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The cable wars

With Tamil Nadu chief minister J Jayalalithaa announcing her intent to nationalise the cable distribution business,the state’s largest media group,Sun TV network owned by her rival Marans,has come under attack.

Written by Archna Shukla |
June 19, 2011 3:36:13 am

Stage and screen have always been central to Tamil politics. Tamil politicians were the first to heed the advent of cable and satellite television in the country in the early nineties and were quick to see them as potential weapons in a political battle.

It was Tamil Nadu that set the trend of political parties and leaders launching their own television channels to further their ends. At least half-a-dozen broadcast networks or independent channels in the state are directly owned by politicians or their immediate family—Jaya Network is owned by Chief Minister and AIADMK leader J Jayalalithaa; Kalaignar TV is run by former Chief Minister and DMK leader Karunanidhi’s family; Mega TV was launched by Congress MP K V Thengabalu; Vasanth TV is floated by another Congress leader and MLA Vasantha Kumar; Makkal TV was founded by prominent regional party PMK leader Ramadoss and Captain TV is owned by Vijaykanth,a leading film star and founder of another regional outfit,Desiya Murpokku Dravida Kazhagam.

Jayalalithaa’s move to nationalise the cable distribution business in the state,as promised in her Assembly election manifesto,is already causing tremors in the crowded world of channels.

“Distribution is the most important part of the broadcast business. Even the best of content will serve no purpose if it fails to reach consumers,” says Rajesh Jain,Executive Director and Head,Media and Entertainment Practice,KPMG. So far,cable distribution has been the primary vehicle routing TV signals to consumer households even as a new digital platform,DTH or direct-to-home,is fast gaining ground. According to industry observers,more than boosting her own broadcast venture,Jayalalithaa is aiming to vanquish the largest and the most powerful broadcast group in the state,Sun TV,by taking over cable distribution.

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Sunshine in the state

Tamil Nadu is the largest regional media-and-entertainment market in the country and broadcast makes up its largest chunk. A report by the Federation of Indian Chambers of Commerce and Industry and audit and management consultancy KPMG suggests that of the 108 million cable and satellite households in the country,more than 11 per cent are in Tamil Nadu. The state generates around Rs 1,800-2,000 crore in annual subscription revenues and more than Rs 1,000 crore in advertising against Rs 700-500 crore generated by other big regional markets such as Andhra Pradesh,West Bengal,Kerala and Karnataka.

The surfeit of political channels in the state notwithstanding,the media market in the state is ruled by Sun TV Network,a deceptively non-political media organisation. According to various estimates,Sun accounts for more than 50 per cent of the total TV viewership,80 per cent of the subscription revenues and more than 80 per cent of the TV ad spends in Tamil Nadu. Sun TV’s promoter Kalanithi Maran may not be a politician but he enjoys immense political clout. Kalanithi is the son of former Union Minister and DMK leader,the late Murasoli Maran,brother of Union Textiles Minister and DMK leader Dayanidhi Maran and grand-nephew of DMK chief Karunanidhi.

In the past two decades,the period during which Kalanithi’s media empire was consolidated,the DMK ruled the state for two terms,from 1996 to 2001 and from 2006 to 2011. His father was an MP for more than three decades and served as a Union Minister under three different regimes at the Centre,holding the important portfolio of industry from 1996 to 1998 and 1999 to 2002,which yet again was the period during which Sun was rising on the broadcast horizon. Kalanithi’s brother held the lucrative telecom portfolio in 2001 and 2002. While he doesn’t own any stake in Kalanithi’s business,it has been alleged that Sun Network drew iniquitous benefits thanks to his sway over the telecom ministry.

Besides broadcast,Maran also runs a flourishing publishing business under which he publishes two newspapers and four magazines. According to Sun’s website,its daily Dinakaran is the number one Tamil newspaper selling more than 1.3 million copies and its other newspaper,Tamil Murasu,is the largest selling eveninger. It runs the country’s second largest FM Radio network with 45 licences in its pocket and 42 operational FM stations. Sun also has a stake in the fastest growing digital TV distribution platform through its DTH company Sun Direct.

After broadcast,the most lucrative business segment that Sun is gradually building is films. After Hindi,the Tamil film industry is the second largest in the country in terms of revenues and the largest in terms of producing films. In 2008,Sun entered the film production,acquisition and distribution business and has since released around 20 films,including the Rajnikanth-Aishwarya Rai starrer Endhiran,which raked in more than Rs 200 crore in gross revenues.

“Films have a natural link with the broadcast business. Besides being a profitable venture,films also feed the movie and music channels of broadcasters,” points out a well known film producer from the state known only by his initials,KR.

Breaking the monopoly

Among all his media ventures,broadcast is the cash cow for Kalanithi. In 2010-11,Sun TV Network,the listed company that houses the broadcast,FM and films business,clocked in around Rs 2,000 crore in revenues and Rs 770 crore in profits—broadcast accounted for more than 80 per cent of this. It is alleged that Kalanithi built Sun’s dominance over the broadcast industry by taking control of the cable distribution business in the state. Many broadcasters and operators cite the story of Hathway,a leading multi-system operator (MSOs are the operators with technical capability to gather TV signals from broadcasters and distribute them to the last mile cable operators who then relay the signals through cable to the end customer) with a pan-India presence,to describe how Sun built its monopoly in distribution.

“Till 1996,Tamil Nadu was like any other market with several broadcasters and a handful of MSOs competing and thriving. Hathway had close to 60 per cent share in the distribution market in Chennai,the largest centre in the entire state,” recalls a senior executive of a leading broadcast company who did not want to be named. Around 1996,Sun launched its MSO operations under a company called Sumangali Cable Vision,later christened SCV.

“SCV moved with a killer instinct from day one. It not only forced all cable operators to work under it,it also asked them to cut off their business with Hathway. By 1999,Hathway’s share in the Chennai market had fallen to less than 10 per cent and soon,they were non-existent,” says a Hathway executive. Today,while it still owns a licence to operate in the city,Hathway is dormant. Hathway’s CEO K Jayaraman refused to comment on the issue.

“Sun used all kinds of coercive methods to subjugate cable operators across the state. Many simply abandoned their business built with crores of investment,others joined them,” says P Sakilan,president,Tamil Cable TV Operator Association. According to him,at present SCV is the largest MSO in the state with control over more than 70 per cent of cable operators. “There are some others but they are too small to get counted,” he adds. Besides a near monopoly over subscription revenues gathered by cable operators,Sakilan points out,SCV also charges a hefty carriage fee ranging from Rs 3 crore to Rs 5 crore a month from various broadcasters.

Sun executives did not respond to queries from The Sunday Express. A detailed email sent to Kalanithi Maran also did not elicit any response.

“Control over cable operators,besides bringing in decent subscription revenues,gives Sun a direct control over consumer households. When an average viewer in Tamil Nadu switches on her television,Sun channels are the first she is exposed to. Sun’s rivals are relegated to distant positions in the placement pipeline and some even get blacked out every now and then,” says the CEO of a national broadcast company.

Besides cable operations,Sun has also been furiously pushing its DTH business,the other emerging broadcast distribution platform. It is estimated that of the 12 million cable and satellite households in the state,Sun Direct already reaches close to 5 million. It is Sun Direct in which Malaysia-based Maxis group picked up a 15 per cent stake for a reported $88 million in the alleged quid pro quo against the telecom licences it got from the Telecom Ministry when Dayanidhi Maran was at its helm.

“It is funny that Jaya TV’s viewership share is higher than Sun TV’s in markets other than Tamil Nadu. Here,crossing a 10 per cent mark has been a big challenge for us,” says K P Sunil,Editor,News,Jaya TV. Sunil says like other broadcasters,Jayalalithaa did not pay much attention to the logistical details of the broadcast business whereas Kalanithi was shrewd enough to have realised the strategic importance of distribution.

In 2006,Jayalalitha tried to make amends by proposing to nationalise the cable distribution but her move was thwarted by the state’s governor who said broadcast distribution was not a state subject and hence,the state government could not touch it. In 2008,following a public row between the Marans and Karunanidhi’s family,the DMK chief launched a state-owned cable distribution company called Arasu Corporation but after a patch-up between the two families a year later,Arasu was conveniently forgotten.

Reviving Arasu will now not be difficult for Jayalalithaa. She had also promised voters she would bring down monthly cable bills from the current Rs 125-250 a month to Rs 45 a month. The move will directly hit Sun. While on one hand,SCV will lose its sway over the subscription segment,Sun’s own channels may lose their prominent slots in distribution pipes. A majority of stakeholders in the industry,including several broadcasters and operators,are happy with the decision.

“This is the only way to break Sun’s vulgar monopoly in the state,” says Sakilan.

Sun’s DTH business may bring it some reprieve but it is still expected to resist the move—unless it gets caught in the ongoing 2G scam.

THE MARAN EMPIRE
Kalanithi Maran

Chairman and Managing Director,Sun TV,son of former Union Commerce and Industry Minister and the late DMK leader Murasoli Maran and brother of Union Textiles Minister Dayanidhi Maran

Age: 45

Education: B.Com from the University of Madras and MBA from the University of Scranton,Pennsylvania,US

Business

* The largest broadcast network in the region and the third largest in the country. The network has 20 TV channels in Tamil,Telugu,Kannada and Malayalam

* The second largest FM Radio business,holding 45 licences and operating 42 stations

* A DTH service

* Publishes two daily newspapers and four weekly magazines

* The largest low-fare airline,SpiceJet

* Emerging as a leading producer,acquirer and distributor of films in the South

TV channels owned by Sun

Tamil Nadu: Sun TV,KTV,Sun Music,Sun News,Adhithya,Chutti

Andhra Pradesh: Gemini TV,Gemini Movies,Gemini Music,Gemini News,Gemini Comedy,Kushi TV

Karnataka: Udaya TV,Udaya Movies,Udaya Music,Udaya News,Udaya Comedy,Chintu TV

Kerala: Surya TV,Kiran TV,Kochu TV

Financials of listed Sun TV Network Ltd that houses broadcast,FM Radio and the films business (2010-11)

Revenues: Rs 2,013.46 cr

Operating Profit: Rs 1,577.86 cr

Net Profit: Rs 770 crore

Shareholding pattern of Sun TV Network : 77 per cent shares owned by Kalanithi Maran; 8.79 per cent owned by family members and friends and 12.55 per cent by various institutions

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First published on: 19-06-2011 at 03:36:13 am

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