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Home  /  Specials  /  Super Seven  / The dream merchant | JUL 06 , 2013

Soumik Kar

Super Seven

The dream merchant
700 million eyeballs are still too few for the man who revolutionised television viewing in India

Krishna Gopalan

When Richard Li, a 25-year-old business tycoon from Hong Kong, flew down to India in early 1992, one of the items on his agenda was to call on Subhash Chandra, a relatively small but wealthy businessman, who had agreed to pay $5 million to lease a transponder on Li’s AsiaSat satellite. For Chandra, who was still in his early 40s, this meant he could, by October that year, set up Zee TV, India’s first private Hindi satellite channel. Convincing the often-mercurial Li was not easy, going by Chandra’s earlier experience of negotiating with him in Hong Kong. It was only after Li came to India and was shown Chandra’s existing businesses that the deal was inked.

It wasn’t entirely unexpected. By then, Chandra, whose family was once engaged in rice trading, was a significant player in the manufacture of laminated tubes (Essel Packaging) and had already had his first brush with the entertainment world in the mid-1980s when he moved into the theme park space. The project, Essel World, located on the outskirts of Mumbai, had slowly begun to make an impact after a lukewarm start. Having sufficiently impressed Li, the younger son of Li Ka-Shing, chairman of Hutchison Whampoa and the owner of Star TV, with his scale of operations and financial heft and with the crucial deal in the bag, Chandra decided to invite him home for dinner. On impulse, he called a friend in the advertising industry and asked him to come over, bringing along a couple of young models. “My wife was shocked when she saw the models and actually became very unwell for three weeks afterwards. She fervently requested me not to enter this business,” Chandra recalls. “I promised her I would not run after any of those girls and then she was convinced,” says the Essel Group chairman with a hearty laugh. 

If Sushila Chandra Goenka was discomfited by just that little hint of glamour, the ensuing years could have been very uncomfortable for her. Only, it is all too evident her husband has been unfaltering in his focus on the business, leaving no room for distractions of any sort. Today, Chandra lords over a ₹17,000-crore group with interests in media, technology, entertainment, packaging, education and infrastructure. Starting with the launch of Zee TV, the group’s broadcasting business now has 32 channels across languages such as Hindi, English, Marathi, Bengali, Telugu, Tamil, Kannada and Punjabi. This cuts across genres such as entertainment, sports, news and action with 700 million viewers (Chandra likes to call them eyeballs) spread across 169 countries. 

Along the way, he has created companies such as SitiCable for the cable distribution business, Dish TV in direct-to-home (DTH) television broadcasting, Playwin in the gaming space, Zee Learn in core education, E-City Ventures that’s into cinema exhibition and retail real estate, and more recently, DNA, a daily English newspaper. Often referred to as India’s media moghul, Chandra says he’s unaffected by the hype and hoopla and is instead busy setting his next target. And that is to achieve in the next eight to 10 years what took 20 years till now. “We have to get to 1.4 billion eyeballs by 2020. It’s really as simple as that,” he says with a smile. Though he remains relatively discreet about how he will do it, he admits that much of it will be through embracing new technologies. If Chandra saw the potential in broadcasting in the early 1990s and made an impressive business proposition out of it, he is quite determined to make it work once again.  

TV on his mind

Ashok Kurien has very interesting memories of the Gulf War, and watching it on television with Chandra. Kurien, who’s over a year older than Chandra, recalls being glued to the television set in early 1991 as the two men were taken in by the live telecast of the war being aired by CNN. This was the time when the Indian government owned all forms of broadcasting, and watching it live meant one had to be reasonably wealthy to afford it. “Subhash spent about ₹1 lakh in those days to have a dish antenna installed in his office,” says Kurien with an evident sense of awe.

As they watched the war unfold, a question crossed their minds. Kurien struggles to recall who broke the ice in that conversation but the thought that crossed their minds was similar. “Why can’t we show it live in India was what we wondered,” says Kurien, who by then was running Ambience, an advertising agency that was just making its mark. The two men first met in 1989, three years after Chandra started Essel World and was on the hunt for an agency since low footfalls were a key concern then. Kurien, an amusement park enthusiast, delivered a campaign that worked wonders for the property (Essel World mein rahunga main, ghar nahin jaoonga main) and, in the process, the duo hit it off. Today, Kurien sits on the board of Zee and remains Chandra’s close confidant.

Interestingly, Kurien and Chandra first decided to set up a television studio where advertisements could be filmed. “Subhash gave me the office space and we decided to work out a deal. Then, Zee came into his life and he got on to bigger things,” says Kurien with a faint smile. At that point, the only access to television programming the Indian viewer had was through the government-owned Doordarshan. With the launch of Zee, the viewer was now exposed to satellite television and importantly, had a choice. It is ironical, though, that from the time Zee TV — a name conceived by Kurien to simultaneously sound both, Indian and Western (“Zee” is a lot like the Hindi honorific “ji”) — went on air in 1992, its neighbour across the road in central Mumbai has been Doordarshan. “Honestly, when we got started, we did not in the least anticipate that the industry would change so much. We did not know this industry and it was impossible for us to say where we would be 20 years later,” says Chandra, as he gently sips from a glass of warm water to fight a bout of flu. 

Setting the scene 

Making well-timed and strategic moves counted for much of Zee’s successful early run. And many old-timers who have worked with Chandra speak glowingly of his sharp business acumen, the ability to respond swiftly to imminent shifts in the business, and be ahead of the curve. In 1993, Rupert Murdoch’s NewsCorp acquired Star TV from Li Ka-Shing and, at the same time, took an equal stake in Asia Today, the holding company for the Zee network. Chandra protected his turf, though: the shareholder agreement clearly stipulated that Star would make no Hindi content. As the market grew, though, Chandra decided half a loaf wasn’t enough and bought out Star’s stake, so that the Hindi viewership was his alone. (It took Star nearly a year after Zee snapped ties to launch its own Hindi programming.)

Prime time

Zee’s flagship business is growing while others are still to catch up

Chandra, however, was caught on the wrong foot in 2000 when Star Plus launched Kaun Banega Crorepati (KBC), a reality game show with Amitabh Bachchan as host. In one stroke, this catapulted the rival channel to the top of the ratings table, with Zee and Sony facing the brunt of this assault. Star Plus began to command astonishingly high advertising rates —  ₹5 lakh for a 10-second spot at a time when Zee was charging the highest, at ₹1 lakh for a 10-second spot. And Star managed to keep viewers from reaching for their remotes by launching new soaps at 10 pm, when KBC ended. Suddenly, the definition of prime time television had changed — from the 8-10.30 pm band, the game had shifted to the 9 pm to midnight slots, and advertisers, naturally, began migrating to where the viewers were.

How did Chandra miss seeing this change? The general belief is that he was convinced KBC was a short-term fad and viewers would return to their regular habits soon enough. By the time he realised this was a permanent change, the Star juggernaut had already started rolling. Shows on Star Plus were getting ratings of at least 10, with Zee managing barely 4 for its programmes. Chandra’s attempt to launch a game show was a washout and by the end of 2000, things were looking very grim. What made matters worse was that KBC had first come Chandra’s way and, for reasons unknown, was turned down.

Peter Mukerjea, former CEO of Star India, has immense respect for Chandra. If he thinks KBC dealt a bloody blow to Chandra, he is quick to point out that the man did not give up. “Yes, Star was a thorn in their flesh and people thought it was the end of Zee. It was here that Subhash’s perseverance paid off,” says Mukerjea. In what he describes as a masterstroke, Chandra decided to move beyond Hindi, into languages such as Marathi, Telugu and Gujarati. “He put together a range of regional channels and realised he could be the biggest in other languages. That just escalated the game.” Zee’s success with regional formats has impressed Chandra’s competitors, too. According to Mukerjea, when Star was focused on being No. 1 in Hindi, “Subhash was very smart in realising he could be No.2 in Hindi and simultaneously could be No.1 in other languages. In that sense, he was ahead of the curve,” he says.

The challenges of today are different though, says Chandra’s son Punit Goenka, the managing director and CEO of Zee Entertainment Enterprises. “If there were 60 channels earlier, there are 200 today. We need to fragment the market and not get fragmented.” 

Chandra is cognisant of that. When he speaks of doubling the number of eyeballs, he’s busy making sense of the opportunities ahead. This means seizing the opportunities on the internet and employing something totally new such as 4G. “We are considering the option of investing in technologies and this will be in addition to exploring new ways of distributing our own content,” he explains. It is obvious that Chandra is playing his cards close to his chest, but when we push a bit, he opens up a little. “We will put our content on the cloud and distribute it across the globe. It will then be possible for a consumer to simply watch, say, Holi or Diwali sequences from different films,” he says. The strategy, in his mind, will need to be to break down the content into what he chooses to call, “frame-by-frame metadata”. Getting to 1.4 billion eyeballs will include two key components, he says: “One will be to make our content available on all platforms and the other will be to embrace technology.” 

Chandra once famously said if content is king, distribution is god. He certainly knows how critical distribution is for a media company. In fact, Mukerjea is quick to laud Chandra for his well-executed strategy before explaining how he outsmarted competition. “At Star, we went for a very urban approach and decided to start from the big cities,” he says. That was not without reason since people in large cities were looking for a way to rid themselves of the menace of the cable operator. Besides, broadcasters themselves were getting a raw deal on subscription revenue since the actual numbers were always under-declared. “Subhash’s DTH strategy was always under wraps and he eventually decided to start from the rural market. It turned out to be a very smart decision,” admits Mukerjea. It was, in fact, remarkably clever.

When Chandra went the rural route, he was dealing with a very different audience — one that had a reasonable disposable income without access to television. Dish TV created a new market. The numbers tell the story. Of the 44 million DTH subscribers in India now, Dish TV, which was launched in 2004, leads the pack with a share of 28.2% while Tata Sky accounts for 19%, followed by Sun Direct and Airtel. 

A tech-tonic shift

With an enviable gamut of media businesses under his belt, the ability to create a robust convergence model is viewed as the logical way forward for Zee. Chandra isn’t willing to buy into that and thinks the future of convergence will be quite different from the way people have visualised it. That is despite the fact that Chandra was indeed one of the earliest to talk about the convergence model, back in the dotcom era. At that time, the buzzword was triple play — voice, video and data. That has changed significantly. For telecom companies, the voice and data service has been a challenge, with spectrum acquisitions having wrecked company balance sheets. Not just that, spectrum has actually been a contentious issue and has been hard to come by. “Of course, the video component remains with content creators such as us. This is the time for partnerships and co-opetition,” points out Goenka. 

The triple-play that Chandra and others were foreseeing at the turn of the millennium was one where telecom operators would be kings of the hill — they would own content and offer it to their subscribers along with voice. Chandra’s brother Jawahar Goel, who is MD of group company, Dish TV, explains why that was a vague and theoretical concept. “There was too much focus on wireless, but airwaves [read: spectrum] are limited.” The new model of convergence, in contrast, calls for cable, which means scaling up is also not a problem (since the infrastructure already exists).

But is convergence still relevant? Yes, says Chandra. However, it will be different. “If one thinks full convergence will be about telecom providers becoming content creators, that will certainly not be the case,” he declares. Instead, it will be about individual players coming together and leveraging their unique strengths (one offering data, another content, a third bandwidth, etc.). Now, it will be many players working together to offer a composite solution, he explains. It could take about five years for that game to play out. By then, Chandra thinks, there will be fat pipes with plenty of capacity going into homes, and providing internet and broadband services.

There could also be over the top services (OTT) offered then, a concept where video, television and other related services are streamed through the internet and not through the network of a service provider, a reality in the US already. “Look at Netflix [a provider of on-demand video streaming in the US], which uses a significant amount of bandwidth. But this has nothing to do with the pipe owner, who is a different entity altogether,” Chandra explains.

It is clear Chandra has a distinct vision of how media will play out in the times to come and is equally determined to get a significant chunk of that business opportunity. “The model in India will be about ‘eat as much as you can’. In that scenario, bandwidth charges will not be by usage and one will pay a fixed charge no matter how much one consumes,” he says. Each of the parties involved, be it the technology player involved in distribution over the pipe or the one who invests in physical infrastructure or just the content creator, will have a role to play. “For instance, I am a content creation company and that is what I am good at. I will have to develop more expertise here and look for ways to become better at it,” says Chandra. 

Riding the wave

Digitisation will sustain Zee’s distribution business growth

According to him, the current models of distribution will not be enough, since the audience won’t be restricted to just those watching content on television. To reach out to viewers on other platforms — handheld devices and smartphones being the most obvious ones — Chandra will need to work closely with others. “Technology will arrive in the life of a broadcaster. The strength any broadcaster brings to the table is content,” thinks Mukerjea. According to him, the challenge for someone like Chandra will be in managing the transition between content as it is consumed today to watching it on an iPad or any handheld device.

It sounds contradictory, but according to Goenka, the decision to de-merge Zee Telefilms into three firms in late 2006 actually allowed the convergence model to take greater shape. This meant the entertainment, news and cable and distribution operation now had to become independent content creators and aggregators. “These verticals run independently and have to carve out their own convergence strategies,” he adds. Then again, Zee Learn was de-merged in 2010 from Zee Entertainment Enterprises to operate independently. This was the big convergence story in the past and Goenka says it was the result of sensing an opportunity in education through television. Zee Learn now operates K-12 and pre-schools for children in addition to training students for careers in media and creative areas. It now also has a stronger television presence with the launch late last year of ZeeQ, a 24-hour edutainment channel for children. Earlier, such programming was limited to a couple of hours every day on Zee TV. 

Challenges ahoy

Kurien says he is once again seeing a certain zeal and enthusiasm in Chandra, which is reminiscent of the Subhash Chandra of the past. “He is definitely on an overdrive and there is a marked change in the last six months. I see the same recharged person,” he remarks. Kurien recalls a meeting recently where Chandra met with his senior staff at Zee. Chandra was not happy about his team saying business would grow by 15%. “His immediate reaction was ‘15% toh ho hi jayega (will certainly happen). But, why is it only 15%?”

But even as he exhorts his team to do better and aim higher, Chandra speaks frankly of a key challenge that lies ahead. He refers to the content creation efficiency factor, which is really the ability to create quality content at the right price. “If the desired level is 90%, we are barely at 50%,” he says. In other words, Zee is a long way from creating programmes successfully at a price where profits are good. 

By any yardstick, that is a seriously large gap, though, according to him, one that can be tackled. Zee has all along been one of the most cost-conscious content producers and that has always showed up in its P&L. Still, Chandra cites the instance of Sri Adhikari Brothers Television Network, one of the few companies that successfully created a low-cost model. Its channel SAB TV, built around sitcoms and not movies or regular content, was eventually acquired by Sony for ₹57 crore. Chandra says SAB produces content at a third of what others in the business normally spend, and is proof that this can be done in India.

Although Chandra’s point of cost-effective content is spot on, he actually scores much higher on this count than any of the other main channels. Today, Star Plus and Colors continue to get in higher ratings with Zee coming in only third place. But there is a fundamental difference. Most large networks have big-ticket shows, which are often risky propositions. Despite the fact that its rivals spend a lot, lot more on content, Zee continues to be in the reckoning, which is because of Chandra’s disciplined approach to programming, says Sam Balsara, chairman of Madison World, a communications group and a respected voice in the media industry. “Zee has succeeded in creating a sustainable, profitable model that harnesses revenue from both the subscriber and advertiser. The network probably has the best resource-to-result ratio in the industry,” he adds.

But there is no escaping the reality that the media business is tough. “Subscription revenue overall is not huge and that makes it really difficult,” says Goenka. Mukerjea can barely conceal his laughter when he says that the media business is nothing short of “an expedition into the unknown.” 

The last piece of the media pie for Chandra is DNA, a daily newspaper that now has editions in Mumbai, Pune, Bengaluru, Ahmedabad, Jaipur and Indore. Diligent Media Corp, the company publishing DNA, was initially launched in Mumbai in 2005 as a 50:50 joint venture between DB Corp (the publishers of Dainik Bhaskar) and the Chandra-promoted Essel Group. In May last year, Essel bought out DB Corp’s stake in the venture. Chandra today, as a result, is now up against older and more established names in the business. Asked about his plans for DNA, he merely says there will be “a lot of action” before revealing a little more with patent reluctance. “The biggest market today is the youth and they do not spend too much time with newspapers. This is something we are aware of and every step ahead will revolve around this,” he says. Chandra repeatedly maintains he is as optimistic about print as much as broadcasting. “If we understand what can be done with new media, there will be a significant increase in the consumption of news and content in any form,” he thinks.  

Recreating the magic?

Much has been said about Chandra’s ability to take risks but most people will concede that it is often measured. Referring to a saying -— fools rush in where angels fear to tread — and half-seriously, Balsara says Chandra has proved this wrong. “I can’t think of anyone who has fathered a string of so many successful businesses in so many unrelated fields in such a short time,” he explains before rattling off ventures such as satellite television, amusement parks, collapsible plastic tubes, creating the Indian Cricket League, electronic lotteries and DTH. 

Balsara recalls his first meeting with Chandra when Zee TV turned one in October 1993 where Chandra struggled to open the customary bottle of champagne. “Most Indians, of course, are not very good at it,” he says with a laugh. Instead, he prefers to talk about what Chandra is an expert at. “Little do housewives today know that it was the baby steps taken by Zee then that has led them to spend two hours of their lives each day with the telly. Nor do today’s media planners know that it is Zee that virtually created the media agency industry,” he says. 

In the time to come, Chandra, as he has in the past, will enter newer businesses. The success quotient in each will be different and he will need to use all the skills he has to get the best out of each. Kurien thinks some of Chandra’s qualities that stand out are being an astute listener. “He listens beyond the words that one says.” And even his temper is used smartly and for maximum result. “It is often done to produce the required effect and he will laugh about it behind closed doors,” says Kurien.

Chandra often speaks of the future more passionately than he recalls the past. He thinks there is a need to be alert and not to ever slip into a dangerous zone of complacence. Chandra has taken unusual decisions such as asking every head of the department or senior official to function like an HR manager. “We have been moving in that direction over the last one year and we actually do not have a full-fledged HR department anymore. Media is a business about people and if that is our only asset, why would we want to leave it to anyone else?” he asks.

So, how does the man many consider India’s Rupert Murdoch (although it’s debatable whether Chandra considers that a compliment), see the future of media in 2020 or even beyond? “I have said a lot of things and I hope I am proven right.”

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