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| Q&A: Vikram Kaushik, CEO, Tata Sky | | 'Pay TV has been a market failure' |
| Vanita Kohli-Khandekar / New Delhi Aug 27, 2010, 00:54 IST |
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 Vikram Kaushik is one of the most fashionable CEOs in the media business. The cut of his suit and the colour coordination of his shirts and ties are always perfect. A self-confessed shopaholic, Kaushik has the air of an elegant, somewhat fastidious, gentleman about town.
It was these qualities that this post-graduate in history brought to the wild world of pay television in India and the entry of Tata Sky, a joint venture between Tata Sons and News Corporation, set the DTH (Direct-to-Home) market in India on fire. In the four years since its launch, Tata Sky has gone to an estimated Rs 1,000 crore-plus in revenues, making it to the list of top 20 Indian media and entertainment companies. Its over 5.5 million subscriber base is lower than that of competitors, but Kaushik reckons that Tata Sky is way ahead on profitability — a sore point in a cut-throat market with six players.
Kaushik, however, will turn 60 in December, an age at which senior managers in the (younger) Tata companies have to bow out. Harit Nagpal, the global head of marketing for Vodafone, will take Kaushik’s place. Though Kaushik is reticent about his plans, it doesn’t look like he is about to fade into the sunset. “I don’t feel like retiring,” he says. Vanita Kohli-Khandekar caught up with Kaushik over a kathi roll lunch on a rainy Delhi afternoon. Excerpts:
People who come into the media business don’t like to go back to any other industry. You have been an FMCG man all your life (HUL, Colgate, Britannia). How do you compare the two?
The intensity of this industry is very high; pay TV is a new category. The pace and, therefore, adrenaline level is high. Other industries, especially FMCG, are mature; the rules are written. Here, for instance in DTH, it is a completely new game. People stay in the media business because of the intensity of the activity.
I am, however, disappointed with the quality of people I see in the media. There is too much opportunism and you have to look for people with integrity. It is probably because unlike in manufacturing, there are large sums of money changing hands here. The rules are unclear, the risks are high and so is the mortality rate. You could be making a huge investment today and six months later you are gone.
How did your years in FMCG companies help in the setting up of Tata Sky?
The first and biggest commonality was that we needed to sell a concept, just like in FMCG. That was comfortable. Only this one was in TV distribution, so I was unfamiliar with the dynamics of the business.
So, we designed the organisation on a functional basis. The people we hired were domain experts and I think that was the best decision — because we were lucky to find a team of talented people. At one time, we had 36 expatriates from News Corporation working in Tata Sky. Everything was new for us at that time. For example, how do you structure content agreements — so we asked lawyers in the US and the UK (where News Corp owns DirecTV and BskyB, respectively). There weren’t enough engineers who knew how to install a DTH system, so we actually went to small technical institutes across the country and trained their trainees on installation. That is how we got 3,000 trained people for installation.
In the FMCG firms I have worked with, like Colgate and HUL, there is a lot focus on developing people, on delegation. I believe my success lies in that. Tata Sky won’t implode when I go. In fact my senior team is intact even as new players have come in.
Then there was the brand. I have done branding for 25 years; we had worked on the rebranding for the entire Britannia portfolio. So I said to myself, “I know this.” We were looking forward to creating a completely new brand. And we had decided against the Tata name, because of the baggage associated with it — it is into cars, housing, tea and so on. And Star was getting a lot of bad press at that time, so that was out. We generated a list of 200 brand names, based on research and focus groups, and then did a deep dive. A shortlist of three went to RTN (Ratan Tata). And he said Tata had to be in the name since it was (then) an 80 per cent shareholder. That is how Tata Sky was coined.
It was a wake-up call for me. Because Tata Sky actually made the job of selling the idea to the trade easier because of the credibility, reliability and trust attached to it. So, the brand part was a great learning.
What was the big difference in the DTH operation in India versus other countries where News Corp offers the service (Italy, the UK, the US, Latin America and so on)?
There were two major differences. India was the first prepaid DTH market in the News Corp portfolio. Everywhere else in the world, DTH is a post-paid service. This meant we had to set up a retailer network (reach 70,000 directly and indirectly) to sell prepaid vouchers, just like telcos.
The second difference was that everywhere in the world the hardware for DTH is free, it is amortised through high subscriptions and, therefore, Arpu (average revenues per user) are higher. Here the benchmark was cable and, therefore, subscription had to be Rs 200 (a month).
Also, consumer dynamics showed that people like to own hardware, and, therefore, we had to sell the box.
The fact is that pay TV is a structural mess and that digital cable is not taking off, so DTH operators don’t start on a clean slate. Is there a way out?
In most other businesses within the value chain — manufacturing, distribution and retail — there is a certain degree of equitability. The manufacturer makes a margin, gives it to the distributor, who, in turn, gives it to the wholesaler and so on. And over a period of time, the volume and value of those margins have been established. Where the margins are higher, say 15 per cent in the agency business, the market has brought the equilibrium. So, now they are under 10 per cent. In broadcasting, given the way things are with cable TV, the broadcasters tend to think: “How much can I extract, or rather, extort.” Therefore, there is a lack of equilibrium, so it is a market failure. Which is why the regulator has to step in. The single biggest change that can happen is for people to start thinking long term across the value chain.
What is the News Corporation view of Tata-Sky?
My view is that they are happy with the successful entry, but disappointed with the levels of Arpu.
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