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Sunday, May 29, 2011

Issue of TV content piracy brought Zee-Star together: Star CEO Uday Shankar

Uday Shankar
This interview first appeared in DNA Money edition on Friday May 27, 2011.

Broadcasters are not getting their fair share of revenues even though there is enough money being generated at the cable operators’ end, says Uday Shankar, CEO, Star India Pvt Ltd. The Zee-Star joint venture will help tackle this issue and get the money flowing in the system. Excerpts...

Your association with Zee for a distribution alliance is a major industry development. Did you face any challenge in partnering with arch rival for this joint venture?

Not many actually. There were obviously concerns initially as this is not the kind of partnership you rush into. These are big calls and the implications, positive or negative, can be very critical. So neither party was willing to rush into it, there was a lot of internal alignment that had to be done. It’s not just about taking approvals from your seniors but also aligning the entire organisation with a new set of goals and objectives, which will eventually gauge the success of such an association.

We were conscious of that and went slow. That is why it has taken us a long time. The conversation started almost two years ago, and then we built the rationale and the need for doing something like this and so on. Given the nature of what we were talking about and the history of the two groups, there was hesitation initially, that had to be tackled effectively. And we did manage to do it efficiently and that is the reason we are now going public with it. So, we have to go ahead and make sure that we deliver on the expectations. Now, the biggest challenge is to integrate the two entities.

What are the key objectives of this joint venture?
The primary objective is that we are able to tackle this issue of piracy, which is a very significant objective. It is piracy that is completely distorting the business model of broadcasting, because money isn’t flowing through the system. This has also completely broken down the business model of multi system operators (MSOs). As a result, they have to now survive only on carriage fees and hence there is an abnormal inflation of the carriage fee.

The broadcasters are not getting a fair share of this subscription revenue, especially the smaller and newer broadcasters. Hence, their ability to invest in differentiating content, high quality talent is very limited. Our primary focus with this initiative is to be able to change most of it, make sure that the flow-through of the subscription revenue becomes smoother and more reasonable.

This will eventually have a huge impact on the entire industry and not just broadcasters. Secondly, the capacity of cable system is very limited in terms of number of channels that it can carry —- with or without carriage fees —- that can be addressed only through digitalisation. That’s creating a lot of challenges and we would like to collectively work in that direction.

But is the Indian legal system effective enough to deal with the piracy situation when defaulters can easily walk out on bail within a day of arrest as you had outlined in one of our earlier interactions?

Yes, we did discuss on that instance. As far as the system is concerned, I’d say it is still work in progress and we will have to devise a model to effectively deal with it. All I can say at this moment is that with two key broadcasters, with many leading channels together, we should be able to bring additional weight to the whole initiative and see how it works out and that’s precisely the objective.

On the capacity part, isn’t the squeeze because of the cable and the technology being used by the cable operators that restrict the total number of channels to around 105?

That is why they need to digitise, because digital cable has a significantly higher capacity and can go up to 900 channels.

But there are concerns being expressed on the investments related to digitisation of the cable industry…
One needs to understand here that the money is very much there on the ground. Every year, the households are paying Rs 18,000 crore and that money should be invested. Every sector has to do what is necessary to reinvent its business and bring it in line with the social, legal and ethical norms. And it’s not that there is no money. The broadcaster and MSOs don’t get enough, but right at the cable operator end, there is enough money. And because almost 90% of that ground money is not accounted for, there isn’t enough money flowing through the value chain. Thus, that unaccounted wealth has to start flowing back into the system and when that happens, there will be enough money for digitisation.

How do you intend to get this unaccounted money into the system?
The government has a plan and we obviously will have to work together. That is precisely why our coming together will make an impact in this direction.

The jurisdiction for this joint venture operation will be restricted to India only?

No, it will be India and a couple of neighbouring areas like Nepal, Bhutan and a few others.

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