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What the partnership with Uday Shankar and James Murdoch will mean for Viacom18

Experts said the deal will help Viacom18 compete better in terms of new original content and taking on global streaming giants.

April 28, 2022 / 01:26 PM IST
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Entertainment network Viacom18 announced a partnership with Bodhi Tree Systems, the content platform of media baron James Murdoch and former Disney India chief Uday Shankar, to create a TV and streaming giant.

Bodhi Tree will invest Rs 13,500 crore ($1.78 billion) in Viacom18, they said on April 27. Viacom18 owns and operates the suite of Colors TV channels and the streaming service, Voot.

“It’s a positive development since Uday (Shankar) was the person who built Star India. Alongside James Murdoch, Uday built India’s largest media and entertainment colossus before selling the same to Disney,” said Nitin Menon of NV Capital. “Given the same combination and synergies between James and Uday, as well as the backing of Reliance, I don’t see any reason as to why they would not be a force to reckon with.”

He added that sports will be an area of focus, with the media rights of the Indian Premier League set to be auctioned in the second week of June.

“Uday was the one who bought all the BCCI (Board of Control for Cricket in India) rights for cricket as well as the ISL (Indian Super League) and Kabaddi. He would continue this same onward march in Viacom18,” Menon added.

According to Karan Taurani, senior vice president at Elara Capital, the infusion of capital will help Viacom18 compete better in terms of new original content and taking on global OTT (over-the-top) giants.

“It (the partnership) will also provide an edge versus competition on the OTT offering if they are successfully able to win the IPL rights,” he said.

Market share

All eyes are on IPL, which made Disney+ Hotstar, the official streaming partner of the league, the leader in the OTT space with a market share of 18 percent in the advertising video on-demand (AVOD) segment and a 26.3 percent market share in the subscription video on-demand (SVOD) space.

On the other hand, Voot has a 2.2 percent market share in the AVOD space. The platform’s SVOD service, Voot Select, which was launched in 2020, got a million subscribers on board in a year.

Disney+ Hotstar, Netflix, and Amazon Prime Video, the top players in the SVOD space, have 46 million, 21.8 million and 5.5 million subscribers, respectively, according to a 2021 report by Media Partners Asia, an advisory, consulting and research service.

“Voot’s subscriber base has been small as compared to the majors like Disney and Amazon. It is still a very AVOD-dominated platform. Post this development, they would aggressively focus on beefing up their OTT content in the areas of regional and sports,” said Menon.

IPL alone contributed Rs 400-500 crore to Disney+ Hotstar’s overall ad revenue last year. Experts estimate faster growth of 25-30 percent in digital ad revenue for IPL this year.

The partnership will also play a key role in scaling up sports content. Recently, Viacom18 launched its sports channel called Sports18. The pay TV channel, available in HD and SD, went live on April 15, offering content such as the FIFA World Cup Qatar 2022, NBA, La Liga, Ligue 1, Serie A, Abu Dhabi T10, and top ATP and BWF events.

Sports on TV will be a key contributor in terms of ad revenue, especially tournaments like IPL, which earned about Rs 3,000 crore for the 13th season. Disney Star is the official broadcaster of the league.

Taurani noted that TV18 has a 13 percent ad revenue market share, which is the third largest after Disney Star and Zee Entertainment.

“With a market cap of Rs 13,000 crore, TV18’s EBITDA (earnings before interest, taxes, depreciation and amortisation) margins have moved up from high single digit to over 20 percent currently, primarily led by better revenue growth, cost cutting measures and operating efficiency. The company has been able to improve its presence in the regional genre, especially Kannada and Marathi, coupled with the dominance in the urban GEC (general entertainment category) genre, led by successful franchise reality shows,” he added.

However, Taurani pointed out that winning the TV rights of IPL may impact TV18’s profitability.

“IPL rights are estimated to be sold at a 50 percent premium over and above the base price of Rs 33,000 crore. In case TV18 ends up winning the TV rights, it will be tough to attain profitability over the near term due to constant pressure on TV ad growth rates and eyeballs shifting to digital, consistently leading to lower viewership numbers,” he added.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Maryam Farooqui