'Love Marriages' In The Broadcast Space: An Analysis

A look at the recent wave of deals in the broadcast space.

Merger. Acquisition. Buy. Sell. Words like these have dominated the Indian broadcast space for the last 24 months. Through acquisitions, broadcasters have entered new territories, foreign players have re-entered this market, and arch-rivals in the distribution space have found common ground to lay the foundation for new beginnings.

What explains this trend? Is there a pattern therein? That's what this article attempts to find out. But first, a look at some of the noteworthy mergers and acquisitions that have taken place in the recent past.

This year, Viacom18 completed its merger with Prism TV, a move that brought five regional channels - Colors Kannada, Colors Marathi, Colors Bangla, Colors Odiya and Colors Gujarati - into its fold.

Broadcast giant Star India recently sealed the deal with MAA Television Network - comprising MAA Gold, MAA Music, MAA Cinema and MAA General Entertainment - to enter the Telugu market. In January this year, Star and HBO entered into an alliance that enabled Rupert Murdoch's News Corp-owned entity to air HBO's originals on TV (English channel) and online (Hotstar). In fact, this was the deal on the back of which Hotstar introduced a paywall to simulcast 'Game of Thrones'. The deal also brought shows such as 'True Detective', 'Silicon Valley', 'Veep' and 'Leftovers' into Star's portfolio.

Sony Pictures Networks ended 2015 with a handshake with ESPN. Previously, the global sports giant was associated with Star India for its India presence. In 2012, when Star decided to go solo, ESPN left the market, ending a 17-year-long relationship between the two. After a three-year-long 'India hiatus', ESPN returned through Sony-ESPN, now a formidable force in the country's sports broadcasting space.

But the maximum number of sports channels and marquee sports properties - barring the Indian Premier League, of course - were still with Star. Sony then acquired Ten Sports Network from Zee Entertainment Enterprises for Rs 2,600 crore, a move that made sports broadcasting in India a one-against-one battle between Star India's Star Sports and Sony Pictures Networks' Sony-ESPN. Just a year before it was acquired, Ten Sports Network became profitable.

In turn, Zee bought Anil Ambani's Reliance Broadcast Networks (RBNL), a move that took the network to the Bhojpuri market, where RBNL's Big Ganga is the market leader. The deal will also give Zee more teeth in the radio business, as RBNL's Big FM will have 59 channels by the end of 2016; the network has spent Rs 116.9 crore to add 14 new channels to its existing 45.

Putting speculations to rest, direct-to-home (DTH) players Dish TV and Videocon d2h (Vd2h) made a joint announcement last month - the two merged to create a new entity Dish TV Videocon, which will have a combined subscriber base of 27 million.

What explains this wave of acquisitions and mergers? What does it say about the direction the broadcast industry is headed in? And what are the perils of consolidation, if any? We asked a few experts in the business, to share their views on the subject.

Edited Excerpts:

Sudhanshu Vats, group chief executive officer, Viacom18:

I think the theme of consolidation applies not just to the broadcast sector but to the entire M&E (media and entertainment) sector. We've seen this with DPOs (distribution platform operators), radio operators, and film exhibitors - it's a crosscutting trend. At a macro-level, the rationale for it is simple. Our sector is nascent enough to gain from consolidation and the existing level of fragmentation is quite high. This makes it only natural for players to look at inorganic growth options.

Acquisitions allow incumbents to enter whitespaces or bolster their existing offering without losing too much time. Specifically, in the broadcast sector, the value of synergies that can be captured through acquisitions - across sales, commercial, distribution, technology and content - is extremely high at this juncture, given the preferences of the consumer and trends in the advertising (industry) and submarkets.

If you look at the data, there's a long tail number of TV channels that are driving limited viewership. These businesses will need to become sustainable soon and consolidation is a viable option.

There's no simple formula as these are complex transactions with several unknowns. However, I'm a strong believer in the importance and role of culture when it comes to the success of inorganic growth. Each organisation is like a living being with its own DNA. Efforts must be made to ensure that both, the host and the target entity, can emerge post the transaction with a common, winning DNA. Most other aspects tend to fall in place but the 'culture piece' can make or break an integration process.

Girish Menon, director, Media and Entertainment practice, KPMG India

The broadcast space has been consolidating for a while now. The driver for this has been the need for large GEC players to expand - first regionally, and then into various new genres. Over the past few years, as advertisers expanded their budgets to target smaller towns and villages, and became more focused on different micro-markets and demographics, the importance of having a regional presence and a wide-genre portfolio, grew.

A large portfolio and reach is also very beneficial in negotiating carriage and subscription deals with MSOs (multi-system operators) and with DTH companies. Scale matters in the broadcasting space, especially when it comes to matters relating to the cost of content.

Consolidation began with the regional space and then moved to 'genre deals'. Today, barring some players in the South, the market is a largely consolidated one.

Tavinderjit Panesar, chief executive officer, Video Business, Hathway Cable and Datacom:

Players in the broadcasting segment have been consolidating to create better synergies in offering a wide range of channels within their respective bouquets. They have been entering the regional space to build reach. For DPOs, consolidation is a step towards reducing infrastructure costs and offering better customer delight.

In light of the new regulations in the broadcast space, broadcasters and DPOs will have to work together to make sure that content is seen and consumed by the customers. We see this as a great opportunity to collaborate with and further strengthen our relationship with all broadcasters. We will work towards aiding them in meeting their objectives that include enhancing reach and distribution. This, in turn, would help translate into higher distribution fee for DPOs.

RC Venkateish, former chief executive officer, Dish TV:

I don't think there is a wave of acquisitions. What is happening is, businesses are spreading their presence. The Dish TV-Videocon d2h merger is a consolidation which will now mean one player will have over 27 million subscribers. The merger has helped them broad-base their presence. It makes sense.

This article was first published in our magazine afaqs! Reporter on December 1, 2016

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