'Projects like Miramax and Fox have come to us because of our distribution network in the US': Ronnie Screwvala- UTV chief executive officer

Movie Channels
Feb 21, 2005 /
indiantelevision.com Team

'Projects like Miramax and Fox have come to us because of our distribution network in the US': Ronnie Screwvala- UTV chief executive officer

Ronnie Screwvala

UTV's initial public offering (IPO) has received overwhelming response, getting 3.4 times subscribed on the first day itself. Most of the bids were received at the upper price band of Rs 130 per share.

The company has launched Hungama TV, laid out an aggressive movie production and distribution plan, and is making efforts to spruce up its TV content business. Will the risks work for UTV?

In an interview with Indiantelevision.com's Sibabrata Das, UTV chief executive officer Ronnie Screwvala explains how the company can scale up its diversified businesses.

Excerpts:

What sets UTV aside from other production houses in India?
UTV is an integrated media company with multiple revenue streams that can be scalable. Content is, of course, the core driver of our business. But we have a diversified portfolio. We have television content, film production and distribution businesses, airtime sales, animation, ad films and dubbing. Each of these hemispheres provides exciting opportunities.

On the movie distribution front, you have paid Miramax $800,000 (approximately Rs 35 million) for 130 titles. How much big business can you make from this deal?
We expect to monetise heavily on these multiple rights which we can exploit for 10 years. The acquisition price we are paying can't determine the quality of these movies, 10 of which are new titles. Miramax had ignored the Indian market and we hope to bring in new direction. Don't forget that the DVD rights can be exploited five times in a 10-year period while in television rights we have the potential of enjoying three revenue cycles. And we have already sold three-year telecast rights of 80 titles to SGL International for $1.3 million.

Star had commissioned UTV for four movies at Rs 450 million. Why has it scaled back its plans and will be funding Rs 245 million for two movies?
We wanted to consolidate operations. We decided to do it in two tranches.

Which means you will still do four films for Star?
There is no guarantee about the second tranche.

UTV has managed to get topline growth in the first half of this Fiscal, but the net profit is affected with overseas distribution making losses.
The first half does not represent our true profits as we have made aggressive write down on three counts - one time expenses for our distribution set up worldwide, for new TV shows, and provision for doubtful debts. Any judgment on 2004-05 can only be made after seeing the annualised results. But we are pretty much on the growth path.
'We expect kids' channels to go the way news channels went - every new launch expanded the market'

How much did Lakshya and Swades gross in the box office?
Lakhsya grossed Rs 380 million while Swades has already made Rs 310 million so far.
What is the movie lineup next year?
We have a rich pipeline with five-six movies on the production side. I can't make forward statements on the distribution front. But an ideal business mix for any company is 8-12 movies.

Revenues from the Mira Nair-directed movie will happen only in 2006-07?
It will end up most probably that way. We are putting in $3.2 million. The total cost of the project is $9.6 million, to be equally shared between three of us. The other two partners are Fox Searchlight Pictures and Japan-based Entertainment Farm. The shoot starts in March.

How do you see the film distribution business growing? What have you gained so far by setting up offices overseas?
Many of the projects that is coming to us now is because of the distribution network we set up in the US. Almost eight months after we started, we have got Miramax and Fox. In film distribution, we have set up a worldwide network and want to be very aggressive in that space.

In the first half of this Fiscal, movies accounted for Rs 225.13 million. Is UTV getting more skewed towards movies now?
Our revenue mix this year will be 45 per cent movies while TV and allied content will make up for the balance. We are pretty much an integrated company.

Why are there so many repeat programmes on Hungama TV?
Kids channels have an element of repeat programming. Besides, the shows that have worked for us can have more exposure on the channel. We are converting weeklies into dailies across the time bands.

You have already told some producers to stop work and are reducing 17 shows to 10 in a matter of four months of launch?
We will be converting some of the top 10 shows from weeklies into dailies. But we are not changing our programming mix - live action will continue as our cutting edge content. Yes, we have cut down on some producers but that is a normal business process.
Have UTV shows also been axed?
Some of them have been taken out.

Have you acquired 30 movies from Star to show on Hungama TV?
Yes, we have acquired movies from Star. I don't remember the exact number of titles we have taken from them. We believe the night slot is for movies and we want to encourage family viewing at that time slot. Also, we are showing movies on weekends, keeping in mind the family as our target audience then.
How big is the kids advertising market?
The kids segment is worth about Rs 4.5 billion and is growing.
But kids' channels make around Rs 500-600 million annually. Hungama, of course, has made a good start so far as audiences go. But is it difficult to monetise this because of a very thin market?
There is no doubt that the market size today for kids' channels is small. But with so many channels being launched in this segment, this space can only grow. We expect kids' channels to go the way news channels went - every new launch expanded the market. The audience is growing, there is a strong demography to back this up, and we stand out as the only local channel which provides live action content while others have animation.
Will Star not pay any distribution income in the first year?
We will get paid by Star after the first year. But we don't have to spend any money for distribution of the channel. Star will take care of that.
Are you still looking at a private placement for Hungama TV?
Hungama TV has a fund requirement of Rs 620 million over two years. We have already lined up Rs 520 million. We are not in a hurry to get an equity investor.
In television content, UTV is absent in the mainstream Hindi channels outside Star and Hungama TV (for which UTV is like a captive supplier). And even in Star, UTV is having a declining exposure. Do you see other channels opening up for UTV in the near future?
We are doing a show on Sony TV called Tarana which will be on the channel by April. We have shows on Star Plus and have also got new programmes on Star One.
Airtime sales used to account for over 30 per cent of UTV's revenues. Do you expect slower growth from airtime sales since this January as the shows for which you sell airtime have come down from six to one?
We had one show on Sun Network, but recently signed up for a new one. It is a cyclic business and we hope to bounce back soon.
Won't dubbing and animation businesses take time to be scalable?
The opportunities currently are limited compared to our other activities where we are gearing up for more aggressive play. Dubbing is a stable business. In animation, we have a conservative view and, in any case, it forms a small percentage of our total business. But we have three shows on the floor.
Have you appointed Ernst & Young to evaluate your post production business?
We have given the mandate to E&Y. We believe the post production business is in for a period of consolidation and mergers.

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