth within the regulations that have kept the distribution value chain under checks.

Other broadcasting companies and MSOs will have to seek for new partners in a landscape that is set to change. The era of collaboration has arrived.