Star India COO: Reforms Needed To Unlock Entertainment’s Value
Outdated policies blocking investments, STAR India COO Sanjay Gupta asserts at CII conclave.
New Delhi: Speaking at a CII conclave in New Delhi today, Sanjay Gupta, COO, STAR India lamented the fact that the Media and Entertainment Industry’s (M&E) target of reaching $100 billion in turnover has continued to remain out of reach.
Addressing delegates at the CII conclave, Mr Gupta revealed that from 0.8% of GDP three years ago, the industry had resolved to grow to 1.5% within a decade. But in the past three years, media as a percentage of GDP has instead fallen by 2 basis points and the $100 billion dream has continued to remain distant. The biggest hurdle has been the choking of investment. To meet ambitious targets, a business either needs to generate large profits internally, which are then invested back into the business or they grow on the back of external investments – national or international. But the M&E industry boasts of neither. Prominent name that were present for the inaugural session were Mr. Sudhanshu Vats, Jawahar Sircar, JS Mathur and Minister of State for Information and Broadcasting Colonel Rajyavardhan Singh Rathore.
During the past 15 years, the M&E sector has barely seen any new entrants and only around $4 billion FDI. To garner $100 billion, the industry needs to invest at least $50 billion over the next decade – something that seems farfetched, given the present circumstances. With M&E remaining an unattractive destination for investments, investors have no interest to invest in a fragmented and unprofitable business. Despite the 12% year-on-year growth touted for the industry, the sector is paradoxically riddled with a host of unprofitable verticals. For example, sports is a $2 billion industry that could easily grow to around $10 in the next five years. Be it Hockey, Football, Kabaddi or Badminton, the new sporting leagues are being lapped up by the audiences.
Yet, the M&E industry has been unable to take off on the back of these investments. Although STAR India has been investing almost Rs200 crore every season for the past two years, dividends are not commensurate. For this to happen, one needs to scale up the volume of content. In other words, more teams, more players and more days of Kabaddi are required annually to capitalize on this opportunity.
“A bizarre challenge confronts us here, however,” Mr Gupta continued. Although Punjab and Haryana contribute large numbers of Kabaddi players, one cannot add more teams based in either of these two states because they do not have a single indoor stadium that could host a Kabaddi match. In Mumbai, the game is hosted at the NSCI Dome, but the biggest constraint is the availability of this facility for a reasonably long period of time. One venue for a city with more than 1,000 Kabaddi clubs simply does not make sense. In this case, consumer interest and the ability to invest are no hurdles, but the fact that the sporting infrastructure required is simply non-existent. Worse, there are no plans to address this situation.
The movie business is no different. With around 7,000 screens, India has one of the world’s lowest screen densities. Despite breakthrough movies such as Queen, PK or Bajrangi Bhaijaan, revenues are stagnant, although the cost of producing these movies has soared dramatically in the past decade. Therefore, a $2 billion industry that sets a billion hearts racing earns zero profits.
News channels fare no better. Without a robust business model, news channel have no money to invest in their business. Whether English or regional, number one channel or last, none of the channels make any money because none earn any money from subscription. Globally, subscription contributes as much as 60-70% of the total earnings of a news channel.
Television distribution is roughly a third of the total value of the media industry. In the past few years, immense investments have been made in both DTH and the cable business. But the tragedy of this sector is that even after many years of continued investment not a single company or business makes any money. Since the sector is considered a basic need from a consumer viewpoint, the prices at which content is sold by creators to platforms is regulated – prices frozen in 2003 haven’t changed in the past 12 years. In the same 12-year period, even the price of milk has jumped from Rs12-15 a litre to Rs35-40 a litre!
Such anomalies are making the sector bleed. But no one seems to care, laments Mr Gupta. In Delhi, for example, the new government has doubled entertainment tax. Consequently, almost 30% of revenue is paid as entertainment tax. The lack of political alignment and consistency of policy in the sector makes it impossible to plan a sustainable business model.
In 2015, where millions across the country receive their daily dose of news from Facebook feed, radio broadcasters can only air news snippets from All India Radio. In the US, radio has gone hyper local and people spend an hour daily listening to radio. This gives a fillip to local brands since a quick and cheap platform is available to build their business. In India, conversely, there are a limited number of radio stations and limited content that can be aired – and without any news. It is no surprise then that even in large cities where FM exists, the time spent on radio per person is five minutes. Can any industry on Earth make money in such circumstances?
Mr Gupta concluded by asserting that unless we “unblock minds” we cannot “unblock capital”. Accordingly, there is an urgent need to make distribution profitable, position animation as the next wave of export-oriented growth, support a serious scale-up of exhibition screens and sports stadiums and allow content innovation in radio. A hugely attractive pitch for domestic and international investors is required, giving them clarity on the policy environment for the next 10 years and confidence of generating sizeable returns on the investments.
All stakeholders, businesses, policymakers and regulators need to stop being happy with the status quo and incrementalism. In the new era backed by technology, every sector from automobiles to financial institutions and even grocery shopping have witnessed dramatic growth and serious disruptions on the back of serious flow of capital. Media and Entertainment too need to see brave new entrepreneurs, disruptive ideas and unconventional business models, stresses Mr Gupta, but this will only happen if we unblock the capital.
Source: Star India