Uday Shankar, CEO of Star India, spoke about the company's plans in sports broadcasting, his problems with TAM ratings and the mistakes that taught him valuable lessons during two extensive conversations with Chaitanya Kalbag and Shamni Pande. Edited excerpts:
Q. Do you plan to be as big in sports as you are in entertainment now?
A. Only time will tell, but yes that's the objective. And that's why we have shown very rapid commitment in deepening our position. So we have a lot of cricket.
India's love affair with sports started with cricket… However, it has remained limited to India's international encounters. It's like a structure which is very tall, but very narrow. And that's a challenge. There is almost no parallel anywhere in the world. In the US, a bulk of the crowd comes in on account of domestic encounters. They have college basketball, football, similarly at the state and the city level. Here the Ranji trophy doesn't evoke any interest… And that is the problem… Only when 11 Indian players play another country's 11 players then the whole country sort of starts running in hordes, which is totally counter-intuitive. It doesn't have to happen.
If you look at the history here, the broadcast of sports, of cricket, started on Doordarshan. Around 20 years ago, the BCCI actually paid Doordarshan to carry cricket… But Doordarshan has its limitations. It used to broadcast only international encounters and we've remained steadfastly stuck on international encounters with the exception of the IPL (Indian Premier League)… But the funny thing is even the success of the IPL doesn't seem to have changed anything.
Q. I believe IPL viewership has actually been dropping?
A. It's dropped a little bit, but I'm not sure whether there is too much to read in that. I think it is seasonal. The format has worked very well for six years and people expect more. It's due for some innovation, it's due for some fresh blood in it. Once those things happen, the IPL will remain as strong.
Q. Do you see Star using sports broadcasting as means to not just transform viewing habits but also perhaps the way sports is organised in India?
A. We are hoping to work with sports authorities and the boards to make local sports popular. If we fail to do that, then our punt will be wasted. It's a very simple, sociological insight, that passionate consumers of sports are, sort of, surrogate players of that sport. Unless the way sports is organised and distributed and played in this country, unless that changes, the landscape of sports will not change and the business of sports will not change.
Neither for the broadcasters nor for the people that are organising it on the ground. That's what we're hoping to do.
My primary source of confidence, personally, is also because the BCCI organises so many domestic games - like Ranji trophy - they have a very active calendar. And the BCCI is also a body that has done something very amazing. It has taken sports outside big cities. So you have games, big international tournaments happening in Ranchi and other smaller cities. Who would have done that? There is huge potential for this to catch on. Because there are two gratification sports gives you. One is money, which happens to fewer people at a later stage, and the other is recognition, where television can play a very big role. So somebody who is better than me can play the national game, make millions of rupees, I may not be that good, but at least I become a celebrity in my state because the game that I was playing went on TV. That's a start.
Q. So, it's a long bet?
A. Yes, it's a long bet. I'm very fortunate to work for a company that only takes long bets... because they're not into it to improve the market cap. My company is in the business to build a long-term franchise. Today we have a very attractive and satisfying franchise in entertainment. But it took us 20 years to get to where we are today. And the commitment that News Corp shows to that kind of thing is quite phenomenal. The economic volatility and all that, we're okay. That's beyond your control. The real problem is the systemic leakages and distortions. They hurt. Because you don't know how to fix it, even if the economy is booming.
Q. What do you mean by systemic leakages?
A. The acquisition of cricket rights is expensive. And for very misguided reasons, several years ago, a law was passed that all sports (including cricket) of national importance would have to be mandatorily shared with Doordarshan. That was irrational. You're forced to share it, but we can live with it. Now the problem is, that it is played on all paid TV platforms - cable, DTH (direct-to-home), everything. So people are making money by providing content for which I have paid… We paid Rs 32 crore per match to the BCCI and this value has gone up further to Rs 43 crore. And Doordarshan gets to relay it for free. They let you share a little bit of the advertising, but that's ok. My problem is that all Doordarshan channels must be carried by all cable operators. So, as a result of that, we're paying and we're left holding the can. So that's what I mean by systemic distortions, or leakages.
Q. What are your issues with Television Audience Measurement (TAM)?
A. TAM measurement is nothing short of a scandal in this country. The data is not comprehensive enough - it only measures about one-third of the country… So, when I'm selling advertising on the basis of those ratings, they are reflective only of one-third of the TV universe. So two-thirds of the TV universe is being given free to the advertiser. As a result, advertising rates in this country are probably the cheapest in the world…
A. Yes, absolutely. On a Hindi news channel, for instance, you can buy advertising for as low as a few hundred rupees, primarily because the data does not reflect the reach of those channels… And independently, the law of the land, which should get all business practitioners to submit the details of their business, audit their books, their subscriber numbers… that's missing in the entire analog cable universe. So how do you know how much money people are making out of the content that you are delivering, which you bought at an exorbitant rate. So those are distortions and leakages.
Q. But even the content providers are not exactly transparent, right?Why would you say that?
A. For instance, they are not listed. You don't know whether they are making money or losing money…
What you are raising is a very complicated issue. You're right, you know, I'm not sure, in the lighter way, what is worse, whether they are listed or whether they are not listed. Because a lot of them who've listed, their investors have lost money big time. The listing did not happen on sound business principles. A whole set of people are in the industry for a variety of reasons. Every builder today has an aspiration - to own a news channel. Because it keeps the taxman and the enforcement guys and everybody else out… Most political parties and a large number of politicians, the more tainted, the more keen they are, on owning a piece of media. And they are the ones who do not want transparency - because they are all in it. India has the world's largest number of news channels. It is not a problem of the broadcasters. It's the problem of the people who are allowed to come into broadcasting.
Q. What was your motive to get into the IPL as an associate sponsor?
A. We get the visibility. The IPL is a very big platform… It gets a lot of viewers, for a long period of time, consistently night after night for about eight weeks. As the biggest entertainment broadcaster, we were keen that we take our marketing messages to that audience and, hence, when the sponsorship opportunity arose we bid for it.
Q. Sports broadcasting is highly unpredictable here, but not so much in other countries...
A. Sports throws surprises and people love those surprises. The problem here is the foundation is very narrow. Though we are supposedly a cricket-obsessed country, we show so little cricket… only when India plays international games and now the IPL, nothing else. We are not forming a habit that I want to watch cricket whenever it's being played, which is what happens elsewhere.
Also, we have not built the culture of native sport. That is something I am trying to correct. For instance, we worked to create a hockey league. The early signs were very encouraging. We are now working to create leagues in some Indian sports, like kabaddi. We are looking at sports that people have grown up with. Unless you create a portfolio of sports and create enough volume of event in each of those sports, you cannot create a habit for it. That we think has been missing.
The other big thing that's missing is the language. In a country where less than three per cent people can understand and speak English reasonably well, almost all sports commentary and graphics are in English. We hope to change that… Viewers go to compelling content. If you put high-quality cricket they watch it. To test that hypothesis, this winter we took the same cricket content and put it with Hindi commentary on Star Sports and with English commentary on Star Cricket. The results were really surprising: Hindi commentary alone added up to 20 per cent incremental viewership.
We have a few clear beliefs. The first and foremost, there is no reason for India to be a one-sport country, and within that sport, an international encounters country. The second thing is that there is a latent appetite for multiple sports, and it's waiting to be unlocked. But you have to sell the sport to the people for them to build affinity. The third thing we are saying is that people will pay for the content.
Q. What about broadcasting content using the Internet?
A. Regardless of all the cynical expressions on poor Internet penetration and bandwidth challenge, this country is at an inflection point as far as Internet consumption is concerned. Online media consumption is very quickly going to blow in our faces and I don't think the content community as a whole is ready for that… We have just launched our site called starsports.com… you can watch live matches, streaming, play back… we were stunned by the response that we got on that site. We did promotions, but the most interesting thing was the amount of time people were spending in watching it online.
Q. Why did you exit the Hathway venture? Do you see no future for cable?
A. No, we actually see a future for cable. We see a huge future for Hathway, which, we believe, is one of the best distribution companies. It was not an isolated decision. Over the last few years, we are getting out of all businesses where we are not participating in the management of the business. We don't see ourselves as merely a financial investor. We invest to build a business.
Q. Is that why you vacated your position in news broadcasting as well?
A. We exited primarily because we saw with 26 per cent and all the restrictions we had no meaningful role to play. (India caps foreign direct investment in news broadcasting at 26 per cent.)
Q. When do you think your investments will break even in sports?
A. It's a long-term investment. It will take a few years.
Q. You have been remarkably busy striking different deals since you took charge. When did you start thinking about cricket?
A. When I took over in 2007, Star was a successful company. But its success was entirely dependent on the performance of one channel -- Star Plus. And the channel's lead was coming into pressure from new competitors. I was clear about one thing -- we can't be a one-trip pony. So we decided we will strengthen Star Plus. Simultaneously, a huge boom was beginning to take place in the regional broadcasting space and Star had entirely missed it.
I have been a big believer in regional. I have always believed that if you want people to consume a lot of content, you should offer it to them in their language of comfort. Hence, we decided we will look at these spaces aggressively. That is where the opportunity came up and Asianet became available. We launched Bengali and Marathi [channels] organically. The second thing we realised, in Hindi, Star Plus had identified the need for a second Hindi entertainment channel long ago and, hence, we launched Star One in 2004. For whatever reasons, it was not successful. We decided to take one more shot at Hindi entertainment, change the name, content, the positioning… and launched Life OK.
I am not a big believer of looking at a business through the lens of ownership of the channel. I intuitively, and I guess that comes from my journalistic background, looked from the audience's point of view. What does the audience consume? There are three big pillars of what the audience consumes and it includes entertainment, drama/movies and reality. We were offering them drama and reality through Star Plus and Life OK. When it came to movies we had Star Gold, but it was a smaller presence. It does not offer too many movies, no blockbusters… so we have left an opportunity in movies for others to compete in. Even those who were not big players in entertainment, created a position by acquiring some movies because it is ready-to-play content. So we realised this is a good counterfoil to those who do not consume drama. Women like to consume drama, but for the male audience, the primary source of content consumption is movies and sports. And we were not a key player in either, so that is how we started thinking about it.
Q. What percentage of your audience was male and female?
A. A disproportionate share came from the female audience.
Q. Is it still the case?
A. It has changed significantly.
Q. So thinking on sports started only after?
A. Sport was the offshoot of thinking about ways of getting a male audience. As things stood then, other movie, sports and news broadcaster were taking away large share of it. So we decided to become more relevant with them as well and accelerated the acquisition of movies… We bought the whole Viacom library… We realised that sports was something that drove big masses of the male audience.
Q. But you had a relationship going with ESPN?
A. That's where some accidental factors come in. Because ESPN-Star Sports (ESS) was not doing so well as a business there was ongoing discussion between the partners - ESPN and News Corp - about the way forward. And both parties agreed on one thing -- that status quo was not the way. ESS was a great business, but it was not making money. It was increasingly facing competition from a bunch of new comers such as SET MAX on the back of the IPL and Neo Sports with the BCCI rights, or Ten Sports. We realised our leadership was getting eroded. That was impacting the business value… both parties were willing to be bought out or buy out. Finally, News Corp was offering a better value. So, I guess, ESPN Disney decided to sell.
But what nobody anticipated in between was that the BCCI rights would come up. The BCCI rights that came up, don't forget, were supposed to be with Neo until 2014. All of a sudden there were issues between the rights holder and the BCCI and consequently the rights were terminated and the BCCI invited tenders. We were anyway looking at being more significant and relevant to the male audience and we were doing all that was possible, but suddenly, the good opportunities came up and it happened almost overnight. Because the joint venture agreement did not allow us to broadcast sports, we agreed that in case the ESS joint venture continued, then we should sub-license the BCCI rights to ESS.
Q. Do you watch the Star Plus shows closely?
A. Yes! All the key shows are loaded to my iPad. I don't have much of a social life. I go home and sit with my wife and dog and watch my channels. I never watch any other channel.
Long ago, someone told me -- never look at your competitors' strategy. How does it help you? Have you seen a sprint runner? The guy never looks over the shoulder. The moment you do that, you lose the race. You should focus on your run. It struck me. I am good at picking nuggets here and there. So, I watch most of my content.
Q. What makes you unhappy?
A. I am very fussy about casting. I am fussy about promos; it's like the first handshake of content with the audience. It is very important.
I believe in the power of the big story. So we have started going into powerful stories, because there is a huge minefield of stories in this country. We are not harvesting that. I get into casting, putting the team together and then the script of a few episodes and then hand it over.
Q. You made any big wrong calls?
A. Yes. Huge wrong calls. Soon after I came on board, I identified, and rightly, that we needed to do something big because perception was running very low on Star Plus in 2007. Everybody thought that Star Plus was finished and the people who created Star Plus had moved on.
I decided that we should do a big show, something that would compete with KBC (Kaun Banega Crorepati), and I identified Paanchvi pass (Kya aap Paanchvi pass se tez hain), which turned out to be an absolute flop. I was a greenhorn and the big show sank without a trace. I decided to pit it against the IPL's first season in2008.
Q. What was the problem, in hindsight?
A. Two things: we underestimated the potential of the IPL. That dented the sampling opportunity of the show. And the show was very western in its philosophy. It had a great anchor in Shah Rukh Khan, who is one of the most magical anchors on TV. But its values were not right for this country. I think people were put off. They don't like the idea of children talking back to their elders and putting them down and making them look silly. I think the show was too western in the approach and didn't work well with our audience, who are still very conservative.
I have had my own share of Rs 100 crore mishaps. The good thing about this company is that when the show was over and I was going to New York for a review where Rupert [Murdoch, News Corp's chairman and CEO] was there, Peter Chernin [then president and chief operating officer of News Corp] was there. I was very, very worried. A young, new guy, untested… does a big show, flops. It had the recipe for retirement. And I remember, when I was flying to New York, I was very nervous. I thought the issue will come up and someone will ask. And it did. Someone wanted to know what happened…I remember what Rupert said, 'Relax. That is the nature of the beast. Sometimes it works, sometimes it doesn't. The important thing is do you have the next one ready?' That gave me enormous amount of confidence… I was no longer hesitant, diffident, scared. Because my bosses had validated that it's okay to fail. I came back and started telling my guys that the search for a silver bullet is illusive and dangerous. So let's have many metal bullets and go with that.