Colors Turns One: A Year Of Unprecedented Churn In Indian Television

Rajesh Kamat_2

When Colors was launched this day last year, messrs Raghav Bahl, Haresh Chawla and Rajesh Kamat of Network18 were repeatedly asked: do you think there is space for yet another general entertainment channel (GEC) in India? It had seemed like they were late entrants trying to squeeze into a narrow window of opportunity that may have existed to wrest for oneself a part of the sizable ad dollars that find their way to GEC channels. GECs get the single largest share of the television ad pie–that is some Rs2500 crore in total ad spends of Rs8000 crore.

The odds were heavily against them. To begin with, there were the giants–Star Plus, Zee and Sony–who, between them, had controlled the entertainment space and seemed to have set into a comfortable equillibrium in rankings and revenue albeit occasional swings in fortunes. For any new channel, the economics wouldn’t work. For one, existing GECs enjoyed splendid subscription revenue. Roughly half of revenues came from subscription–give or take 10%–for any of these channels. Subscription revenue is a function of the demand for a channel’s content. The more houses demand Star Plus from their local cable operator, the more cable networks carry the channel and this results in more subscription revenue. A new channel would have no subscription revenue because there is no demand for its content. Yet.

What makes it worse: the media boom over the past 5-6 years had clogged the analog cable pipes that carry satellite television across this vast country. There were now far more channels than what a conventional coaxial cable could carry. Cable networks decide which channel is carried on which band. Millions of old TV sets in India supports only 10-15 channels. This means, to be able to serve those customers, a cable network had to put your channel on the so-called prime band. The supply-demand balance tilted against the channels and a new phenomenon, where channels paid the cable networks to be carried (and carried favourbaly), arose. It came to be known as carriage fee.

Quarter after quarter, the ‘marketing and distribution’ overhead on TV channel balancesheets started bloating uncontrollably. Channel bosses were suddenly at the mercy of cable networks, some of whom milked the situation dry by renegotiating contracts every quarter. So when Colors launched, the cost situation was looking precarious–in addition to content costs, you had to pay through your nose to be on prime band, which you had to, even to stand a chance in the ratings race.

On the revenue side, the situation was more straightforward. Spend on programming. If viewers like the programming, media buyers would loosen the purse strings. This meant you had to spend as much as the market leader. We are talking about a total cost line of Rs450-600 crore a year.

So you had to spend more than the market leader, but you could aim for only half his revenues. As one network boss hubristically told this reporter at the time: “Please try to understand. They are trying to compete with us with one hand tied at the back. They can never win”. He was referring to the crop of new channels that wouldn’t have any subscription revenue.

Then there was the matter of other new competitors. Two new channels, set up by formidable operations, had come on air in preceding months, and had tasted some early success. Both were headed by celebrated executives–former Star India CEOs Peter Mukerjea and Sameer Nair. In comparison, the 35-year old Rajesh Kamat, who Network18’s Bahl and Chawla hired from content shop Endemol to head Colors, was a minion.

Mukherjea’s company, INX Media, was funded by a bunch of private equity firms, including Singapore government’s Temasek Holdings. Nair was hired by a joint venture between NDTV and NBC Universal (NYSE: GE). INX Media’s 9X had launched in November 2007 and Nair’s channel, NDTV Imagine, in January 2008. Imagine rode high on its bet on mythological series Ramayan. 9X tasted some early success with a mix of soaps and reality shows. They had already formed the tier 2 of GECs. It was then, that Network18 was launching yet another channel with partner Viacom (NYSE: VIA) and were asked, quite naturally, if there was space for yet another channel.

In the months that followed, Colors shook the television space. It breached Star Plus’ decade-old leadership and infused real competition into a market that was a virtual oligopoly. Once Colors demolished Star Plus’ invincible aura, Zee TV, which has been trying to beat that channel for nine years without success, suddenly was able to achieve the impossible.

Colors took some audacious bets in content. While it was believed that Indian audiences liked nothing better for entertainment than domestic politics between a new bride and her mother in law in extravagant settings, Colors’ flagship soap featured a child bride in rural Rajasthan. Primetime entertainment with a social message! Success of this one soap–Balika Vadhu–empowered programming heads to ditch formulaic content and try out new and diverse themes (Little known factoid–Balika Vadhu‘s script was written many years ago and it had done the rounds of many channels before Colors decided to commission it). Viewers are better off for this. There is more diversity even in the reality show formats that are being imported to India.

Even before it completed a year, Colors went pay from free-to-air, and ratings didn’t drop. There is now a very narrow gap between the ad rates of Colors and Star Plus, media planners say. In essence, in one year, Raghav Bahl added a full fledged entertainment channel–a future corner stone if you will–to his media conglomerate. What it has proved, however, should be Colors’ biggest lesson–don’t take your viewers for granted. Every week it spends away from the No.1 position will make it that much harder to make the advertiser accept its leadership.

Most importantly, Colors’ success is a cautionary tale for all media players–startups and leaders alike. Indian media consumers are willing to try out new products and even embrace them. Your platform–channel or newspaper or website–might be a legacy property, but consumers don’t discount for that if a nimble-footed competitor serves up better content on a new platform. Odds might be stacked up against a startup, but it is also likely to take more risks and those might prove disruptive to the space you operate in. And, there’s always room for competition.

loading

Comments have been disabled for this post