The Viacom – Network 18 Alliance

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Contents
1. Introduction .............................................................................................................................................. 3 2. Network 18’s Portfolio Companies ........................................................................................................... 3 3.1 Industry Overview ................................................................................................................................... 4 3.2 Drivers for M&A in media and entertainment ........................................................................................ 5 4. Viacom ...................................................................................................................................................... 6 5. Initial objectives of the partners ............................................................................................................... 7 5.1 Network 18’s objectives .......................................................................................................................... 7 5.2 Viacom’s objectives................................................................................................................................. 7 6. Value Creation........................................................................................................................................... 8 6.1 Complementary Assets ........................................................................................................................... 8 6.2 New Revenue Streams from new segments ........................................................................................... 9 6.3 New Content ......................................................................................................................................... 10 6.4 New Films distribution .......................................................................................................................... 11 6.5 Other opportunities .............................................................................................................................. 11 7. Implementation Issues in Alliance .......................................................................................................... 12 7.1 Compatibility of partner’s values: ......................................................................................................... 12 7.2 Alliance Ownership Structure ............................................................................................................... 12 7.3 Alliance Autonomy ................................................................................................................................ 13 7.4 Key Management Personnel ................................................................................................................. 13 7.5 Potential Issues ..................................................................................................................................... 13 8. Alliance Analysis ...................................................................................................................................... 14 8.1 Assessment of the success/failure of the alliance ................................................................................ 14 8.2 Alliance Results ..................................................................................................................................... 15 8.3 Predictions on future prospects of the alliance. ................................................................................... 16 9. Recommendations for effectively managing this acquisition/alliance ................................................... 17 9.1 Our recommendations .......................................................................................................................... 17 Exhibits ........................................................................................................................................................ 19 References – links ....................................................................................................................................... 27

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Network 18’s (formerly known as TV18) media assets now address over 80% of the US$4. With acquisitions as well as tie-ups in the television. Network 18’s Portfolio Companies  TV 18 – Owns and operates CNBC TV 18 and CNBC Awaaz. IBN 18 also operates a joint venture with Viacom.1. It owns Newswire 18 which was formed by acquiring the staff and business of CRISIL Marketwire Ltd. (Exhibit 2 for holding of TV18)  IBN 18 broadcast Ltd: This was formerly known as Global broadcast news (GBN). Printing services and publishing outsourcing. TV 18 has also invested in the internet business through its subsidiary Web 18 holding Ltd and E 18 Ltd. a New York-based global entertainment content company announced the creation of a 50:50 joint venture operation in India called Viacom 18. direct marketing. It owns and operates one of India’s leading 24 hour English language news and current affairs channels. show ticketing. real time data terminals. the company is also adequately positioned to access US$4. event management and more. mobile content. TV channel distribution. India’s first real time financial agency. TV 18 has a leading stake in Infomedia 18 Ltd. Magazine publishing. It also owns and operates Home shop 18. The strategic alliance will include television. This is a joint venture with the Lokmat group. In this paper we have analysed the alliance from Network 18’s point of view using widely available sources as well as through interviews with employees and mid management at the both firms. which has strong presence in diverse business areas spanning Business directories. primarily through cable television and the internet. VH1 and Nickelodeon channels in India. news-television. print and Internet markets over the past two years. Studio 18 which is the group’s filmed entertainment operation and 3 . It has 50% stake and manages the operations of IBN7. called Viacom 18 which houses the MTV. a Hindi language news and current affairs channel which is a joint venture with the Jagran group. jobs and travel portals. music television. on air/online shopping. the Network 18 Group and Viacom Inc. CNN IBN. 2. film and digital media content across numerous brands to build India’s leading multi-platform entertainment company. It currently launched its first regional channel. IBN Lokmat in Maharashtra. a televised home shopping service selling credible brands through interactive electronic media. Network 18 has businesses straddling filmed entertainment. Introduction In May of 2007.5bn of subscription opportunities. news portals.9bn ad revenue pie.

Rising ad volumes will dent ad rates. which could lead to significant losses in the initial phase due to lack of immediate synergies and the learning curve. 3. 4 . where persuading readers to switch to another paper is not as easy as flipping channels. It has a growing web portfolio and new revenue streams are expected to kick in from print media and general entertainment. as ad volumes and rates are unlikely to move up simultaneously. The pace at which channels are being launched is alarming and indicates the lack of significant entry barriers in television. driven by new launches from entities funded by private equity investors and international media conglomerates. required for reaching breakeven point. Building scale is critical. but could dent earnings momentum The entire broadcast sector wants to expand. (Exhibit 3 for holdings of IBN 18) The group started as a single channel broadcaster in 1999 and today continues to demonstrate its ambition and youthful energy by venturing into all aspects of the media business in India. a broad range of channels and control of strategic assets are well-positioned to fend off competition. This also ensures that advertisers are offered a spectrum of media choices.1 Industry Overview The volatile tastes of India’s TV audience leads to ratings volatility and viewership fragmentation which can put pressure on ad rates. In addition we have analyzed the following factors - Lack of entry barriers bringing new competition There are currently over 300 channels in India. as only companies with well-diversified exposure.has recently launched ‘Colors’ which is a new Hindi general entertainment channel. General entertainment channels command a 40% share of the total advertisement pie and have an estimated ad market size of US$1bn and have seen an increase in serious competition over the past few quarters. The group’s relatively older news businesses continue to do extremely well. hence. however. This comes at a cost. such as print. compared to the stickiness of other media. leading to growth through higher addressable ad volumes and reduced sensitivity to ad rates. when expansion TV18 is diversifying into unrelated assets. incumbents could see slower top-line growth. as earnings performance deteriorates during the transition phase. and over 100 new channels are being funded.

could trigger a deceleration in medium-term ad revenue growth. Expect acceleration in organized pay revenues Expert estimate India’s organized subscriber base to expand at a 36% CAGR over the next three years. Consolidation is on the cards for most of the companies. Alliances have taken place among national and global organizations. 3. In longer-term. Subscription revenues directly add to profitability and should help broadcasters balance out margins pressure from competition and rising costs.Expect deceleration in ad revenues Research suggests a slowdown in revenue growth for ad spenders this year. The organizations now are concentrating more on expanding their footprint and becoming full-fledged M&E companies. growth will continue due to our expectation of a resumption of positive macro trends. along with slowing GDP growth. Relaxation of the policies and regulations by the Indian government is encouraging the companies to go in for consolidation within India and is welcoming Private Equity (PE) and major global M&A players who want to capitalize on the growth of the Indian entertainment industry. services and products 5 . This. The expanding market places have enabled major media companies to diversify in terms of cross-media ownership. we believe that strong market growth and pay revenue streams will ensure their survival of these channels in the near term. the distribution of power and reduction of costs • Acquisition of new technology. While a worsening competitive environment. The major drivers for these consolidations are: • Globalization – increasing the geographic reach • Attaining economies of scale • Better leverage in rates for advertising • Content enhancement. while the unorganized subscription pie is expected to witness a sharp contraction (-7% CAGR) due to ongoing efforts to switch customers onto the organized network. lower liquidity in financial markets and high interest rates could lead to a tough operating environment for broadcasters.2 Drivers for M&A in media and entertainment The media and entertainment companies in India are undergoing rapid transformation.

this transformation into a media giant did not come without its toll. and Spike TV. 1994 and the acquisition of Paramount in July. which included BET Hip Hop. book publishing. We believe that the only way to achieve long-term business model sustainability in such an environment is to adopt conglomerate status by acquiring synergistic assets. Most notable among them were the merger with Blockbuster in January. is an entertainment content company that provides programming for cable and satellite television. in our view. compounded by low entry barriers and India’s cultural diversity. Viacom gradually emerged as an “entertainment colossus” and expanded its empire through a number of mergers and acquisitions. BET Mobile and BET. Bought by visionary Sumner M. which includes television and radio broadcast networks. Comedy Central. has resulted in a highly fragmented market with multiple competitors in each segment. Viacom. motion pictures and digital products. Redstone in 1986. The company incurred huge debt. Dream Works. structure and management challenges loomed and the fast-changing entertainment and media industry posed new threats to the company. This. Nickelodeon. Viacom Viacom. Standalone media assets will witness margin deterioration leading to the non-viability of their business models. established by CBS Broadcasting as an independent company in 1970 has now become world’s second largest media conglomerate. However. outdoor advertising and music recording operations. Among its properties are the MTV Networks. Today. The current company is the result of a split of the former.com. into Viacom and what is called CBS Corporation. including MTV Music Television. 1994. 6 . and BET. 4. MTV Films and Nickelodeon Movies. timely strategic alliances and product diversification.The need for larger addressability is understandable given that India’s media industry has become extremely competitive. with an entire spectrum of companies wanting to fill gaps in their asset positioning by addressing various segments of the value chain. Inc. Its motion picture production and distribution division includes Paramount Pictures. much larger company at the end of 2005.

With competitors also growing inorganically Network 18 was looking for speed in growth. It is keen on growth initiatives which will exploit untapped market gaps in Indian consumer and business media spectrum. the New York-based company that owns MTV and Paramount Pictures.5.2 Viacom’s objectives Viacom. Therefore.  Production expansion and developing diversified content offering & leader brands The group is concentrating on providing the highest quality content that fulfills the wide ranging and ever evolving consuming preferences & user needs in the most convenient and affordable manner. The objective was to embark on the joint venture at a time when India’s cable television broadcasting industry is preparing for unprecedented competition that many believe will lead to a period of blood-letting and consolidation in the months to come. wanted a strong local partner to help with an ambitious agenda of launching a Hindi-language channel in India within the next year. Viacom’s two major objectives are as follows  New market entry 7 . 5.1 Network 18’s objectives  Fast Growth The macroeconomic viewpoint and growth rates indicate that traditional media in India such as television.  Building on strengths in new media through complementary assets In the new media space the company has been diversifying in India. Initial objectives of the partners 5. strengthen the value proposition to existing consumers of the group. This media space has shown signs of being a major growth opportunity. agglomerate audiences in a more meaningful manner for advertisers and partners and encourage users to move up the value chain through the various services being offered by the group. Network18’s strategy in this space has been to continue sustaining its growth momentum both organically and inorganically. print and so on are far from reaching saturation levels. Network 18 intends to strengthen its existing presence constantly through acquisition or alliance with players with complementary assets. filmed entertainment.

including Rupert Murdoch’s Star TV and Japan’s Sony.The push by Viacom comes amid increasing excitement over India’s $1. Value Creation 6. Together they will launch a general entertainment channel. to be growing 21% a year. We do believe that they are extremely strong brands and therefore can be scaled up even more than what has been achieved so far. VH1.  Increased market presence Viacom views India as a more promising market in a region where its main channel. a shrewd entrepreneur who has rapidly turned TV 18 into the country’s primary news channel operator by using rights to the CNBC and CNN brand names. has been losing money. CNN. 8 . MTV. and will also contemplate launching a number of additional niche channels from the Viacom family of channels worldwide. such as Zee.Analysts we have spoken to in the TV industry say the partnership with TV 18 buys Viacom the cooperation of Bahl. Viacom chief executive. a research firm. Viacom hopes to learn more about the Indian media industry especially about the distribution side of the industry. The Network 18 Group will contribute its film activities from the Studio18 Group.” says Philippe Dauman. Bahl will be able to cross-sell the entire offering to advertisers. general entertainment and children’s TV in the form of Nickelodeon. DreamWorks. “We can boast of one thing that no American media company can boast of.” he said. Nickelodeon. which is estimated by Media Partners Asia. including news.7-billion broadcasting industry.” Although his news channels are not part of the venture. and several large domestic broadcasters. where can you see a collection of these brands [in one stable]?” 6. TV insiders say the partnership creates what is known in the industry as a “full bouquet. Sun TV and Sahara. “Where can you see CNBC. The market is dominated by foreign-owned operators. MTV. Our Insight . Paramount Pictures.1 Complementary Assets Viacom will contribute channels which they have developed over a number of years. “We are really choosing to focus our activities in those markets where we believe our investments will pay off in a big way for a long time.  Learning Technology/skills/capabilities from partner Through this alliance with Network 18. There is a considerable scope for expansion on the revenue and profitability side as well as on the audience share side.

Sr. “The Viacom and TV18 joint venture will help us leverage the assets of both Viacom and TV18. She further adds. the canvas just got larger. Since January 2009.: “COLORS has received tremendous response since launch in India and we are confident that its shows will now become household names amongst the Indian Diaspora in these markets. a new-age motion picture brand that produces. Viacom 18’s kids channel Nick (Nickelodeon) has increased its market share from 9% to 18% and has become the fastest growing channel in the kid’s category. films and digital media. Network Development.6. “Colors” is the first ever global launch of an entertainment channel on IPTV. The third factor contributing to Nick's success is our robust distribution that has ensured that Nick is the second largest distributed kids channel in India today. According to Sanjev Hiremath. soon. with worldwide reach. in the near future. Nick remains one 9 . the fastest growing kids channel has had tremendous momentum over the last year and has been gaining market share. and Viacom 18 Media Pvt. Viacom 18 will deliver content related to television.” Kid Segment Nickelodeon. So in that sense. Ltd. Vice President. With colors. which has a good mix of library as well as acquired shows that have made Nick the comedy destination for kids. Viacom 18 has made its foray into the IPTV sector which will certainly be one of the biggest distribution mediums. Studio18. thus enabling us to explore opportunities across platforms. Second is our 360-degree multi-platform marketing strategy. acquires and distributes Hindi films launched the Hindi General Entertainment channel – COLORS.2 New Revenue Streams from new segments Hindi entertainment In-spite of the tough competition and neither partner having any experience in operating a Hindilanguage entertainment channel. According to Nina Elavia Jaipuria – VP and GM Nick some of the success factors of Nick are: The first among them is the fabulous programming we offer kids on our channel. The launch has been made possible by a partnership between Viacom 18 and The New Media Group which owns “World-On-demand” IPTV platform.

the channel has won numerous awards at Indian as well as International level for its unique humor and unmatched creativity. MTV VJ Hunt. there is a substantial scope for Network 18 to be able to scale these existing properties up. India’s leading multimedia youth platform. hip hop. pop culture. offering them an exciting mix of music and non-music programming (Bollywood. which this JV will provide to all the three channels. MTV Music Summit for AIDS.” Youth Segment MTV. the juiciest stories and the latest in your favourite artiste’s life. adventure. MTV Youth Marketing Forum. punk. Launched in January 2005.of the focus areas for Viacom-18 in India. providing music buffs with their daily dose of international music. the channel today reaches almost 20 million homes across India and is growing rapidly to reach many more. These channels are in their early stages of growth and we clearly see a lot of potential for all these channels. Other successful channels include a male-oriented channel called Spike TV in the US.8 million households in over 141 territories.3 New Content Viacom has a large number of differentiated channels both in the US and in various countries around the world. fashion & style and fiction). the channel has today become a preferred destination for advertisers to reach out to Indian youth. Style Awards. 6. coupled with the biggest stars. We believe that with the force multiplier. The important thing 10 . With an exhaustive music library spanning over 30 years and genres like flower power. reality TV and celebrity lifestyle. they have been rolling out Comedy Central which has worked well in several countries. Known for its unique properties (MTV Immies. These represent a dramatic expansion of the scope of activities of both Network 18 and Viacom in India. humor. Vh1 is available across 142. Since its launch in 1996. pop and many more. Vh1 is India’s only 24-hour international music and lifestyle channel. Globally. caters to the interests and passions of 15-34 year olds. and Nick's growth and performance over the last 12 months are a testimony of the same. reggae. rock. presented in its inimitable style by Indian VJs. Viacom 18 will be exploring which new channels would be appropriate to launch in India. Vh1 has brought the best international music to India. MTV Youth Icon and MTV Roadies among others). Vh1 customizes its music and programme mix to appeal to Indian tastes. For instance.

thus forming an entertainment conglomerate that will have a competitive advantage in serving the needs of both viewers and advertisers.4 New Films distribution This joint venture is very broadly based and both firms will be exploring a lot of specific opportunities for them to cooperate. and digital and mobile platforms where people can follow their products wherever they are. Viacom. VH1. Nickelodeon. MTV . where can you see a collection of these brands [in one stable]?” The underlying reason. CNN. Paramount Pictures. 6. We are really choosing to focus our activities in those markets where we believe our investments will pay off in a big way for a long time. we believe. Viacom18 brings together the unique strengths of two formidable partners.for the alliance is to look at it from a consumer perspective to see what will appeal to the consumers here in India and create very compelling programming that will work on air. “Where can you see CNBC. including news. behind the success factors is the strong understanding of the Indian markets which Network 18 brings and the strong production and technical capabilities of Viacom.” he said. a shrewd entrepreneur who has rapidly turned TV 18 into the country’s primary news channel operator by using rights to the CNBC and CNN brand names.” Although his news channels are not part of the venture. Chief Executive.5 Other opportunities Viacom18 also runs Viacom's consumer products business in India. May 25. TV insiders say the partnership creates what is known in the industry as a “full bouquet.” Philippe Dauman. This could include distribution operations in India for films that are produced by Paramount and DreamWorks 6. DreamWorks. general entertainment and children’s TV in the form of Nickelodeon. “We can boast of one thing that no American media company can boast of. on its joint venture with TV 18 (Source: Financial Times London. Bahl will be able to cross-sell the entire offering to advertisers. 2007) Analysts we have spoken to in the TV industry say the partnership with TV 18 buys Viacom the cooperation of Bahl. 11 . “India is one of Viacom’s priority markets for expansion internationally.

Nickelodeon and the only international music and lifestyle channel in India . MTV Networks is a 100 per cent subsidiary of Viacom in India. all the forthcoming Hindi film productions. Insider sources at TV-18 have mentioned that the alliance deal was signed in the wee hours of a morning party in Goa. with immense future growth prospects.We analyzed the alliance from the three dimensional fit and besides the operational and strategic fit and synergies that most alliances in this space do achieve. MTV.  It was a vibrant group in terms of ventures.Together the JV is in a process of realizing synergies between the partners and has built one of India’s leading multimedia entertainment power-house.2 Alliance Ownership Structure The Indian operations of Viacom 18 would be launched with an investment of $13 million.1 Compatibility of partner’s values:  NW18 found as favorable the below characteristics of Viacom  Strong holdings in the general entertainment sector  It was as diverse in its portfolio as NW18. The original alliance started with Viacom bringing 3 channels (MTV. HSN-Cyprus which is the main company involved in fund routing is a JV between Cayman Islands based Network 18 and Mauritius based SAIF II Mauritius Company Ltd. 7. 7. acquisitions and distribution ventures of Studio 18 (TV18 Group) will also form a part of the joint venture. the most important factor of success in this alliance has been the cultural fit. operated by MTV Networks India Private Ltd in India. mergers and acquisitions in new sectors. In addition. now come under the newly formed company. funds for the venture would be routed through Cyprus and Cayman Islands. The vibrant and fun loving culture inept in both firms has led to a much smoother functioning of the joint venture – unlike other alliances in this space such as Times NOW with Reuters which have had enumerable frictional differences. Nickelodeon and VH1.VH1) while TV18 brings its motion pictures division to the JV.  A fast growing company similar to NW18. Interesting fact . Implementation Issues in Alliance 7. 12 .

was instrumental in leading MTV Networks Asia & India on a profitable growth trajectory. using its tentacles to seize every part of the media pie. This would facilitate speedy integration and faster results for the joint venture. who joined MTVNI in 2005. Network18. Competition is fierce. but the new partnership faces many challenges. Raghav has taken the group to new heights. For instance.7. 7. Jain spearheaded the company’s expansion and led many key market developments including the successful launch of Viacom 18’s general entertainment service. however. There are more than 200 channels in India with more being created every day.5 Potential Issues This alliance may look good on paper. Neither partner has experience operating a Hindi-language entertainment channel in today’s market. which ranks among the top two general entertainment channels since launching in July 2008. around the time of CNN-IBN’s successful launch. VH1 and Nickelodeon) would continue to operate exactly the way they are. MTVNI for Greater China.4 Key Management Personnel The key person behind the successful growth of network 18 – was Raghav Bahl. Bahl quickly grabbed a 46 per cent controlling stake from Jagran Group’s M. South East Asia and India. 7. He also played a principal role in expanding Viacom’s business interests through the formation of Viacom 18 – Viacom and TV18 Group’s joint venture in India. with their content and with the same management teams in place in order to avoid disruption of creativity and implementation issues. has been like an octopus. COLORS. Gupta family — and was able to hit the market at the time of CNN-IBN’s initial high with a Hindi sister channel. IBN 7. While most other media companies have preferred to guard their monopolistic turf without venturing into alien territory. the group was also working on a business plan for a Hindi news channel to complement its new English one. As Executive Vice President and Managing Director.M. Amit Jain. A shrewd entrepreneur and strategist. But fewer than half will generally be carried on a given cable network and the advertising market is not growing quickly 13 . From Viacom.3 Alliance Autonomy Post Alliance It was decided that the three channels which are operating in the JV immediately (MTV. When the floundering Hindi news channel Jagran TV came up for sale.

8. TV18 and GBN.500 Crore.1 Assessment of the success/failure of the alliance The alliance has been extremely profitable and the company has grown to new heights in the media industry – firmly establishing itself as a media powerhouse. It has emerged as the fourth largest media group along with HT Media after the Times Group with estimated revenues of Rs 4. The alliance has been successful in not only meeting its initial objectives. is expected to touch Rs 1. Calling it NewsWire18. In a country that is obsessed with its movie industry. The group. “The group is building an effective synergy between Moneycontrol.000 crore in FY2008.com and NewsWire18 to compete with Bloomberg.000 Crore. from revenues of Rs 135 Crore in 2004.500 Crore and the Zee companies together clocking Rs 1. from Rs 35 crore in the previous period Due to its lack of presence in the news wire space. Network18 acquired Crisil MarketWire. the company broadened the service into an integrated information terminal and now has 600 terminals in the country. TV18’s profits ballooned almost four-fold to Rs 22 crore for the nine-month period ending 31 December 2007. Network18’s two listed flagships. In late 2006. an analyst with Khandwal Securities. The Studio 18 management wanted to leverage on the additive benefits of two partners and the expertise of Viacom’s management while learning the best practices from them. but as expanded upon the scope of businesses that it was originally intended for and has made valuable strategic decisions in the recent past in their quest for convergence.enough to cater to all of them. Alliance Analysis 8. The market share of general entertainment channels is also falling. Star India Rs 2. leap-frogging into the news-wire space seemed like a logical move. Since the formation of the alliance. a media company without a film division is like a 14 . Network18’s convergence strategy has not gone unnoticed. analysts believe the $100 million the partners are rumored to be investing in the venture will give it a head start and enable it to create itself barriers to entry in this competitive space. have galloped along at a 50 per cent and a 70 per cent clip. several new revenue streams and products have been included. a real-time financial news wire service from Crisil. while GBN’s losses were pared down to Rs 8 crore for the same ninemonth period. respectively. Still.” says Ashok Jainani.

Studio 18 . HomeShop 18 . Since the home shopping channel is currently not available on the DTH platform. a stone’s throw away from Famous Studios. The combination of their stronghold in the youth audiences and access to the audience franchise of Network18 will lend enormous leverage and strategic advantage to their entry into the mass general entertainment space. COLORS has emerged as the number two player ahead of Zee TV. and Bahl’s group didn’t have one. It had the strongest opening week performance and within 3 months of launch. Viacom 18 made smart use of Network 18’s news channels to cross promote the entertainment channel. which will hold all (intellectual property rights). a fact that has been well leveraged. It had two huge successes in 2007 ‘Jab we met’ and ‘Welcome’ with welcome achieving the third largest opening and final grosser ever. Studio 18 will primarily focus on creative and distribution services while its forays into production via the 14 projects have been transferred to IFC. Bahl lured away Sandeep Bhargava from Sahara One Motion Pictures. is Viacom 18's flagship brand in the entertainment space in India. but following the formation of IFC early this year. HomeShop 18 decided to create programmes to reach out to a wider audience through COLORS. while Zee is at 220 and Star is at 278.Leveraging the strength of Network 18’s television channels. This would have not been possible without Viacom’s support through Paramount and Dreamworks.'COLORS' launched in July 2008. who defected with his entire team to set up shop in the backlanes of Mahalaxmi Race Course.2 Alliance Results COLORS . For Bahl.Viacom 18 has joined hands with The New Media Group KK (TNMG).Queen without a crown. His solution? Poach and build. reaching out to extended audiences through the rest of the network’s channels is a way of leveraging synergies. Viacom’s distribution strategy is 99 % responsible for the success of COLORS. 8. COLORS clocked GRPs of 250. to enable the channel to be seen via the IPTV service World On-Demand. (Please Refer to Exhibit 3) 15 .The Indian Film Company (IFC) will produce six films on a budget of about 24 million dollars. Bindass who have been vying for increased presence. refer to Exhibit 6). COLORS on IPTV . (Please Refer to Exhibit 5) MTV – MTV’s performance has been improving with respect to other players such as zoom. TV 18 established Studio 18 about a year ago to engage in all aspects of the film business. (For post-launch COLORS’ performance. sitting on the sidelines of a booming multiplex market was not an option.

3 Predictions on future prospects of the alliance. with lack of differentiation leading to a reduction in viewership The broadcast space appears cluttered. Flushed with cash. The company’s acquisition strategy has also engineered some savvy deals. the future prospects of this alliance have the following risks as well:  User fatigue. Studio18’s first slew of in-house films. in the Rs 8 crore-10 crore range. too. Network18 Media & Investments. we expect this trend to continue and impact their bottom line. hence. User fatigue due to the lack of content differentiation could soon lead to a search for alternative entertainment modes. including ‘Fruit and Nut’ with Boman Irani and Cyrus Broacha. Bhargava has moved forward with a three-pronged strategy: financing in-house films. due its recent box office successes. are mid-budget. Network 18’s corporate structure is a labyrinth of companies with criss-crossed equity holdings and complicated joint ventures that can confuse investors.Nickelodeon – The channel targeted towards the kids segment is emerging as the leader in the kids segment. Rising ad volumes will dent ad rates.  Increase in television rating points volatility. with content having a similar look and feel across channels. This move has given Studio18. At the top of the heap is the listed holding company of the group. With the expected launch of more channels this year. It has achieved the fastest relative share growth of 81% and has rapidly grown in to the third position as is on its way to become the market leader. The Network 18 group recently listed The Indian Film Company (TIFC) in Guernsey. co-productions and acquisitions. such as theatre. (Please Refer to Exhibit 4) 8. in which Bahl holds a controlling 51 per cent 16 . movies or gaming. incumbents could see slower topline growth. on London’s AIMs exchange and raised $100 million (Rs 400 crore) about 18 months ago.  Cost-push inflation as the scuttle for talent impacts margins The impact of intense competition on employee retention costs is visible in the rising option expensing trends at TV18. the group’s front for its film business.000 crore. with viewership fragmentation essentially leading to a reduction in ad rates The volatile tastes of India’s TV audience leads to ratings volatility and viewership fragmentation which can put pressure on ad rates. However. arming it with a war chest of Rs 1. in our view. as ad volumes and rates are unlikely to move up simultaneously. a lever for raising an equal amount of debt.

This is a prime example of a case in which the success of the alliance is due to the smooth working relationships between both parties. but also focus on the day to day relationship issues. Perhaps in recognition of this criticism. Both partners have built and maintained internal alignment around the choice of partner (through a great cultural fit). Also – the alliance would benefit from improving and training employees involved in the alliance on collaboration building. HomeShop18. 9. Network18 in turn controls 51 per cent in two other listed subsidiaries — GBN and TV18.stake.1 Our recommendations The alliance would benefit from having a dedicated alliance manager function –one that does not exist today. it could be heading for the sky. there are the JVs that include Viacom18 and the partnership with the Hindi print giant. 9. And finally. Jagran Group. and how the alliance will operate. Recommendations for effectively managing this acquisition/alliance The alliance between Network 18 and Viacom has been successful in enlarging and appropriating the maximum value of the pie. Media watchers also point out that the group has a maze of brands that have little recall value. They seem to have effectively implemented a process for identifying key decisions and issues related to the alliance. Since both parties brought to the table complementary assets and were clear about each other’s strengths – they have split the gains possible. Besides these. This dedicated person (often referred to as an alliance manager or relationship manager) should oversee not only the business objectives and milestones of an alliance. Both partners seem to have established common ground rules for working together. the group has launched an aggressive branding campaign to give the group’s properties a brand identity through the number ‘18’. these employees should be trained to become skilled at joint 17 . Setpro18. Specifically. the group has a host of unlisted corporate entities including Web18. For a company passionate about convergence and growth. the purpose and goals of the alliance. Capital18 and the cable distribution arm. Effective management of any relationship issues that may arise is essential for the productivity and long-term success of the alliance.

problem-solving. conflict resolution. and explicit exchange of feedback. We also believe the alliance would benefit from ‘relationship audits’ – which implies jointly monitoring the health of the working relationship between alliance partners (i. process. or standard procedure. executive reviews. When companies can audit the relationship side of an alliance with a formal mechanism. they should try and follow some of the principles we discussed. The alliances would be more effective. 18 . more valuable to stakeholders. and easier to manage. Companies that have this capability recognize the criticality of collaborative skills for all alliance-involved employees. or other similar processes are examples of relationship audit mechanisms. off-sites. Such methods as surveys. open and direct communication. In order for Viacom 18 to leverage its access to complementary assets – Viacom's inherent creativity content and Network18's operational excellence. and instilling these skills as a corporate necessity. and routinely invest in maintaining.. if not also enhanced. the alliance is most often preserved. updating.e. These companies also emphasize the need to maintain collaborative mindset when dealing with un-collaborative partners and do so by instituting routine validation of collaborative thinking – a good best practice to be followed to develop a collaborative corporate mindset. how they are working together to further their substantive goals).

Exhibits Exhibit 1 19 .

Exhibit 2 Exhibit 3 20 .

Exhibit 4 21 .

Exhibit 5 Exhibit 6 22 .

23 .

Exhibit 7 24 .

November 2008 25 . 2 in General Entertainment Category COLORS: Revenue curve to follow viewer ship gains Viacom18’s other properties – MTV.COLORS: A strong No. Nickelodeon & Vh1 Exhibit 8 Indian television broadcast revenue pie – INR 480 million by 2015E Source: Indian Entertainment & Media IDFC SSKI.

Exhibit 9 GRP CHART 26 .

pdf 27 .com/myprofile/login.com/catalyst/2008/05/22/stories/2008052250010100.html?page=2 http://www.marketlineinfo.com/headlines/y2k9/jan/jan249.com/money/2007/may/23viacom.org/chapter/netherland/2008programoctober30 http://albany.com/Entertainment/Movies-Theatre/2007-07-23/384473news.rediff.indiantelevision.html> ISI Emerging Market <http://library/E_Resources/Redirect/ISI_Emerging_Markets.com/reports/Network18%20Group%20-%20Dec08(QA).com/money/2007/may/23viacom.htm http://www.pdf ABI Inform <http://library/E_Resources/Redirect/ABI_Inform_Global.html http://www.htm http://www.network18online.php http://www.aspx> http://www.in/dp/network18.sebi.bizjournals.com/albany/stories/2006/09/04/smallb2.cfm?type=request_pub&id=105 http://www.com http://www.com/library/Default.strategic-alliances.html> Datamonitor <http://www.htm http://www.html> LexisNexis Academic <http://library/E_Resources/Redirect/lexis.vantagepartners.html> ET Intelligence Group <http://library/E_Resources/Redirect/ETIG.zeenews.rediff.References – links http://www.thehindubusinessline.gov.viacom18.

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