afaqs!

What does Disney's UTV takeover imply?

By Anindita Sarkar , afaqs!, Mumbai | In Media Publishing | August 01, 2011
While the goodies are many, there are a few risks, too. Disney is a big pocket player and with it building a large network in the mass entertainment space will surely lead to more fragmentation of the market.

International media companies are readily upping their bet in the Indian media space, and the latest to enter into the fray is Disney. Last week, The Walt Disney Company (Disney) conveyed its intention of taking full control of UTV Software Communications (UTV).

So, what could this deal mean to Disney and as a consequence, to the industry?

Many media analysts opine that the Disney-UTV deal poses an extremely positive move, reinforcing the fact that that the West is taking keen interest in the Indian media fraternity.

"India is a potential revenue driver and will provide a huge consumer base to Disney," says a top analyst of a broking company who does not wish to be quoted.

While the deal will help the global conglomerate to get further access into Bollywood through UTV which has grown to become one of the leading producers and distributors of films in India, Disney will also gain expansion in the mass Hindi entertainment space through the UTV television channels.

"While most of the content on the UTV channels is suitable to the Disney taste and will only see further improvement in programming with more money from the Disney stable, the UTV Bindass channel could eventually see a slow content transition," speculates Prabhakar, head, CMS Media Lab.

For Navin Khemka, senior vice-president, ZenithOptimedia, the deal means a massive expansion of the target group for Disney in the Indian television landscape.

"UTV has a good channel portfolio, especially in the niche domain. The brand is established. And, with more money being pumped in by Disney, the network could move on to show huge potential," he says.

But, while the goodies are many, there are a few risks, too. Disney is a big pocket player and with it building a large network in the mass entertainment space will surely lead to more fragmentation of the market.

While Disney's growth will fundamentally pose a threat to the existing large players such as STAR, Viacom18 and Zee, it will also infuse further crowding of the market. Content costs will go up, and so will distribution.

"This will lead to less margins, more costs, and thus, more pressure," says another top executive from a broking firm.

He states that in the Indian media space, while the operating margins are high for a channel, its sustainability becomes an issue in the long run. And, therefore, many look at foreign investments to sustain business in the long run.

Earlier, in January 2009, Turner International had formed a 50:50 joint venture with Alva Brothers Entertainment, to launch the Hindi entertainment channel 'Real' which could not sustain in the market.

So, evidently while the company is a large global entity, the success of the brand in the Indian market is still speculative.

However, media pundits think that in the long run the Indian entertainment industry could become more of a global phenomenon in a local market.

Currently, the channels in the UTV stable are -- UTV Action, UTV Action Telugu, UTV Movies, UTV Bindass, UTV Stars, and UTV World Movies. Meanwhile, Disney currently operates Disney Channel, Disney XD and Hungama TV.

Interestingly, Walt Disney's decision to take full control of UTV comes as a growing number of media and entertainment networks such as NBC, Time Warner, Viacom and Sony, are seeking to expand their presence in the country.

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