Business Today

Cable fault

N. Madhavan        Print Edition: July 10, 2011

There has been overwhelming demand… for the immediate revival of Arasu Cable TV Corporation for providing cable TV services ... This government will nationalise private cable TV operations." That was Governor Surjit Singh Barnala spelling out the priorities and programme of the new All India Dravida Munnetra Kazhagam, or AIADMK, government in his address to the Tamil Nadu legislative assembly on June 4.

Read: TN govt to take over cable TV services

Why would a party, which won on an anti-corruption plank, list the nationalisation of cable distribution as one of its major goals? The answer lies in the bitter political rivalry between the AIADMK and the Dravida Munnetra Kazhagam, or DMK, which was in power till the April Assembly elections.

Read: Budget crunch hits Tamil Nadu

The Maran brothers - Union Textiles Minister Dayanidhi and Kalanithi - are nephews of DMK patriarch M. Karunanidhi. Kalanithi owns the biggest TV distribution network in the state, Sun Cable Vision, or SCV, which naturally gives a certain muscle power to the DMK. Ostensibly, SCV is not a business that generates massive revenues. Its parent company Kal Cables posted a Rs 4.09-crore loss in 2008/09, the latest year financial data is available for the company. Income from TV signal distribution in Tamil Nadu accounts for four per cent of Kalanithi's Sun TV group's revenues.

Read: Problems await Jayalalithaa in TN

Yet SCV is crucial for both the Marans and the DMK. "SCV is the base on which the Maran empire is built," says C. Umashankar, former Managing Director of Arasu, the state-owned TV distribution company referred to in Governor Barnala's speech, which will control all cable distribution in the state if Jayalalithaa carries out her threat.

Read: Tough days ahead for Jayalalithaa

SCV, which currently controls the bulk of the distribution market in Tamil Nadu, gives the Sun TV channel and consequently the Marans and the DMK, a unique advantage. "SCV determines placement of its own channels vis-à-vis competitors. All Sun channels are placed in the prime band," says P.V. Kalyanasundaram, who chairs Polimer Media that runs an eponymous channel.

Presence in the prime band, coupled with strong content, has helped Sun TV notch up unbelievable viewership numbers. Its share in the general entertainment category in Tamil for the week June 5 to 11 this year - the latest data available - stood at 72.85 per cent. Rupert Murdoch's Star Vijay was a distant second with a meagre 7.45 per cent.

Such dominance has translated into stronger ad revenues and super normal profits. For the quarter to March 2011, Sun TV posted a turnover of Rs 460 crore and a net profit of Rs 208 crore. Its operating profit margin, or OPM, was an enviable 97 per cent and net profit margin, or NPM, stood at 45 per cent. In comparison, the OPM and NPM of Zee Entertainment were 23 per cent and 14 per cent, respectively. "Control over distribution has led to the high returns," says Timmy Kandhari, who leads the media practice of PriceWaterhouseCoopers.

It also helps Sun TV keep competition at bay. "By placing rival channels poorly, SCV crushes competition," says Kalyanasundaram. His channel is not available for 200,000 set-top box using households in Chennai, as SCV does not distribute its signal digitally. When queried, SCV Managing Director Vittal Sampathkumaran declined to comment.

In fact, in her earlier stint as chief minister from 2001 to 2006 too, Jayalalithaa had sought to hit the DMK in a similar manner. She even brought a Bill seeking to nationalise SCV, which the Assembly passed, but on that occasion the same Governor Barnala sent it back without signing it. Relations between the Centre and the DMK were then very different from now, when senior party members - former Union Communication Minister A. Raja and Karunanidhi's daughter M.K. Kanimozhi - are in jail.

Ironically, Arasu owes its existence not to Jayalalithaa, but to the DMK. Karunanidhi as Chief Minister had set it up in 2007 to end the dominance of SCV during a family feud with the Maran brothers. But once they made up, Karunanidhi had no further use for Arasu.

In the past, SCV has refused signals to those attempting to set up a parallel distribution network. Even Karunanidhi's son and Union Minister for Chemicals and Fertlisers M.K. Azhagiri, has been a victim. In June 2008, with the Karunandhi-Maran feud still on, when Azhagiri launched Royal Cable Vision, or RCV, in Madurai, Sun simply refused to share signals. RCV then moved the Telecom Disputes Settlement and Appellate Tribunal. "Without Sun feed, no distribution company can hope to succeed," says Umashankar.

Jayalalithaa's second effort to rein in SCV, then, does not bode well for Sun TV. It is staring at a loss of distribution muscle. This, aided by better positioning of rivals, is expected to increase rival viewership at Sun's cost. "Sun has established a strong base due to first mover advantage. It will remain a major player but competition on distribution front will end its abnormal profits," says Kandhari. The heat is stifling, and all rivals are hoping for a Sun set.

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