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.