Vikatan Group - From content shop to media major

Thread started by Venki on 6th February 2012 07:55 AM



From: http://www.business-standard.com/ind...-major/463781/

Starting as a regional humour magazine, Vikatan moved on to join the exclusive club of content companies that have managed scale across media.


What’s a magazine company doing on television? The Rs 140-odd-crore Vikatan Group is the publisher of nine popular Tamil magazines. In the late nineties it got into television. Last year Vikatan became one of the top five TV content companies in India. Many of the most successful daily soaps in Tamil, Telugu, Kannada and Malayalam come from Vikatan. Remakes are popular too. For instance, the biggest hit on Zee Television for the last two years, Pavitra Rishta, is a remake of Vikatan’s Tamil soap, Thirumathi Selvam that aired first on Sun TV.

Much of this puts Vikatan among a handful of content companies to manage scale across media. The Rs 948-crore UTV (recently acquired by Disney) is arguably the largest content firm out of India having presence across films and television. The only other company of some size is the Rs 152-crore Balaji Telefilms. Globally too it is rare for content companies to manage scale in one medium forget two.

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THE SUCCESS STORIES ON TELEVISION

Thendral
Thendral commenced in December 2009 and is on episode 545 (on January 27, 2012). A truly romantic story of Tamil (name of Hero!) and Thulasi who literally swim through thick and thin, and are literally torn apart facing the consequences of their love marriage on their respective families and lives. A first youthful prime time daily soap in Tamil! Show is at 9 pm every night on Sun TV.

Tirumathi Selvam
Tirumathi Selvam commenced November, 2007 and is on episode 1,074 (on January 27, 2012). The story of an honest mechanic who is made to pose as an engineer to become the groom — the trials and tribulations of a hardworking family man who hits riches through his dedication and professional approach — and how the big bad world of ‘business’ and ‘high life culture’ tempts the protagonist. Will he or won't he be tempted?

Azhagi
Azhagi commenced October, 2011, and is on episode 77 (on January 27, 2012). At 10.30 pm on Sun TV it is by far the most successful late night show. The story revolves around the protagonist, Sundari, a 45-year-old widow working 5 part time jobs including housemaid, and her struggle to bring up her 3 children, now past their teenage, without compromising on her values, and without letting go of her children’s needs and dreams
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That is why Vikatan, which will hit an estimated Rs 170 crore in revenues in March this year, is interesting investment bankers. Many have been sniffing around waiting to see if this zero-debt company with 20 per cent in operating margins raises money. Managing Director Srinivasan B is chary of the idea. “It is not that we are not looking for investment, but I believe that any potential investment must add value strategically rather than be purely financial,” says he.

The whole roller-coaster of creating a business plan to get an investor doesn't make sense. “Three years back I could never have predicted 16.5 per cent compounded growth. I cannot commit how much more growth we can achieve. In media everything has a long gestation period,” explains Srinivasan. Besides, there is a creative, serendipitous air to the way Vikatan has grown. Its story has just begun.

A foothold in the print business gave Vikatan a strong tradition of fiction writing and dealing with writers. (See box – The Vikatan Saga) This was used as the base on which it built the, more exciting, television content business.

“We realised that TV was taking away a substantial amount of entertainment time and that time came from magazines. So in 1998 we decided to get into TV production,” says Srinivasan. The start was slow and Vikatan Televistas stumbled a lot. Then in 2003 its fortunes changed with Kolangal. The show about a married woman who wanted to give her salary to her mother’s family was a huge hit. It ran on Sun TV from 2003 to 2009 and was remade in Kannada, Bangla and Hindi. In 2007 came Thirumathi Selvam. The show aired on a dead 1:30 pm slot which got about one on the TVR chart. Within a year of launch Thirumathi Selvam hit a rating between 15 and 18, a sizeable number in any genre.

Since then Vikatan has grown in confidence making creative calls that have, largely, proven to successful. The firm recently delivered a hit on the sleepy 10:00 pm - 10:30 pm slot on Sun TV with Azhagi; a show about a 45-year old widow and her struggle to bring up her children. “Azhagi was in incubation for two years. The screenplay was written and the cast, a majority of them newcomers, were trained (long before it went on air),” remembers Srinivasan.

His point is that you cannot chase slots or channels till you have an idea and a full-blown script that works in a highly competitive market. Soaps are the staple diet of India’s 700 million TV viewers and the biggest generator of ad revenues for the Rs 33,000 crore television broadcast industry. The fact that Vikatan agonises over every detail improves its hit rate, he says.

Over the years Vikatan learnt three important lessons about its business. One, that fiction in magazines was a dying story. Earlier more than 50 per cent of the content in Ananda Vikatan was serialised novels, now it is only 5 per cent. Not surprisingly readers were unwilling to wait for a week to read just one chapter in a novel. So on the print side, it is now focused on non-fiction.

Two, in TV fiction is the way to go. “For a story to reach its true potential it should be capable of crossing 1,000 episodes in a primetime slot. Plus it takes roughly six months to recover the investment into a daily soap, ‘if you are lucky’. So if the life of the soap is less than 500 episodes then all the effort is a waste,” says Srinivasan. With reality shows et al, there is no leeway to have such longevity, so fiction makes more sense.

Three, films, a large part of the content industry, are “not such an ROI (return on investment) business,” as Srinivasan puts it. Vikatan made two films, including the critically-acclaimed SMS. But has decided to keep off them for a bit.

The trouble with TV
Of all its businesses clearly television content is the one that excites investors most. Largely because of the size and potential. A Tamil magazine may be able to reach at best 70 million Tamilians in India and a few abroad. But a show can reach several times that number because you don’t need to be able to read Tamil in order to enjoy it.

There are however two big flaws in Vikatan’s TV strategy. One, it works only for the Sun network. The unwritten code of the southern market is that if you make programming for Sun TV, you cannot make it for any other channel. Many years back the Sun Group chief Kalanithi Maran had told this reporter that he prefers it that way. This makes Vikatan’s TV content business very vulnerable to the fortunes of one network. “Our relationship with Sun depends on our ability to deliver a consistent product. As long as we do that there is no question mark. It is a mutually rewarding relationship,” emphasises Srinivasan.

One of the rewards is that unlike a bulk of Indian TV producers, Vikatan retains the IPR (intellectual property rights) on all its 4,000 hours of programming. It licenses the remake rights in other (non-South Indian) languages such as Bangla and Hindi. “With Pavitra Rishta, a lot of things opened up,” says Srinivasan. About five per cent of the firm’s estimated Rs 68 crore TV revenues come from remake rights or license fees. And this brings us to the second flaw. This ownership of IPR, especially in TV, has not been seriously exploited by Vikatan as yet. There is an international market for South Indian soaps — in the Middle East, Malaysia, Singapore and so on. But Srinivasan reckons that Sun TV already reaches many of these markets. He is banking on the partnership with YouTube to leverage the shows better. He dismisses dubbing or subtitling, “because we can’t control it,” says he.

Other content company CEOs point out that monetising IPRs is a game for big boys. It is where the Google, Airtel or YouTubes rule. For now, Vikatan will continue to do what it does best — create content.





The Vikatan saga

Ananda Vikatan was born in 1926 as a humour magazine. It is to Tamil Nadu what M.A.D (born 26 years after Ananda Vikatan) was to America. Over the years the group launched Junior Vikatan (scoops and bold investigative stories) and Aval Vikatan (targeted at the contemporary woman) among a total of nine magazines. Then there are 500 titles of books, about 90 per cent of them being fiction.

In 1997 the print business went online. About five years ago, it decided to go pay. The results are not bad. Of its 5 lakh registered users, 25,000 pay the Rs 1,000-1,500 per annum the site charges. Then there are the free apps, downloaded by about 26,000 people across platforms. Roughly five per cent of Vikatan’s estimated Rs 75 crore print revenues came from digital in March 2011. This is in line with what some of the largest media groups in the country make from online.

“The value of the IPR in print is more physical (or tangible) than in TV. Our ability to leverage print is higher, especially because of new media,” says Srinivasan. So his focus is on moving the whole print business digital, at the front end (through apps and online) and backend (through cloud computing).

In 2012 Vikatan will also launch titles in ‘neighbouring languages.’ Read that as magazines in Telugu, Malayalam or Kannada.
Srinivasan B
MD, Vikatan Group



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