Financial Daily from THE HINDU group of publications
Wednesday, Apr 03, 2002
`TV-18 is no more at the mercy of channels'
NEW DELHI, April 2
THERE is a buzz in Television Eighteen. The company's share price has started moving northwards, it has restructured its entertainment business, reworked its deal with Sony Entertainment Television and is looking at aggressive expansion. A tete-a-tete with Mr R.D.S Bawa, Chief Financial Officer, Television Eighteen (TV-18) India Ltd.
What were the key decisions taken at the board meeting held on Monday?
The board decided to make a preferential allotment of 7 lakh shares at Rs 88 to Octopus VC Ltd. We wanted to associate with somebody who has bought into the TV-18 story and could act in concert with the promoter.
We have also decided to come up with a rights issue of partly convertible debentures in the ratio of 1:13 at Rs 150. The merchant banker will work out the details.
Why is there the need for additional funds?
Funds are being mobilised for expanding our operations both within the country and in the overseas market.
So, is the plan for setting up an infotainment channel being revived?
No, at this point, we are not looking at setting up a separate entertainment channel.
What were the reasons for shifting focus from the entertainment software production business?
The programmes we were making were on a commission basis. We did not hold the copyright or the IPRs (intellectual property rights) for the programmes we made. The upsides and downsides both went to the channel. Initially, we got good returns and there was a steady cash flow.
But in the longer term, it was not making sense. We were always at the mercy of the channels. If the channel pulls out a programme, we were stuck with all the costs. If programme A was called off in March and programme B was commissioned to start in September, we still had to bear costs for six months. Hence, we decided to restructure.
Could you please elaborate on this restructuring?
As far as the entertainment business is concerned, we have moved out from fixed costs to variable costs. All the people working in this section are no longer on the rolls. They have been allowed to do freelancing outside. As and when we get work, these people will work for us. If we get 13 episodes, they will work for that duration.
Also, we have hived off the entertainment business into a separate subsidiary called Eighteen Entertainment India Ltd. This will allow us to have a focus on programming and costs.
We now have just a couple of shows including Kya Maasti Kya Dhoom on Star Plus. A few more with the top three broadcasters are in the pipeline.
What are the other cost-saving measures adopted during the last financial year?
We closed down our bureaus in Chennai and Kolkata and have appointed local stringers there. Much news was not being generated from these centres. Though there is an one-time expense in closing operations, it will bring down expenses on rent, transport equipment and so on.
How have all these measures helped the company?
We have brought down our overall costs by 20 per cent. But this reduction has not been possible only through these measures. Other factors like reduction in communication costs, satellite costs have also helped us.
The board also reworked its arrangement with Sony Entertainment Television (SET). Could you please elaborate?
The original agreement with SET was that Sony would do the distribution and airtime sales of CNBC India. Sony also had the option of picking up 20 per cent stake in CNBC India. (TV-18 holds 49 per cent in CNBC India through Television Eighteen Mauritius Ltd).
Now, we have decided not to sell the 20 per cent stake to SET and will also do the airtime marketing for CNBC India.
However, SET will continue to distribute the channel along with its other channels.
What is the rationale behind calling off the airtime marketing deal with SET?
Earlier, SET was involved in selling the FCT (free commercial time) and we had our own team for selling sponsorships etc. There was a lot of khicidi happening. Sometimes, their team would visit a set of advertisers and our team would meet the same set. There was a lot of confusion.
With this decision, our in-house marketing set-up will work with a focused approach. This will also be strengthened.
Will this have any negative impact on the revenues?
No, I do not see any depletion of revenues for even a single quarter. We have sufficient contracts already to see us through the present quarter. Anyway, our advertisers are very different from Sony's. We are a bit of a niche channel and we have insurance companies, broking houses and so on.
What is the ratio between revenues from advertising and subscription?
If one takes into account all kinds of advertising including FCTs and sponsorships, subscriptions is 20-25 per cent of the total revenues. Subscription fees will look up, once the changes in the cable industry happen.
Has CNBC India as a channel started making money?
I cannot really comment on CNBC India (as it is a joint venture between TV-18 Mauritius and CNBC Asia). But I can only say that TV-18 is generating sufficient operational surpluses to meet its costs towards programming in CNBC India as well as its investments in the channel.
How is your portal moneycontrol.com doing?
The portal is not bleeding. It generates enough revenues to cover the costs, especially from licensing content and some commission through online trading. We are not looking at investing further, but let's see how it develops in the future.
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