Post-marriage, will it be business as usual for Balaji?

When the STAR group announced on Wednesday that it is going to buy a 25 per cent equity in Balaji Telefilms, Peter Mukerjea, STAR India CEO, was at pains to explain how the deal will have no bearing on Balaji's role as a content provider to other channels.

Apparently, the assurance hasn't cut much ice in the TV fraternity. Officially, non-STAR TV channel executives do not admit of having any misgivings whatsoever. But people associated with the medium are already asking uncomfortable questions.

"In creativity, it's the idea which counts the most. Now that STAR and Balaji are one and the same, I will be apprehensive and nervous when I approach STAR tomorrow with an idea. After all, what's the guarantee that my idea won't be passed on to Balaji?," asks a television software producer.

"I know a lot of small producers, who will feel similarly apprehensive about approaching STAR. I wonder why did STAR get into this deal in the first place," he adds.

STAR's Mukerjea reportedly said on Wednesday that STAR will have a greater say in the programming, with the new 'strategic' holding, while explaining the rationale of purchasing Balaji's equity. He added that some members of STAR's programming and creative team will join the Balaji board to ensure this.

Sources from the television media say that channels, in any case, control the content of programming. "Ekta Kapoor's team (Kapoor is the chief executive of Balaji Telefilms) has to listen to what the channel executives say, especially when TVRs drop. So, what's the big deal in Mukerjea's claim of having a 'greater say'?," quips a source.

Conflict of interest is another issue which Balaji Telefilms and STAR have to grapple with. It will be in STAR's interest to buy the best available content from Balaji and at a reasonable price. Media watchers believe that STAR's 'substantial' stake in Balaji can lead to a situation where Balaji produces most of its better software for the STAR group, leaving the 'rejects' for the other channels. "Will Balaji be able to hawk its produce to the highest bidder?," asks one industry analyst. If Balaji is limited to content production for only STAR, its profitability will come under pressure, she adds.

"This will be a double-edged sword for STAR. If it meddles with Balaji and forces it to part with the better programmes for a pittance, STAR's investment in Balaji will fall flat. At the same time, even if STAR gives Balaji a free hand, other channels and producers will continue to see this alliance with a fair degree of suspicion," the analyst adds.

Speaking of STAR's competitors, Sony has actually got very little to do with Balaji these days - except for the currently running programmes Kkusum and Kkoi Dil Mein Hain. When Sunil Lulla, Sony's vice president, programming, was quizzed by agencyfaqs! on the nature of the channel's future relationship with Balaji, especially post the STAR-Balaji marriage, he declined to say anything. "Currently, we have two Balaji-produced serials on Sony. We will continue to run them. As far as future work with Balaji is concerned, I will not make any comments...."

There has been, of course, a lot of talk about problems between Sony and Balaji.

Kapoor has gone on record to blame Sony for the debacle of Kkoi Dil Mein Hai. Further, Kkehna Hai Kucch Mujhko, which marked Pallavi Joshi's return to television serials, proved to be a cold turkey and was also dumped unceremoniously. King Aasman Ka Raja had neither a media launch, nor any promotional push and understandably sank without a trace. Kapoor has been also quoted as saying that she had no plans for Sony in 2004. Of late, there has been some talk around a serial about three sisters with different ambitions in life. However, with the freshly-minted STAR-Balaji deal, it will be worthwhile to watch out for the next Balaji-produced soap on Sony.

As of date, none of Balaji's serials are being telecast by ZEE, and Doordarshan is too much of a 'fuddy-duddy' broadcaster to bother about such alliances.

There will be other kinds of 'conflicts' as well. Will STAR's competitors feel comfortable in discussing their programming strategy with an entity closely associated with STAR?

STAR India COO Sameer Nair provided a word of advice for the other broadcasters on Wednesday. "I think the other channels should look at this (referring to the deal) in a very mature manner...." The question is: Are the channels in a mood to listen?

Says Chandra Shekhar, a Mumbai-based investment banker, "Balaji, it seems, has played a smart game. From now on, STAR will be compelled to buy Balaji's software to ensure that its own investments do not go down the drain. So, in effect, a certain portion of Balaji's future revenue streams will be guaranteed by STAR. In any case, some 35-40 per cent of Balaji's revenues are on account of the television software sold to STAR."

However strange that it may sound, some market movers believe that ZEE and Sony will be the real beneficiaries of the STAR-Balaji deal. "Since small creative TV producers will be in two minds while approaching STAR from now on, STAR's future programming might suffer. Both ZEE and Sony will capitalise on this," comments one market analyst. The ZEE stock, in fact, is already on the rise in anticipation of this trend. The stock rose 6 per cent on Thursday.

"I think the Balaji juggernaut is over", says another senior investment banker, citing Balaji's results for the quarter ended June '04. The company reported a decline of over 25 per cent in its net profit to Rs 11 crore, while its sales remained flat at around Rs 43 crore.

Balaji Telefilms, meanwhile, is confident about the future. Jeetendra Kapoor, chairman, Balaji Telefilms, said on Wednesday, "We believe that the investment made in the company would assist in achieving a higher level of growth and in the process, generate significant value for all the stakeholders."

The market probably thinks differently. The Balaji Telefilms stock, which was hovering around the Rs 98-range on August 17 (last Tuesday), closed Thursday at Rs 88.35 on the Bombay Stock Exchange - registering a fall of almost 10 per cent within two trading days, when the overall market actually rose. © 2004 agencyfaqs!