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29 May 2007
High
content costs dent Star India earnings
Ashish Sinha
Business Standard
(c) 2007 Business Standard. All rights reserved
Operating profit declines 34% y-o-y to $19 million.
Rupert Murdoch’s Star TV has admitted to an erosion
of its earnings in India, its largest market in Asia,
owing to higher content costs, competition from rivals
such as Zee TV and disruptions in ratings measurement.
According to Star’s financial results for the
quarter ended March 31. 2007, its operating profit declined
by 34 per cent year-on-year to $19 million (about Rs
76 crore). This was mainly owing to a slowdown in its
India operations, media analysts pointed.
“The new rating
standard has doubled the size of the rating panel, resulting
in reduced ratings for everybody and it has given the
advertisers an opportunity to jockey with us a little
bit,” News Corp Chief Operating Officer Peter
Chernin said in the latest report by international media
research agency, Media Partners Asia
(MPA).
He also admitted to the cost increase in India owing
to Balaji shows (production house creating all the top
shows on Star Plus) as they got older leading to cycle
a of renegotiation and cost increases.
Star’s March quarter showed 11 per cent y-o-y
revenue growth to $137 million (about Rs 548 crore),
driven by advertising. Star’s financials are computed
on the basis of its operations in the entire South-Asian
region. Star’s financial year runs from June to
July.
Globally, News Corp’s profit stood at $871 million
in its third quarter ended March 31, up from $820 million
in the same period a year ago. Revenue rose 21.5 percent
to $7.5 billion. But television earnings of News Corp
fell by 4.5 per cent as higher revenue from the Fox
network were offset by lower earnings from Star Group.
But Chernin stressed that Star Plus in India was still
leading the ratings and had all the potential to increase
the ratings margin again. “We also hope to launch
three or four new regional channels this year,”
Chernin added.
Star India has already announced its intentions of launching
regional language entertainment channels in south India
through its joint venture with Balaji Telefilms.
at an initial investment of Rs 120 crore. On its direct
to home (DTH) venture, Tata Sky, Star said that since
its launch, the company has had good uptake and was
closing in on 900,000 subscribers.
“Since we’ve launched, we’ve seen
very good uptake though the faster we’ve grown
in these early stages, the more expensive it is, until
we turn the corner,” Rupert Murdoch was quoted
in the MPA report.
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