The importance of being No.1

I see strength across the entire STAR business. You have returned us to leadership in Hindi viewership, and, on a bigger level, made us the number 1 in network share across the world's largest democracy. You've done this by making STAR faster, more driven by insight, more flexible, a better partner for advertisers, and a more creative company that is truly driven by setting standards for viewers and setting the benchmark for performance.

That's an internal memo the brass of STAR India found in their e-mail inboxes in early June. It didn't take long for the congratulatory message to filter through to the 1,000-odd employees of the Indian arm of the STAR TV network, the Asian broadcasting arm of Rupert Murdoch's media and entertainment conglomerate, News Corporation (or News Corp. as it is popularly known).

The author of that memo: James Murdoch, Chairman and Chief Executive (Europe and Asia), News Corp., and son of the legendary patriarch. Murdoch was congratulating the STAR India team for convincingly bringing back its flagship entertainment channel, STAR Plus, to the numero uno slot—it's been there for eight weeks now amidst cut-throat competition.

The STAR India team, led by 48-year-old CEO Uday Shankar, has a lot more to celebrate. For the first time in almost two decades—since kicking off an all-Hindi STAR Plus in 2000 with the path-breaking Kaun Banega Crorepati—the STAR Network claims to have emerged top dog by revenues (see STAR India Is a Force to Reckon with). Powered by STAR Plus, and with a generous contribution from its bouquet of regional channels— a few of which are leaders in viewership—STAR India's broadcasting operations (with 14 channels, excluding joint ventures) totted up revenues of Rs 3,250 crore.

But Shankar and his team are still not ready to pop the champagne. The next goal is to become numero uno in the Indian media and entertainment space. Put together all the STAR businesses in India—channels, distribution joint ventures like STAR Den and Hathway Cables, other broadcasting JVs like ESPN STAR Sports—and Murdoch's India business could well be closing in on the leader in the Indian media and entertainment market. Bennett, Coleman & Co. Ltd (BCCL), the group that publishes The Times of India and is the owner of a clutch of other media properties (with a few more in the pipeline), reportedly closed 2009 with revenues of over Rs 5,000 crore.

They're not right up there, but the Murdochs should still be delighted with their Indian operations. After all, just five years ago, STAR India's revenues were barely half those of BCCL. The big push came in the past year, when STAR India grew at approximately 23 per cent, even as it scaled up operations organically (by overhauling content for its existing channels) and inorganically (by acquiring regional broadcasters like Asianet in Kerala in January 2009).

Analysts point out that if Murdoch seems to be growing more rapidly than BCCL, it's because his Indian operations revolve almost totally around broadcasting and have an almost negligible presence in print publishing and journalism (it has India offices for the The Wall Street Journal and newswire agency Dow Jones).

Subhash Chandra's Essel Group, which has an expansive presence in media and entertainment, right from broadcasting (with 30 channels) to publishing (in a JV with Dainik Bhaskar) to multiplexes to online lotteries (Playwin), is also a group that STAR is catching up with. Chandra's media and entertainment empire is estimated by analysts to be over Rs 5,000 crore.

To be sure, being No. 1 is much more than an ego or morale booster. "The ranking of a channel can create a positive bias among advertiser buyers in agencies," says Punitha Arumugam, Group CEO, Madison Media, although she does add that "the actual viewership is the true test".

Shankar, who has been reporting directly to James Murdoch since August 2009—earlier he reported to Paul Aiello, then CEO of STAR TV Asia in Hong Kong—has undoubtedly hit pay dirt. Today, STAR India contributes roughly 75 per cent to the Asian operations, with Murdoch virtually taking the spotlight away from China and focussing it on India.

The importance of the Indian arm became evident when Asian broadcasting operations were restructured last August into three business units: STAR India, STAR Greater China and Fox International Channels (FIC). Under the earlier structure, STAR India, China and Taiwan reported into the Hong Kong headquarters and not to New York.

Shankar came on board STAR India in April 2007 as Chief Operating Officer at a time when the network was under severe pressure. STAR Plus' relative share in cable and satellite homes had plunged to 48 per cent by end-2006 from 60 per cent in 2004, and rival Zee TV had gained the most at its expense, with a seven per cent increase in viewership, to 21 per cent, during that period.

The relatively unheard of Shankar, relative to STAR hotshots like Peter Mukerjea and Sameer Nair, also had to contend with an exodus of sorts at the senior level as Mukerjea and Nair went on to launch 9X and NDTV Imagine in the general entertainment space. The competition intensified with the entry of Colors, a Viacom-Network 18 combine, which would go on to steal the No. 1 slot from STAR Plus in the years to come.

"I walked in at a time that was superficially stressful," says Shankar, referring to the resurgence of Zee, the launch of Colors and the depletion of talent. "There was also the anti-incumbency factor, with so many people willing to believe that STAR's best days were over," he says. By October 2007, Shankar found himself in the CEO's hot seat. Amongst the first tasks was to get the portfolio right.

"When I joined the group, I was immediately hit by its sheer spread and influence, but I was equally aware about how lopsided it was," says Shankar. Despite having 14 channels in its portfolio, there was a crippling dependence on STAR Plus, which accounted for up to 60-65 per cent of revenues (it has since dropped to 40-45 per cent).

Perilously, the cash cow was almost entirely dependent on one content provider, Balaji Telefilms. A STAR affiliate had taken just under 26 per cent in Balaji, and both parties had an exclusive content agreement (STAR couldn't source from any other provider, and Balaji couldn't sell to any other broadcaster).

Shankar decided it was time to end the restrictive exclusive clause in the relationship—as well as its baggage from the past, in the shape of once-iconic-but-by-then-passé soaps like Kyunki Saas Bhi Kabhi Bahu Thi and Kahani Ghar Ghar Ki. "We have a strong relationship and still hold a stake in Balaji, but we needed to experiment," says Shankar. Result: New genres of programming, like Yeh Rishta Kya Kehlata Hai (YRKKH) and Bidayi were flagged off, which helped increase viewership.

For instance, the Taj Mahotsav special on the Bidayi show got ratings of 10, significantly higher than the K serials when they were at their nadir. As it went about improving content, STAR India expanded its reach into the regional markets, which make up close to half of the Rs 11,000 crore advertising pie in broadcasting. To expand its footprint in the southern states, STAR acquired a majority stake in Rajeev Chandrasekhar's Jupiter Entertainment, to form STAR Jupiter.

The JV, in turn, acquired majority stakes in Malayalam channels Asianet and Asianet Plus, Kannada channel Suvarna and Telugu channel Sitara. There's also STAR Vijay, which the Murdoch company had acquired in 2001.

All these efforts have helped STAR double its share of viewership in the southern markets from 4.3 per cent in 2008 to 8.5 per cent in 2009. Courtesy Asianet, it's a leader in Kerala, but still has plenty to do in Karnataka, Tamil Nadu and Andhra. But, as Vikram Sakhuja, CEO (South Asia), GroupM, puts it: "The fact that STAR thought beyond Hindi and sought to have a full regional offering is significant as today it is important to have a pan-India presence, the way Zee has." GroupM is the parent to WPP's media agencies.

The regional ramp-up has also gone a long way in helping STAR boost the top line and help Murdoch come within striking distance of Chandra and the Jains of BCCL. Yet, whilst BCCL may be the one to beat in revenues, STAR barely competes with the publishers of The Times, which has a negligible presence in broadcasting. The competition is squarely with Zee, Colors and Sun TV (down south).

Nitin Vaidya, COO and Business Head, Zee TV, maintains his entertainment channel is still a leader— in its own way. "Leadership has been redefined. Due to the market dynamism, today leadership is not channel-wise but slot-wise. Zee TV is the No. 1 channel in the primetime slot on weekdays and weekends." Adds Colors CEO Rajesh Kamat: "The scenario of a three-way battle will continue for a bit. What will matter is who will consistently stretch its leadership position over a period of time."

How difficult is that task of sustaining leadership? "I think STAR Plus has as much chance of being able to sustain the top slot as Sachin Tendulkar has of scoring a century of sixes in every match he plays," jokes former STAR India CEO Mukerjea. Murdoch may have well found the right man to lead his India charge. And he's responding by loosening the reins.

"Earlier, too much control was given to people who didn't understand the market. Now the team has been given autonomy and is being left alone to chart its own course," adds Mukerjea. Shankar and STAR India are clearly being watched from several quarters— not just by his rivals in broadcasting but also the Jains of BCCL.