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Viacom-TV18 Group forms 50-50 JV in India called Viacom-18

Published on Tue, May 22, 2007 at 12:23 | Source : Moneycontrol.com

Updated at Wed, May 23, 2007 at 11:12

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Viacom and TV18 Group have formed a 50-50 Joint venture in India called Viacom-18. The joint venture will launch a Hindi general entertainment channel within a year and will have locally produced programmes.

TV18 Group investments in Viacom-18 will be through GBN , which is subject to approvals. It will transfer its motion pictures divison operations to Viacom-18. Raghav Bahl, MD of TV18 Group, said the production, distribution and other labels will get transferred to the JV.

All TV and digital activities in the future would be through the new JV.

Excerpts from CNBC-TV18's exclusive interview with Raghav Bahl, MD of TV18 Group, and Philippe Dauman, President and CEO, Viacom:

Q: Could you lay out the contours of this JV and what exactly is going into it from TV18 Group and Viacom Network?

Philippe: I am excited to enter into this JV with the TV18 Group. It's major expansion of Viacom's activity into India, which is an important market for us from a global basis. We are contributing the channels that we have developed over a number of years like MTV, VH1, and Nickelodeon. The TV18 Group will contribute its film activities from the Studio18 Group. Together we will launch a general entertainment channel, and we will also contemplate launching a number of additional niche channels from the Viacom family of channels worldwide. Going forward, we see a lot of opportunities in the digital arena both on the internet and mobile.

This is a great new day for Viacom in its business in India and I am particularly delighted to be in this partnership with Raghav Bahl.

Q: On the operating channels, do you take on everything including content production and ad-sales and would they start contributing immediately to the JV revenues?

Bahl: I would like to thank Philippe; this is truly a momentous day at the TV18 Group to be entering into this JV.

The three channels, which are operating in the JV, will continue to operate exactly the way they are, with their content and with the same management. We hope that the strengths that the JV will now have with two partners instead of one partner running the JV will be additive and will be able to truly scale up our ambitions in these three running channels. The three channels will continue to run the way they are.

Q: Can you tell us what the three toplines add up to in India so far because they have been running for a while in the country?

Bahl: I don't think we are at liberty to give this information, as it is classified and confidential. They are certainly category leaders and since the whole entertainment space is on its second wave in India, there is also considerable blue sky where they can be taken up too. There is a considerable scope for expansion on the revenue and profitability side as well as on the audience share side. We do believe that they are extremely strong brands and therefore can be scaled up even more than what has been achieved so far.

Q: What is your plan or blue print for this JV in the film business? Which legs of it will you be engaged in and what is Studio18 getting from this joint venture on that side and what will Viacom bring to the table?

Philippe: We are looking to the TV18 Group through its Studio18 operations to be providing films that could be made available through our new general entertainment channel. This joint venture is very broadly based and as the next few months unfold, we will be exploring a lot of specific opportunities for our two companies to cooperate. We have a distribution operation in India for films that are produced by Paramount and DreamWorks and we will look at ways, over a period of time, to cooperate between our film operations in this venture. But having just signed the JV agreements this morning, we have plenty of time now to explore all the many opportunities before us.

Q: Where does Studio18 features in this JV and what are those operations going to be in this JV now?

Bahl: As part of the JV, the production, distribution, promotion branding, home video label and music label operationally get transferred to the JV. From here on, the JV will be undertaking all those activities. The partners still have to finally decide how to brand their film label in the Indian context and we will have further discussion on that. Studio18 is not the only branding vehicle we have as an option, we have other options that we will sit down and discuss.

Philippe: Our combined objective is to make this venture the leading cross platform media company in India.

Q: Hindi general entertainment, that's the space which can take up a lot of investment. Could you detail out what kind of investment this JV will need to make in the next one-year and where you would need to raise this capital from?

Bahl: As we have communicated to our shareholders, this investment will be made through Global Broadcast News, which is a subsidiary of the group. The reason for doing that is because it's the company through which we are building our general broadcast and news properties. Our general entertainment properties, via the JV, are also going to be in GBN. The fund raising will have to be done at the GBN level and we are confident that the group will be able to invest whatever is required to make this an enormously successful venture.

These are aggressive ambitious moves and we are both aggressive ambitious companies. We have the requisite balance sheet sizes to support an entry which we can assure you is not going to be a tip-toe entry into the market, it is going to be right at the top level.

Q: Could you give us some sense of how much you would like to invest in these businesses or in all of these businesses over the next one-year?

Philippe: We are not disclosing all the details of our JV agreement. We are contributing our channels to the JV and from an overall Viacom perspective this is very important to us in India but it is not within the context of our company to have a material cash investment. We are going to put all the resources we can bring into the JV.

Q: What is the primary motive for routing this vehicle through GBN? Is it because it made strategic sense or because you have capital raising headroom under GBN and not so much under Network 18 or Television 18?

Bahl: It's clearly strategic and there is absolutely no doubt about that. TV18 has clearly developed a business model, which is focused on business news information and services, and the company is continuing to invest very strongly in those spaces, whether it is television channels or our internet properties. For our regional expansion, we have already applied for uplink licenses to the ministry and we are interested in looking at the print space as well, as long as a good opportunity comes up there.

That's a business news information services company while GBN is clearly a general broadcast company. Therefore, it makes sense for us to be able to synergies all the general broadcast properties under GBN. It does not have anything to do with fund raising, as our shareholders are fully aware that we are in the middle of re-capitalising Network 18, so that it would have the bandwidth to make investments. TV18 holds sufficient cash today but we believe that cash is best deployed in TV18's own plans, which also have been discussed and shared with our shareholders. So, it makes strategic sense for this investment to be made through GBN.

Q: So GBN will own 50% in this JV and Viacom 50%?

Bahl: This is a 50:50 JV.

Q: What other products do you see since you spoke about it being a multimedia platform and you have started by making contribution with your three operating channels in India? What else can you bring from a television perspective into this JV over a period of time?

Philippe: We have a large number of differentiated channels both in the US and in various countries around the world. For instance, we have been rolling out our Comedy Central and that worked in several countries. In Europe, it is a very successful channel whereas in the US we have a male-oriented channel called Spike TV and several other channels.

We as a board of this new entity will be exploring which new channels would be appropriate to launch in India. The important thing for us is to look at it from a consumer perspective to see what will appeal to the consumers here in India and create very compelling programming that will work on air, and digital and mobile platforms where people can follow our products wherever they are.

Q: Are you saying that all your future product launches or forays into general media in India, whether its film or television broadcasting will be through this joint venture that you have struck today?

Philippe: We have a separate film distribution operation in Paramount. So motion pictures that are produced by Paramount and DreamWorks will get distributed outside of this venture through our distribution network. In terms of our television and digital activities related to that, our new entertainment channel would be quite different from what's in the market place today. All of those activities would be conducted through the joint venture.

Q: GBN shareholders would want to know whether the investments that you need to make in this general Hindi entertainment channel would be substantial in nature and whether it would require serious equity raising over the next 12-18months?

Bahl: The GBN board met a few weeks back and declared to its shareholders its intention to raise USD 200 million in capital, in several forms and shape. We believe the capital raising will be more than sufficient for the kind of investments that would be required. We do have plans outside this JV as well and the capital raising would be sufficient for all those plans.

The board has discussed it and is in the process of getting shareholders' approval, which we believe should be forthcoming as it is in the interest of shareholders to have scaled up so quickly. One must remember that operationally speaking it is just an 18-month old company, which has launched very successful brands already and is already a market leader in the spaces in which it operates. We believe that via this JV it will get a scale and scope which will make it one of the most successful network of channels in the country and truly scale the company to be among the top media companies in this country.

Philippe: My only amendment to that is instead of aspiring to be one of the best channels in the country, we aspire to be the best channel of the country.

Q: Give us some sense of what kind of investment would be needed into setting up a general entertainment channel in Hindi and what kind of cash burn you need to sustain after that?

Bahl: It is not our mandate to be able to share that information. As we said, both the partners are extremely strong companies, with strong brands and balance sheets. We will do whatever is needed for this business.

Q: Are you confident that you can substantially enhance both the prospects and revenue potential of the three channels that have gone in from Viacom into the JV today?

Bahl: Yes, those are very strong properties especially MTV, which has been around for quite a while. MTV is an iconic brand in India as it is globally. We believe that with the force multiplier, which this JV will provide to all the three channels, there is a substantial scope for us to be able to scale these existing properties up. Besides as Philippe said, launch the most successful general entertainment channel.

Philippe: In addition to MTV, the Nick channel has had tremendous momentum over the last year and has been gaining market share. VH1, which we have launched, is way ahead of our business plan. These channels are in their early stages of growth and we clearly see a lot of potential for all these channels. That gave us the comfort to enter into this, which represents a dramatic expansion of the scope of our activities of Viacom in India.

Q: As more investments need to be made to grow the business streams that you are entering into right now, would you want to maintain that 50:50 shareholding in the JV or would it change in the future depending on which partner gets in how much money?

Philippe: We are entering into this JV as a 50-50 venture and that's how we are planning to move forward. It is an equal partnership, we will have an equal board representation and that's the way we are embarking on this.

(Note: Web18, which owns Moneycontrol.com and Indiaearnings.com, belongs to the Television 18 Group).