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Sun TV aims distribution revenue growth of 20-25%
South Indian broadcaster Sun TV is banking big on Rajnikanth's forthcoming special affect film Endhiraan. The company is expecting a 12-15% margins from the film, said Ajay Vidyasagar, COO of the company, reports CNBC-TV18.

Divulging further plans, he said that the company is targetting distribution revenue growth of 20-25%. He informed that their Malayalam kids channel which had hit a roadblock will hit the markets within six to eight months.

On Telecom Regulatory Authority of India's (TRAI) tariff order in July for digital addressable systems including DTH, Vidyasagar comment that the broadcaster is planning to have a dialogue with TRAI to sort out the matter.

"We don’t particularly think that moving into some of the price cuts that they have recommended straight away is the right direction. So, we are contesting it, we are going back to have various dialogues with them both directly and through some of the bodies that help us arbitrate," he added.

Below is a verbatim transcript of the exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: What have you made of the July order of TRAI? Are you guys contesting it or do you think it will have a serious dent on your numbers going forward?

A: Specifically, on TRAI recommendations, we have studied this very carefully. We have been talking to a lot of our community, a lot of our peers within the broadcast industry and we believe that there is an opportunity to go back to them and have a lengthy dialogue about it. We don’t particularly think that moving into some of the price cuts that they have recommended straight away is the right direction. So, we are contesting it, we are going back to have various dialogues with them both directly and through some of the bodies that help us arbitrate. So, that is our view. We are not diving into it; we are beginning a dialogue to debate it.

Q: Have you worked out a worst case scenario, in terms of how it may impact your revenue breakup as it stands right now and whether it will impact your margins as well, which have traditionally been very strong?

A: Broadly, all of this is regulation that is within the subscriber revenue line item. We have a very well diversified revenue mix, we have revenue that come from our advertising revenues, we have revenues from the broadcast revenues, which are the slot sell revenues, we have international revenues and we have subscriber revenues. So, within our overall piece, the subscriber revenue line item is not more than 30% of our overall revenues. So, point number one is we don’t believe a lot of this will get down to reality in terms of impacting revenues.

Point number two is in the unlikely event it does, we have enough flex within our other keyline items to take care of that to ensure that there is no major dropdown in our overall numbers.

Q: One of those line items is financing movies as well now. There is a big blockbuster launch, which is coming up from Sun, the new Rajnikanth movie. Can you take us through how much you spent on that? What kind of returns one could expect or you are expecting?

A: The movie has had some very good initial response. The music has just been launched a few weeks back and we have seen some phenomenal numbers being generated in terms of offtake of the music. There is a very good buzz for the film, and it is a very high budget film. We haven’t finished the film completely in terms of packaging it and getting it ready to go into theatrical. So, we are at this point of time not talking about the total cost of the film simply because we don’t want to quote a number which may not necessarily be accurate as and when we finish it. So, no specific numbers on the cost of production. However, we believe that the overall movie production business of us operates at a 12-15% margin, we are reasonably confident that we will get to those kind of margins on this film too.

All early indications show that some people have told us that you guys maybe a bit too conservative. But we are a conservative South Indian company. So, we would stick to our guidance in that zone itself.

Q: There are some other launches we believe, which are coming up in new products from Sun, that include a Malayalam kids channel, can you confirm that? What kind of investment might go into it?

A: When we planned our kid’s launches, we launched one in Tamil, one in Telugu and one in Kannada, the Malayalam product was part of that rollout itself. It unfortunately didn’t happen at that time because we were trying to take our two Malayalam channels Surya and Kiran pay, which we did in summer this year. So, we believe that the timing is reasonably good. There is a fair amount of content already in our stable, which needs to be enabled in Malayalam language, some of it is enabled in Malayalam language, some are not. So, our model is proven international content for kids, which is positive, which does not have sex, which doesn’t have any violence.

We basically enabled that in the language that kids in that market are able to consume. We are focused on 4 to 14 age group. So, it is a product line, which has already been baked to a great extent and some of the work involved now is to tie-up the ground distribution piece and some amount of the Malayalam enabling and then we would be set to role high. I believe that in a six to eight months period we will be looking at getting that out into the market.

Q: A lot of vernacular print companies have reported a great appreciation in terms of ad rates this time around. What has the television experience been in terms of an ad rate appreciation you have been able to push through or you are likely to see this financial year?

A: We hiked our ad rates in January this year and we took a rate hike in the range of 10-33% and that has got done quite well. This has been across the network on different channels, different day parts. Typically, any ad rate takes a certain amount of time 8-12 weeks for it to actually impact itself in the market and starting this summer we have been able to put that in place and it is rolling out quite smoothly now.

Q: There is a large amount of cash on Sun TV’s books and you are not riddled with debt as some other companies might be. Where does it that you want to rout most of that money, do you want to focus on the radio space on some of these movie opportunities as you have?

A: We are fundamentally a broadcast media business and we will be more focused on broadcasting opportunities, it could be either organic or inorganic. We could surely sit down and decide on that. But we will be directing most of our leverage on cash into a lot of the television broadcast media opportunities, both in the South and outside of the South.

Q: How smartly do you see subscription revenues growing for Sun TV? They were the standout performer for the current quarter, but given that you have started on a new distribution platform and the kind of challenges with the new TRAI order, how do you see this whole distribution revenue channel moving going forward?

A: We have pegged our distribution revenue growth in the region of 20-25%. That is what we are targeting to get to. This would come out of the mixed bag of analog and digital. We are quite confident that we will be able to get to growth levels in that region. I think this new relationship that we have put together with Network18, your parent group, would help us in doing two things.

One is solidifying our own strong presence in the south and ensuring that collections are in order and we can push through with some more growth in the analog space because what we have as part of this new relationship a very powerful product range, which includes India’s strongest regional channel lineup and one of India’s biggest Hindi language channels and some of the strongest English language business and entertainment products. So, it is a very unique combination, as a product, as an offering, it is something that nobody else in this country has.

So, we believe that we can create a certain amount of teeth for ourselves both in the South and in the rest of India to ensure that that in itself contributes significantly to ensure that we get to some of our growth goals that we have set for ourselves in the subscriber revenue space.


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