NDTV: Doing biz in style

Monetising the lifestyle piece is a good idea, as is the buyback of bonds at a discount.

The NDTV stock rose 7.5 per cent on Friday as NDTV Networks, the non-news subsidiary of NDTV, roped in a strategic partner, Scripps Networks, by giving it a majority 69 per cent stake in NDTV Lifestyle. The deal values the lifestyle piece at $80 million.

Besides, NDTV also bought back convertible bonds at a fairly good discount, which will ease the strain on the company's balance sheet. Analysts believe approximately half the $55 million that Scripps is bringing in would be spent on the lifestyle channel, NDTV Good Times, while the rest would flow into NDTV Networks. Clearly, the alliance with a foreign partner and the financial resources should help improve the lifestyle channel's content.

In fact, both from a strategic and monetary point of view, the sooner NDTV is able to place out the 26 per cent stake in NDTV Networks, that it recently bought back from NBC Universal, the better. When NBC Universal acquired the stake in early 2008, it had valued NDTV Networks at close to $600 million.

Meanwhile, the September 2009 quarter didn't see any meaningful improvement in NDTV's performance, with the broadcaster posting a net loss of Rs 88 crore on an increase in consolidated revenues of just 16.7 per cent at Rs 140 crore. In fact, revenues from the news operations actually fell 6 per cent, thanks to a drop in advertising revenues. Not surprising, since both the English business news channel, NDTV Profit, and the English news channel both face intense competition in their respective markets.

The launch of ET Now and the recent alliance between UTVi and Bloomberg, in the business news space, will make it even more difficult for NDTV Profit to sustain viewership. While operating losses are no doubt lower year-on-year, NDTV will have to spend on new content and marketing, especially for its general entertainment channel, NDTV Imagine, and that could push up costs. In fact, costs are already up on a sequential basis.

While NDTV Imagine now attracts more than 100 gross rating points, analysts feel the channel hasn't cashed in on the higher viewership with some big shows. They believe it will not be able to make money unless viewership improves further. NDTV is in the process of demerging its news and non-news operations, the idea being to ring-fence the news operations from losses in the entertainment channels.

While the economic environment is no doubt improving and should help the broadcaster earn more advertising and subscription revenues, the competition across genres remains keen and will keep costs high.