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Latha Venkatraman
Shyam G. Menon

WHERE BOUQUETS BLOOM: For the country's fledgling broadcasting industry, distribution strength seems to be the critical factor that would determine survival and alignment of channels will be the passport to prosperity.

MUMBAI, March 6

FOR India's evolving broadcast industry, distribution strength will be a critical factor for survival. Consultants, equity analysts and investorsbelieve broadcasters will increasingly align to acquire strength in a ``bouquet''.

Much of the speculation stems from the recent development that saw Zee Telefilms Ltd (ZTL) take a majority equity stake in the comparatively small television broadcaster, ETC Networks Ltd.

ZTL acquired a 57 per cent equity stake in ETC Networks Ltd and plans to make an open offer for another 20 per cent.

ETC with two channels — ETC Music and ETC Punjabi — has joined the Zee bouquet, taking its strength to 19 channels.

Industry observers see value in the transaction for ZTL, with ETC's Punjabi channel in particular possessing a loyal viewership, courtesy the contract with the Shiromani Gurudwara Prabandhak Committee (SGPC) to telecast Gurbani for 11 years. ZTL has overseas subscribers and there is sense in including such programming to the channel bouquet, according to a senior official at a competing private broadcaster.

Prior to this, ZTL had entered into a 74:26 joint venture with Turner International (India) Pvt Ltd for distribution and trade marketing, whereby three Turner channels — Cartoon Network, HBO and CNN International — joined the Zee bouquet.

With these moves, ZTL has made clear its seriousness about distribution, a crucial input as the company tries to strengthen pay revenues.

These developments and the larger drift towards bouquets should see industry consolidation, officials feel.

"As bouquet strength gains currency, stand-alone channels will have reduced chances of survival,"Mr Apurva Shah, analyst, Prabhudas Lilladher, said.

"Zee and Star have not only bouquet strength but also investments in MSOs (multi-system operators),'' he said, arguing that stand-alone broadcasters would eventually look to align with leading bouquets.

A strong bouquet is also useful for times when direct-to-home (DTH) is allowed.

At a more contemporary level, poor growth in revenues from advertising has forced broadcasters to align on the distribution front. According to one recent news report, TV ad spend rose by a measly 10 per cent to Rs 294 crore in 2001.

A stronger bouquet of channels, on the other hand, provides better bargaining power during tough times.

Even otherwise, the Indian broadcaster's revenue model, skewed greatly towards advertising revenues, is theoretically projected to fall in line with the global model wherein pay revenues dominate.

"Growth in subscription revenues will come from consolidation, leading to revenue gains for the leaders, increased pressure on local cable operators to improve declarations and growing number of cable households,'' a research report from Enam Securities, says, though currently under-reporting of household coverage is a problem at the cable operator level.

According to a CII-Ernst & Young report on the media sector, coverage is constrained by the resistance of cable operators to the introduction of pay channels, ad-hoc pricing of channels by broadcasters and inadequacy of supervision infrastructure.

Arthur Andersen also believes distribution and delivery infrastructure will be among the key drivers of the entertainment industry, which includes broadcasting.

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