Fans will drive the media business: Sudhanshu Vats of Viacom18

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New Delhi: Viacom18, the joint venture (JV) between Indian television company TV18 and the American firm Viacom Inc., completes 10 years this month. Sudhanshu Vats, the group chief executive of Viacom18 Media Pvt. Ltd, says that the JV has grown exponentially in this period. Vats, 50, who joined the company in 2012 from Hindustan Unilever Ltd, spoke in an interview about the growth of the television business, the strategy for motion pictures and future digital plans. The interview took place last Wednesday (15 November), before Viacom decided on Sunday to delay the release of its controversial movie Padmavati. Edited excerpts:

How did the joint venture happen and how has it performed in the last 10 years?

When the JV happened, Viacom was operating in India as MTV Asia. It had three channels: MTV, Nickelodeon and VH1. It was a small operation at about Rs60 crore. Network 18 was operating its news channels CNBC-TV18, CNN-IBN, IBN Lokmat and others. Raghav Bahl’s (then head of Network 18, which is now owned by Reliance Industries Ltd) intention was to dial up the business and enter into entertainment. Viacom’s motivation was to dial up their India play and launch a general entertainment channel.

The JV was formed with TV18, a subsidiary of Network 18. Both partners are invested 50:50 in the JV which has scaled up considerably. Fortunately, for the last five years, we have been PAT (profit after tax) profitable. At the time of the JV there was one business—TV. Now there are five: television, films, digital, live entertainment or experiential entertainment and consumer products and merchandising. Within television we have gone from three channels in two languages to 42 channels in 7 languages.

What do the revenue numbers look like?

Basically, if you look at FY 2017 top line, it is in the vicinity of Rs3,100 crore. We have been PAT profitable and it’s a three digit PAT profitability. In 2014, 2015 and 2016 we were growing consistently. In 2017 and 2018 the PAT may not grow but we may still be PAT profitable. This is because we made a lot of investments in digital and launched 10 new channels including MTV Beats, Cineplex and Colors Super. We will be launching Colors Tamil in the March quarter.

How do you rate your films business?

This year, when advertising has been under pressure, we have delivered double-digit growth in the first half in entertainment at 11%. And that is because we have had a phenomenal run on our movies. We did Toilet Ek Prem Katha, which is an out-and-out success and in the second half we have Padmavati. Our film portfolio this year will deliver incremental growth to us as a business of close to about 6-7%. This growth in our absolute top line will come to us from films.

We are a profitable business unit even though the profitability may be low. There are a few things we did: we pioneered content-led cinema. If you look at films like KahaaniOMG—Oh My God!, Special 26Bhaag Milkha BhaagQueen, Mary Kom, these are all very content-led, mid-budget films which have done well. Second, we brought science to the art of film making. Every project has to have a return on marketing investment. Last week we introduced a horror film called House Next Door which is in Hindi, Tamil and Telugu. For this you will not see advertising plastered everywhere. I have invested Rs10 crore on the film and I will get back Rs12 crore.

Let’s look at a big project like Padmavati with a cost in the region of Rs180 crore. As we stand today, we have recovered all the money we have spent even before its theatrical release. This is through sale of international distribution rights, digital, satellite TV and music rights. What I will incur is my print and advertising cost for launching the film and my theatrical has to just recover that. If my theatrical is a bummer, then also I am not going to lose money. If it does very well then I am going to make money.

How much did TV advertising decline?

We entered the year with the assumption that TV will do a very strong double digit growth—in the mid-teens. Last year, demonetization happened in November. We thought we were coming out of it and had factored in two to three months for GST (goods and services tax). But the effect of GST has (been) prolonged and we have come under some pressure. So as a company we are close to very low single-digit growth. GST, which I thought, will take a couple of months, is going to take couple of quarters. So we had the first Diwali where we were not full (on inventory).

Are the regional markets growing?

We will widen and deepen our presence in regional. In markets where we are strong we will launch an additional channel like we did with Colors Super in Kannada. Regional is our growth engine. Regional for me is not just TV. It is films and digital. I gave you the example of House Next Door. We have done Marathi and Bangla films. And we will do regional in digital. To me regional is a theme. My thinking is very simple, 60% of India today communicates in their native language. 39% India communicates in Hindi and 1% or less than that, in English. Over the years, ad monetization has been much higher for English and Hindi. And it’s been lower for regional. As the regional content improves, viewership grows, ad dollars will follow. So the rate of growth of regional will be far higher than the rate of growth of Hindi as we go forward.

Your digital platform Voot is advertising-led. When will you move behind a paywall?

We started with advertising-led video on demand. We have had 50 million gross downloads and, more importantly, 30 million monthly active users with an average watch time of close to 50 minutes per person per day. We are in the top three in any matrix and in watch time. Once you are in top 2 or 3, advertising is very good. But we will take some part of Voot behind a paywall. That will happen towards the middle of next year. We will have a dedicated offering for kids—with more content, e-books and light gaming. That will be behind a pay wall.

As consumers move to digital, how much growth do you expect for TV?

As I keep saying, India is an “and” country. There will be TV “and” digital. There is a section of India which, in my opinion, for the foreseeable future will be watching television. The reason being, a consumer pays $3 for 300 channels. That’s incredibly inexpensive.

Among reasons for Netflix’s success in the US is that the cable TV bill was $80-100 while Netflix came at $8 to $10 dollars a month. So the value arbitrage you had for the customer is very high. Secondly, since content is owned by studios, Netflix was able to aggregate a lot of it. And third is the success of originals like Narcos or House of Cards.

In India TV is for $3, so where is the value arbitrage? Besides, 80-85% of premium content is owned by top five TV players in India who put their content on their digital platforms. So the ability to aggregate is not there.

Do you have any plan to get into sports broadcasting?

In the journey we are in, there are a lot of investment opportunities for us in other areas. In that context, to me, at this moment at least, sports does not seem the right thing for us to do. In India sports is largely cricket and cricket is a very high-investment, long-gestation game.

Are you looking at new properties in the events space?

We have built a very strong brand called Vh1 Supersonic which will be in its fifth year next year in Pune. It’s an electronic dance music (EDM) festival. Now what we are doing under MTV is MTV Bollyland, basically Bollywood dance music. This is for second rung India—cities such as Indore, Lucknow, Bhopal, Chandigarh. We have also done a Comedy Central Chuckle festival with comedians.

The future is in experiential entertainment: you have to build a fan base. Fans will drive the media business as we go forward.