26 July 2006

Disney expands in India
By Geoffrey A. Fowler
The Wall Street Journal Asia
(c) 2006 Dow Jones & Company, Inc.

WALT DISNEY Co. announced yesterday that it will acquire Hungama, a popular Indian children's cable-TV channel, as it plays catch-up in the expanding Indian entertainment market.

Disney will pay about $30 million to acquire Hungama from United Home Entertainment, a company owned by Indian media conglomerate UTV Software Communications Ltd. and its chairman and chief executive, Ronnie Screwvala. In addition, Disney will spend about $15 million to buy a 14.9% equity stake in UTV, which produces television programming, animation and Bollywood films.

"India is a long-term strategic priority," said Andy Bird, president of Walt Disney International. "It is very important that we grow our business locally as well as through exporting U.S.-originated content."

Mr. Bird said Disney will use television as an entry point to build the brand's reputation and is looking to develop its consumer-products business in India. A theme park in India could come a "long time down the road," he said.

India's TV market for children is still a niche part of the country's cable-television industry, itself only a $1.02 billion advertising market, according to analysts Media Partners Asia Ltd. But analysts expect it to expand considerably in the coming years as the ad industry expands and India's increasing middle class spends more money on children. In the 2004-05 fiscal year, advertisers spent about $26 million advertising on Indian children's TV, an increase of nearly 16% from the previous year, according to TAM Media Research.

While India has 114 million TV households -- far fewer than China's 400 million, another Disney priority -- industry executives consider the cable-TV industry in India to be more mature and open to foreign investment than China's.

Mr. Screwvala said the Disney deal provides UTV with an important strategic partnership as the Indian market blooms. "We are in very early days, and in the next two to three years we are looking at exponential growth," he said.

Hungama will join two other Disney-branded cable-TV channels, which the company owns and has operated in India since December 2004. Hungama, which also launched in late 2004 and reaches about 30 million homes, will break even for the first time later this year, Media Partners Asia estimates.

One challenge for Disney of Burbank, California, will be finding a way to differentiate its Disney Channel, Toon Disney and newest channel so they don't steal one another's audiences and ad dollars.

But Disney's bigger worry is competing with Time Warner Inc. of New York, which has been in the Indian market for a decade and has a first-mover advantage. In June and July, Time Warner's Cartoon Network and Pogo channels had almost half of the market share, trumping both Disney and Hungama, according to TAM. Hungama is the third-most-popular children's channel in India.

The move to acquire a more popular rival underscores the challenge Disney faces in developing markets to make programming that appeals to Indian tastes.

"This is a recognition that local experience and local content is important in this market," said Nicky Parkinson, managing director of Walt Disney television in Asia.

"Sanya," a popular Hungama program Disney plans to continue to air, is a comedy about a 17-year-old girl who finds she can't say no to somebody who asks her for help, leading to a dilemma at the end of every episode. Like many other Indian TV programs, "Sanya" is shot as a serial that propels the narrative from one episode to the next. Most of the children's programs that Disney produces are driven by comedy that occurs in relationships and interactions between characters, whose stories viewers can pick up and leave at any time.
Rasul Bailay in New Delhi contributed to this article.