23 May 2007

Viacom Venture Taps Hot India Market
Geoffrey A. Fowler
The Wall Street Journal Asia
(c) 2007 Dow Jones & Company, Inc.

Viacom Inc. is forming a joint-venture entertainment company in India with local player TV18 Group, in an effort to boost its presence in one of the world's fastest-growing media markets.

The new company, called Viacom-18, will launch a Hindi-language general-entertainment cable and satellite channel within the next year and will produce local programming as well as collaborate on film and digital projects.

For its 50% stake in the venture, Viacom Inc. will contribute to the company its three existing Indian TV channels — MTV, VH1 and Nickelodeon India — and some capital; it declined to say how much. Analysts at Media Partners Asia estimate that such an operation would require an investment of more than $100 million.

"India is one of our priority markets for expansion, and we see long-term growth opportunities across virtually every area of our business," said Viacom Chief Executive and President Philippe Dauman, in Mumbai.

The general-entertainment venture pairs two unlikely partners: Viacom, known for films and family entertainment, and TV18, known for its news operations in partnership with CNBC, a unit of General Electric Co.'s NBC Universal, and Time Warner Inc.'s CNN.

Both parties in Viacom-18 have aspirations to grow beyond their current niches. "We want to be the leading multiplatform entertainment company in India," Mr. Dauman said.

India's pay-TV market was valued at about $4.2 billion last year, including subscriptions and advertising, Media Partners Asia estimates. Viacom, which has had MTV in India for a decade, is joining a wave of investment in Indian TV by multinationals eager to tap the country's growing base of more than 114 million TV homes.

Last year, for example, Walt Disney Co. acquired children's cable-TV channel Hungama and a nearly 15% equity stake in Indian media conglomerate UTV Software Communications Ltd.

The growing number of TV channels means competition is on the rise, and profit margins are under pressure. General-entertainment channels, which accounted for about 60% of the total spending on TV advertising in 2001, have shrunk to 40% of spending today as regional, sports, news and children's channels have expanded, Media Partners Asia says.

However, the companies think there is still space for general-entertainment TV. "We believe that the Indian media industry is really now set for a second wave," said Raghav Bahl, managing director of TV18 Group.

Viacom has been struggling to turn a profit with its MTV Networks around the region. Last year, the company restructured and laid off staff at its regional headquarters.

With the new India partnership, Viacom will also jointly own with TV18 the management company for Indian Film Co., a film-investment fund that is in the process of being listed on the Alternative Investment Market of the London Stock Exchange.

In coming months, Viacom said, its Paramount Pictures and DreamWorks studios will explore additional opportunities for collaboration with Viacom-18.