In the world of entertainment and 24-hour news channels, there’s really no such thing as too much information—except when it comes to one of the most visible and respected faces in the industry, Subhash Chandra. The chairman of Zee Entertainment Enterprises has been keeping a low public profile since October last year, after two editors at his news channel, Zee News, were accused of demanding Rs 100 crore from Jindal Steel and Power chairman and politician Naveen Jindal to stop airing stories that could damage Jindal Steel. In a sting op, Jindal had taken a video of the attempted extortion and made it public.

By November, the editors were arrested and let out on bail. A month or so later, with the furore refusing to die down, Chandra and his son Punit Goenka (the managing director of Zee) applied for anticipatory bail. The case against the editors is dragging on, and there’s been no move as yet to implicate either Chandra or Goenka.

Meanwhile, Chandra has let Goenka do the talking—at least in public. Even at a formal dinner Zee hosted for editors to mark its 20th anniversary, Chandra said little. But that doesn’t mean that the 62-year-old is ready to be counted out. He has big plans, but so far, he’s not letting on what they are.

For someone who deals in breaking news round the clock, Chandra is playing his cards close to his chest. The industry only knows that he’s planning two new global ventures; Chandra himself gives a tantalising hint when he says each of the global ideas “can add up to as much as Zee’s market capitalisation”. (Zee Entertainment’s market cap is a little over Rs 20,000 crore today.) Making an educated guess based on his past ventures, and from what he lets drop, it seems likely that one venture will be a global TV channel, possibly along the lines of National Geographic’s History Channel, or science and history reality shows on Britain’s Channel 4. But for all anyone really knows, the new channel could as well be on fashion or lifestyle. His other bet is something he’s more willing to talk about: expanding the content and reach of his U.S. television network, Veria Living. In 2011, he committed $250 million (Rs 1,357.2 crore) over five years to develop and acquire content for Veria. “Most of my time in Zee is spent overseeing these new ideas. I will move out when they are on firm ground,” says Chandra.

Pressed for details, Chandra is willing to talk a little about his plans for Veria. “It will grow out of that we now have in the U.S. You can watch it on the mobile phone; this is going to be big,” he says. “We think this will be a break-out product for the TV industry globally.”

In starting two global channels, Chandra is playing in an established, crowded market which will test his understanding of the global entertainment business. And if he’s still the smart entrepreneur he once was.

The new strategy is different from Zee’s current international business, where Indian programming is dubbed in local languages and beamed to 167 countries. After a decade, the international business brings in 13% of Zee’s revenue of Rs 3,040 crore. If Chandra’s plan fructifies, more than half of the company’s revenue will come from the international market. “When we finish with our strategy, we can call ourselves global,” says Chandra.

Global ambitions give Chandra a new dimension, though he has never been short on big ideas. In the late 1980s, when his theme park, EsselWorld, got less than 50% of the projected visitors, he needed a business that would generate cash fast. He believed then that getting into television would be a profitable way out. That was the beginning of Zee. When Zee succeeded, the need for distribution had him start Siti Cable and direct-to-home (DTH) broadcasting company Dish TV. Today, with a 40% share, Dish TV is a market leader though it continues to make losses due to high investment costs.

It has been a long journey for the man whom the industry more or less wrote off a couple of decades ago. No one believed then that Chandra could make a commercial success of broadcasting when he paid $5 million, against the street price of $1.2 million, to hire his first transponder to beam channels through satellite before cable TV arrived. Chandra envisioned several businesses ahead of their times—a flexi-tube packaging company, an entertainment theme park, a cable TV company, and a DTH business. Group sales have risen from nearly Rs 2 crore in 1992 to $2.5 billion now, and market capitalisation from nil to $5 billion.

But several of Chandra’s lofty ideas haven’t quite panned out. His early business, Essel Propack, a speciality packaging company, has a market capitalisation of only $100 million, while EsselWorld is no longer a force to reckon with, given the stiff competition from Manmohan Shetty’s massive theme park, Adlabs Imagica. Siti Cable, the early multi-system cable operator, hasn’t made a profit in five years. Today, the major companies under the Zee umbrella are Zee Entertainment, Zee News, Zee Learn, Siti Cable, Dish TV, EsselWorld, and lottery business Playwin. These are the businesses that give Chandra revenue—as well as a reputation as a successful entrepreneur.

By opting to go global, Chandra is doing what most Indian companies did when their home bases were threatened. Bajaj Auto, for instance, bought boutique speed bike company KTM as it could not mount a direct attack on market leader Hero Motors, or technology leader Honda, which began expanding in India after breaking up with Hero. “No one has come to us to review a globalisation plan but sooner or later, Indian companies have to seek new avenues for growth,” says Jehil Thakkar, partner and head of the media and entertainment practice at consultancy KPMG. And Chandra could be the first in that space.

Veria TV in the U.S. is not a new venture; Chandra kicked it off in 2009 when Zee’s ratings in India were slipping due to poor programming choices. At the time, Veria was pitched as a niche health and wellness channel, but made little headway for two years, and cable distributors were not keen on promoting it. Says Chandra: “In the first two years, even my American staff could not understand the long-surviving concept of happiness in the eastern cultures and how to showcase it without becoming preachy.”

At the time, says Chandra, the Zee board wanted to pull the plug on Veria as it was sucking up too much money and executive time. (Veria is still called the “chairman’s project” within Zee.) But Chandra spearheaded several changes to put Veria on the growth track. One significant step was a branding change, which included a new logo, and re-positioning Veria as a general entertainment channel. That meant Veria could be bundled with several other channels and sold as a package, instead of relying on individual subscriptions as a niche channel. Veria was also distributed through DTH.

General entertainment channels don’t rely on subscriptions; they feed off advertising revenue that is based on viewership data. That data is provided in the U.S. by tracking agency Nielsen only to channels that are available in 45 million to 50 million homes. That’s more than double Veria’s current reach of 20 million.

This means that Veria’s advertising revenue is limited until it can show viewership statistics from Nielsen; Chandra’s target is for the channel to reach 50 million homes by 2015. “The good news is that we get 75,000 to 100,000 new views on DTH every month and that acts as a surrogate for viewership,” says Paul Cestari, general manager, Veria Living.

Chandra’s focus on turning Veria around worked, and today in the U.S., Veria Living is expanding its scope beyond broadcast. It is already test-marketing cosmetics, and there are plans to launch branded food supplements. It will also be opening wellness centres, inspired by the offline activities of Yoga Journal, a popular American yoga magazine, which conducts conferences and workshops throughout the year to enlarge its franchise.

Long-time analysts of Zee, such as Nikhil Vora, equity research analyst with investment firm IDFC, still don’t track it closely as there are no commercial disclosures available on Veria Living or the new channel. But Chandra says there are no doubts about Veria’s viability and that there is an opportunity in going global.

Content is not being ignored in all this. Chandra is ensuring the creation of original content, to be able to make rights available across mediums, including the Internet. Says Raymond Donahue, head of programme sales and content distribution of Veria: “We found that buying rights across mediums is always a problem for specialised programming, and we are ensuring our content library will eventually work to our advantage.”

It may be too early to say if Chandra will succeed in creating a winner in Veria. But if there is anyone who can navigate the labyrinth of the global entertainment business, it is him. A decade ago, Chandra fought off media baron Rupert Murdoch’s bid to own Zee. Last year, Chandra tied up with Murdoch’s channel Star to create a venture to jointly distribute the two companies’ channels.

The show of unity with Murdoch comes at the right time; the industry today seems to need all hands on deck to be able to bargain effectively for better regulations with the government. Zee will gain if the government allows broadcasters more room in pricing channels to distributors.

Punit Goenka, the managing director of Zee, is keeping the show going at home  as father Chandra looks for new opportunity abroad.
Punit Goenka, the managing director of Zee, is keeping the show going at home  as father Chandra looks for new opportunity abroad.

Chandra knows that he’ll have to make a go of his international ventures, given that there are increasingly loud voices back home casting doubts on Zee’s ability to withstand competition in a digitised market. A manager who used to work with the group says, “Zee is hardly a professional company and decisions are taken at the family dinner table, rather than in the boardroom.”

A recent report by consultancy firm KPMG points out that in the general entertainment space, which accounts for more than 70% of revenues for Indian broadcasters, Zee did not have a fiction programme in the top five. In the non-fiction genre, it had two long-running shows—Dance India Dance (No.4) and a music competition Sa Re Ga Ma Pa (No. 10). Even in 2012, Zee could not launch a show that featured in the top five. Viacom18 Media, a joint venture between Viacom and Mumbai-based general entertainment channel Network18, had four programmes in the top five fiction and non-fiction categories.

The broadcasting market is split among four players: Star, Zee, Sony, and Viacom18. Despite higher viewership, according to unpublished data, Zee’s advertising revenues are close to the No. 3 player Sony, as it prices advertising spots cheaper. In viewership ratings, Star and Sony lead, though Zee sometimes grabs the top spot. But here’s the thing. Advertising revenue has so far been based on television rating points or TRPs, a somewhat ad hoc method of calculating viewership. With cable digitisation, viewership data can be collected far more accurately and scientifically. There will be far more data available on what people are watching, and advertising will be based on that data.

With analogue cable, broadcasters did not know their subscriber base accurately. With digitisation, they will now know their audience, which is prompting them to invest more. Already, the likes of HBO are available in HD channels for a higher subscription in digital and DTH.

The KPMG report adds that the revenue of broadcasting companies in India will more than double to Rs 46,400 crore by 2017, as subscription revenues increase from 36% of overall revenue in 2012 to a projected 48%, driven by digitisation and the proliferation of DTH. Advertising during this period is expected to grow at 14%, and broadcasters are already trying to get their share. To gain a larger market share of advertising, Star paid what market observers call an “unviable, substantial” premium to buy out ESPN for its cricket rights. A Viacom representative said they were planning to expand investments in the country after having understood and gained a reasonable footprint in the first phase of investment through Network18.

In this competitive space, Zee hasn’t led from the front. It did not enter the bidding for expensive cricket rights, though the sport brings in a huge chunk of advertising. Its grip on the Hindi heartland has been loosened by Star, and later Sony, buying of the rights to the hugely popular game show, Kaun Banega Crorepati, hosted by Amitabh Bachchan. “Zee’s long-term growth will depend upon its ability to invest upfront to lead the market, something it has always shied away from,” says Vora.

It’s not all bad, however. Zee is the only national broadcaster with a strong regional presence; it has six regional language channels—Punjabi, Marathi, Bengali, Telugu, Kannada, and Tamil. In effect, Chandra and Goenka are increasing the size of the pie. Regional channels and the like will give Zee secular growth.

So far, it has been business as usual. The company generates Rs 500 crore in net profits each year and cash of Rs 2,500 crore. Zee’s return on capital employed has been a healthy 22%; to keep it at this rate, Chandra will have to deploy Zee’s cash even more gainfully, especially as he says he’d like Zee to grow at more than 25% annually.

The multiplier effect, to borrow jargon from economists, which is what Chandra is known to aim for, will come from Veria and the unidentified channel. Meenakshi Madhvani, who worked with Zee in its early days and heads media research agency Spatial, agrees: “His mind will certainly not be on running Zee but on creating newer, bigger value in the entertainment space.”

Chandra has already demonstrated his understanding of the U.S. market by putting Veria back on track. He now needs to make his plans for future growth clear, hang in there, and make it a success if he wants to call himself a global media baron.

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