Imagine that you are the head of a $14-billion (Rs 63,840 crore) global media empire that spans across every continent. You own some of the world's most successful newspapers, magazines; film, TV and radio companies.

In the euphoric early nineties you spent $825 million to buy the only foreign company broadcasting into China and India, both dream markets then. Come 2000 and the Chinese blackhole has already swallowed up a billion dollars of your money without any sign of returns. 

Analysts across the world think that compared with your global competitors, you deliver very little value to shareholders because you risk your money into such markets. Only 8% of your global revenues come from Asia after seven years of heavy spending in the region.

Now picture a scene in March 2000. You are sitting in a closed conference room in Mumbai listening to a presentation by one of your Indian executives. He is showing you some poor numbers on how your channels rate with Indian audiences. How would you react? 

"Oh! my gawd, I don't want to ever see this again," is how Rupert Murdoch, the 70-year-old chairman of News Corporation, reacted. Hold your sympathies.  Murdoch was probably still reeling under the China numbers when he said that. Star TV India presents a healthier picture than China.

Compared to a reach of less than half the 80 million cable homes in China, Star reaches 90% of India's relatively smaller base of 30 million cable and satellite homes.

More important, unlike China, India contributed more than $100 million of News Corp's $111 million Asia-Pacific revenues in the year ended June 1999. China is part of the remaining $11 million along with Singapore, Taiwan and others. Of course, Star India is not yet profitable unlike competitors Zee and Sony, which roughly have profit margins of about 50% on total revenues.

"This is the best property they have in Asia," says one international media analyst. In fact, based on a projected Rs 700-crore revenue target for June 2001 by Star TV India and assuming a Rs 100-crore profit, Deepak Nanda, managing director of Communications Equity Associates, an American investment bank specialising in media deals, values Star India at about $2 billion - a little less than profitable competitor Sony which was recently valued at $2.5 billion by SSKI, a Mumbai-based broking company. (Though it is much less than Zee's $5 billion or Rs 22,434 crore.) 

As his Chinese dream sours, all this is heartening news for Murdoch. News that can be used to push home the point with media analysts worldwide - look, Asia is finally paying off! In the hope of accelerating growth in a market that seems like it is ready to deliver, he is placing - what may well be - his final bet on India. 

Over the next two years he will be investing more than $300 million in India. That figure is significant. It is roughly two-thirds of the $500 million he has spent on just running Star TV in India over the past seven years. Look at it this way - the total of $800 million pushes up the ante in India and places it very very close to China, Murdoch's dream country so far. (Incidentally, the figure is also close to the $322 million net gain from the Zee deal.)

From the Internet to FM to new channels and more programming, Murdoch is tying up all the points in a matrix which cuts across the swathe of the media business in India to leverage every possible revenue stream and opportunity. When Murdoch bought Star from Richard Li, he in effect bought a broadcasting company that could not telecast in local languages, because the partnership with Zee did not allow it. As a result he lost out on a beginner's advantage in the satellite TV business. Now he doesn't want to miss the Internet, FM and new media buses.

By 2002, he expects 85% of his India revenues to come from satellite TV, 10% from FM and 5% from the Internet.  

You can judge the seriousness of what Murdoch is doing from one single fact. To finance his expansion in Asia, Latin America and Europe, Murdoch has just transferred all of News Corp's interests in these properties to a newly-formed company called Sky Global Networks. In July this year, Sky filed with the Securities and Exchange Commission in the US for an initial public offer and the company will trade on the New York Stock Exchange. The prospectus talks glowingly of India's contribution to Star's total revenues, the growth in the subscription and advertising market, the success of Star News and its imminent break-even, et al.

So serious is this whole bet on India that a recent Kaun Banega Crorepati (KBC) piece on the front page of New York Times which did not refer to Star TV or News Corp drew an angry message from Star TV chairman James Murdoch (Rupert's son) to the India office about lost publicity opportunities. 

All this is unusual. Any analyst will tell you how loath the senior Murdoch is of taking any of his properties public and the scrutiny it involves.

News Corp has always been synonymous with Murdoch, who along with his family controls 30% of the voting stock. Things have changed. After the break up with Zee was official early this year, Murdoch owns Star TV India lock, stock and barrel unlike any of his other Asian or Latin American properties. Unlike, say, China where he is hamstrung by local partners and the government, the leeway this allows him - to dictate strategy and drive the business and, therefore, reap returns in India - is tremendous. So, what does he want to do? 

"We want to become the number one media company in India," says India CEO Peter Mukerjea. And what does that mean? It means trying to rein in different horses on different courses to reach a Rs 700-crore revenue target for June 2001. Such as dominating the Rs 2,500-odd-crore market for cable and satellite advertising in the country by growing advertising sales revenues from around Rs 300 crore to more than Rs 500 crore by June 2001 - a 70% jump in a market that's growing 20-25%. Or getting a larger (and larger) share of the Rs 3,000-crore pay-for-view market. Or launching Star Gold, a Hindi movie channel, this month and a health and education channel soon after. Or a possible tie-up to bring Disney's channel into India. Or taking Star Plus and Star News to the 15 million-odd overseas Indians.

It also means helping Pramod Mittal's Music Broadcast run his six-city FM radio station by providing content, ad sales and maintenance services. It means picking up a 26% stake in the Raheja-owned Hathway Cable to expand distribution and rolling out broadband content. 

Or buying into their cable operators to do the same. Or buying, building or partnering with dotcoms to ensure that he is in every virtual space. It means investing in cybercafes and mobile-commerce. It also means launching more mass programming to sustain the lead that Kaun Banega Crorepati, its blockbuster game show, has given the network. And it means hiring 250 people or more than 50% of its current strength of 450 to do all this! Phew!

Is Star stretching itself too much to fulfil Murdoch's Asian dream? Will things snap? "There is pressure on us to deliver on the bottomline," agrees R.S. Narayan, chief financial officer. The question begs closer scrutiny of all the money being spent. You could look at the Star India strategy as a three-pronged one. 
       
One, investing in strengthening the brand, programming and distribution of its satellite TV business to get a leading share of viewership, advertising and pay revenues. Two, seeding new businesses, either through alliances or investments. And three, leveraging the synergies between the existing and new businesses to create new revenue streams. 

Building Existing Businesses

After the Zee break up when Star was finally free to do what it wanted, the first step, says Mukerjea, was to ensure that flagship brand Star Plus was seen as an Indian label, delivering mass-appeal programming. A three-member core team - Mukerjea, marketing head Sumantra Dutta and programming chief Sameer Nair - along with advertising agency Ogilvy & Mather brainstormed on everything from the name to the logo. "It is so much like going through a sex change," quips Mukerjea. Finally they stuck to Star Plus, to retain the value of the investments already made in building the brand. ...Continued