UTV founder-promoter Ronnie Screwvala has shown again and again that he is a smart dealmaker. He got a string of private equity funds and News Corp. to invest in his TV content company which had successfully expanded into a diversified media model.
But nothing can get him more excited than the latest deal he cut out with Walt Disney. The buyout of Hungama TV ($30.5 million) and a 14.9 per cent stake in UTV ($14 million) has given him the potential to build a war chest of Rs 5 billion. "In media, that offers lots of opportunities," he says.
Screwvala can now take fresh risks as he aims at sizing up UTV to a Rs 10 billion company by 2010. His first goalpost: Rs 5 billion by 2008.
He feels he has come a step closer to his goal. "If I don't take risks, what is the use of being in this game? I need to be in control of my destiny. And I need an international surge," he says.
On Screwvala's expansion plate is not just movies and animation but also new media content including gaming. The fun, as he says, is playing in a bigger field.
In an interview with Indiantelevision.com's Sibabrata Das, Screwvala talks of the business model he has carved out for UTV's second phase of growth and the script his company plans to write with Walt Disney.
Excerpts:
How did the talks with Walt Disney initiate? |
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What did Disney have in mind? |
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Why were you looking at an investor after Astro had agreed to buy a 26.01 per cent stake in Hungama TV for $7 million? |
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So what made you exit from Hungama TV when the kids channel had established its base among audiences in a short span of time? |
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Did Disney make an investment in UTV because you wouldn't have otherwise parted with Hungama TV which they needed for strategic reasons to expand their TV business in India? |
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How will the Disney deal help you leverage the company for scaling up? |
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What are the growth opportunities Disney will throw up and when will this script begin? |
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Hungama's monthly cash burn was around Rs 13 million. Was this a matter of concern for you? |
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Were investors still disturbed with this? |
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So were you under pressure from investors? |
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What made Hungama click in a highly competitive environment where it was up against established multinational brands? |
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When you conceived Hungama TV, where did you see you could carve a space outside the big global kids channels? |
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Post Hungama, how is UTV poised for its second phase of growth? |
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What will the movie pipeline look like? |
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Have you lined up international co-productions? |
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Will UTV also be aggressive on the film distribution business? |
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Are you planning to produce regional films? |
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How significant will the movie component be in the revenue mix of UTV and what is the de-risking system you are adopting? |
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For the last fiscal, UTV posted a revenue growth of 18 per cent but the bottomline was hit. Going forward, will the pressure on margins continue? |
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What does that imply?
Let's take the movie business of exploitation, for instance. We want to keep all the rights rather than part with them for a longer period, because we will get more value in future. That is what we want to build. That doesn't necessarily mean that our margins will be under pressure. It just means that we are not going to put ourselves under pressure to make any short term decisions that has any long term implications because we have reached a certain critical stage. We now also have a good cash reserve to follow this model. |
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Are you on a weaker wicket on the TV content production segment?
We should be given credit for what we have got right rather than where we went wrong. We have got stability in a business that is so erratic that most production houses have been badly hit. TV content is a good business for us because that is what we have grown up with. But we are not at the top end of the value chain and not in control of our destiny. Even if you come up with a good product, there may be a cycle in the life of a broadcaster, the channel may not be doing well, the slot may not be working - or they may be wanting to do things differently. We must also not forget that we have continuously maintained our No. 2 position for the last so many years. We will see incremental growth in this segment. Being a pure TV content or movie player is an almost impossible model to succeed with, if you want to be a company of great size. The fact is that we have a mix of multiple revenue models, given the fact that nothing is so hugely scalable. |
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You were never bullish on the animation sector. Has that stance now changed?
We are more aggressive if not bullish because we have a good order book in outsourcing and are also involved in originating content. We invested Rs 100 million last fiscal in setting up the infrastructure and have a 225-seater facility in 3D animation. We are having a pipeline across the value chain and have project orders worth $18-20 million.
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Are you eyeing acquisitions to make an entry into gaming?
We are planning to enter into gaming as an extension of our businesses in animation, post production and special effects. We are eyeing acquisitions of domestic and overseas gaming companies. There is a model for international companies to look at India as an outsourcing centre and an Indian story for going overseas. We are spending a lot of time evaluating the gaming business. |
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Do you see scope for acquisitions in the movie business as well?
There are no companies with movie libraries or franchisees which will allow you to develop sequel properties. No such model is available in India at the moment. We don't see scope for inorganic growth in this area. |
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Will UTV see a substantial jump in topline this fiscal?
We are expecting a 25-30 per cent growth in topline for FY07. But the big jump will come over the next two years. We have now started playing in a bigger field. |