Star India COO Sameer Nair calls it a strategic investment. Which indeed it is. And it is not the first time that the Murdoch owned network has taken an equity stake in an Indian production company. Star had earlier invested in UTV, but the stake was much lower at 19 per cent.
So why indeed is Star plonking down so much moolah (almost Rs 1553 million) to acquire a 26 per cent stake in a single company? The reasons could be many. One of these is revealed in Star Asia's CEO Michelle Guthrie's statement in the official release. Quoth Guthrie: "As Star continues to expand its services and offer more choices to viewers, we see enormous strategic benefits from strengthening our relationship with Balaji."
Her statement can be interpreted to mean that Star needs a strong entertainment content provider. And Balaji has proved itself to be the best.
Star rules in Hindi entertainment with Star Plus accounting for 40-odd of the Top 50 shows. And it rakes in almost Rs 7000 million for the network each year. Star wants to replicate that success in the other major Indian languages. It has a presence in the Tamil language space with Vijay TV, which it bought out totally recently. But the channel is not the front runner there, Sun TV shines brightly in the southern language segment. Star has in the past tried unsuccessfully to do a strategic alliance with Sun but has failed in that endeavour.
Star is going to need all the content it can get for its cable bouquet as well as its DTH bouquet. Star can leverage Balaji's expertise in content creation into other languages too as it launches language channels or acquires weak languishing ones and injects life into them. But for that to happen, Star will have to create many more Ektas (the creative director and the driving force behind the creative excellence at Balaji). The Star management probably thinks it can do a photocopying job well. And the money will likely go into expanding, developing infrastructure and hiring professionals for the language forays. Also, one could see the launch of channels from the Balaji stable.
Sure there could be benefits such as dividends coming into Star TV courtesy the profitable Balaji. But observers believe that News Corp is not an investment oriented company, it makes investments for strategic benefits. Not for the loose change that comes by way of dividends.
