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TV production houses scale Rs 30-cr peak

Vanita Kohli-Khandekar  |  Mumbai 

Soapmakers grow to redefine business, some may breach Rs 100-crore mark in two years.

Three years ago, it was impossible to find a television production company that had crossed the Rs 30-crore barrier, except, of course, Balaji Telefilms. Now there are more than half-a-dozen of them. Vikatan Televistas (Kolangal, Thirumathi Selvam), Optimystix (Comedy Circus, Saas Bina Sasural) and Hats Off Productions (Khichdi, Sarabhai vs Sarabhai) among others have just made it to the Rs 80-100 crore club. They will, in the coming year or two, cross the Rs 100-crore mark.

In November this year, actor Anil Kapoor’s production firm got a Rs 100-crore deal to make a Hindi version of 24, an action series for television from Twentieth Century Fox. In 2010 the ^600-million UK-based Zodiak Television acquired a controlling stake in Sol Production (Koffee with Karan, Nach Baliye). In the same year, UK-based Fremantle Media, the creator of formats such as Idols, Got Talent and X Factor, made an entry into India.


Revenues (Rs  cr)

Balaji Telefilms 152
Endemol 100*
Optymystix 70*
Vikatan Televistas 68
Sphere Origins 50-70*
DJ's 40-60*
Hats Off Production 40-60*
Company Revenues (Rs  cr)
Contiloe  60*
Cinevistaas 35
Radaan 33
Sri Adhikari Brothers 32
Bag Films 26
Creative Eye  13
*Industry estimate. 
Source: Annual reports, company sources and industry estimates 

Is the business of making television shows coming of age? Should investment bankers, hankering after content deals, start partying? The answer is “not yet”.

“Just five-six in the Rs 80-100 crore bracket is not enough if you consider the size of the broadcast market,” says Darius Pandole, partner, New Silk Route Growth Capital, one of the investors in 9X Media. He has a point. At 142-million TV homes, over 650 channels and Rs 33,000 crore in revenues, the Indian television industry is big. Even if 300 channels are buying 6-8 hours of fresh programming a day, the numbers are huge. So five production houses of Rs 80 crore apiece hardly mean anything.

Not if you know that this is one of the toughest segments of the media business, globally. In India it has had particularly bad luck because of the way the market is structured, as you will read later. So, in spite of a boom in broadcasting in India, scale and profitability have remained elusive for content firms. Balaji Telefilms is the biggest one at Rs 152 crore in revenues. The others are all between Rs 2 crore to Rs 30 crore -- a larger number are under Rs 10 crore. Clearly then Vikatan and Co are doing something right. What is it?

How it works
To figure that out, it is important to know two things.

One, the making and selling of television content to broadcasters remains a fragmented business with an estimated 6,000 producers, all willing to do it at a price less than the earlier guy. It is next to impossible to sustain value growth. Even Balaji has seen erosion with revenues halving over the last five years.

Now, add the fact that both costs and revenues have been hit. The cost of making a 30-minute show could range from Rs 75,000 to a crore depending on language, genre (fiction/non-fiction), broadcaster and so on. These have doubled over the last three years as talent costs have increased. On the other hand, revenues in broadcasting overall have grown slowly. So, the rates paid to production haven’t increased significantly. “We work on very thin margins,” says S K Barua, managing director, Fremantle Media.

Two, a bulk — about 70 per cent — of the programming created is commissioned. The broadcaster retains the IPR (Intellectual Property Right). The remaining 30 per cent of the programming created in India is made on a telecast fee or a sponsored model. This means the broadcaster leases airtime, say a half hour slot, to the producer. The producer then makes the show, sells the advertising time on it and tries to recover the money he paid plus make a profit. In this case, the IPR rests with the producer. Roughly half of Sun TV’s programming and all of Doordarshan’s is based on this.

The ownership of IPR and the freedom to trade in them is key to helping content industries scale up, say experts. In the UK, for instance, a 2004 change in trade regulations ensured that IPR is retained by the firm that makes the shows, not the broadcaster. This was a turning point of sorts. As a result production such as Fremantle Media or Shine (Masterchef, Got to Dance) became very aggressive about creating exportable formats and scaling up.

Inching up
The Network18 group got out of television production ten years ago. Haresh Chawla, (outgoing) CEO, Network18 Group, reckons that, the television content business is a contract manufacturing business. “Unless the model changes scale is difficult.” Many of the now-growing TV firms are re-inventing themselves in an attempt to find the sweet spot between being a vendor, a creator and a business.

Take Vikatan, for example. It prefers to work for South Indian broadcasters where they retain the IPR. “I will pitch for a slot if there is a good show, but will not try to create a show simply because I have got a good slot,” says Srinivasan B, managing director, Vikatan Group. Its Tamil show Thendral has gone on to be remade in Malayalam, Telugu and Kannada. Its Tamil hit, Thirumathi Selvam, got remade in various languages including Hindi, as Pavitra Rishta on Zee TV.

Srinivasan, who is passionate about the creative process, reckons that, a story — if it has to reach its true potential — should be capable of crossing a 1,000 episodes in a primetime slot. It takes roughly six months to recover the investment into a daily soap, “if you are lucky”, he says. Vikatan retains the IPR because it makes programming only for the Sun Network. It gets about 5 per cent of its revenues from remake rights and licence fees. It is also in the process of becoming an official channel on YouTube to exploit the diaspora market.

Optimystix was a small-time production house till founders Sanjiv Sharma and Vipul D Shah brought in management consultant Srikant Gupte in 2008. The former CEO of Marico worked with the Optimystix team in order to create processes and make a company out of a production outfit. The experience made both Shah and Sharma reorient themselves.

“We are a service provider for general entertainment channels,” says Sharma. “What we need to focus on is creating successful programs for our clients. If our clients succeed ... we succeed.” Much of it may sound like consulting mumbo-jumbo, but in a business where corporate structures and processes are rare, this reorientation helped. From being a one show firm, Optimystix now has over 11 hours of programming on air every week. That would put its revenues at somewhere between Rs 60-80 crore, though Sharma declines to share the number.

The second reason scale is getting a chance is because the nature of the demand is shifting from daily soap kind of shows to more specialised ones on food, lifestyle or travel, says Karan Ahluwalia, executive vice-president and country head, media and entertainment banking group, Yes Bank. This is happening as niche channels and networks take off. TLC or NDTV Good Times among dozens of others now need more programming of the non-soap, non-reality show type. This is specialised content. So competitors cannot easily undercut you.

The results show on the numbers. We are a long way from becoming a large, format-exporting industry like the one in the UK. The journey, however, has begun.

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First Published: Mon, December 26 2011. 01:04 IST