will Viacom-TV 18 venture Colors be able to spread its hue for long?

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The strategy that Colors has deployed is quite similar to what Star Plus did eight years ago. Star Plus created a hot property in the form of Kaun Banega Crorepati (KBC) and weaved other clutter breaking [the K politics serials were very much clutter breaking and refreshing eight years ago ;-)] programmes around it. Similarly, at the time of its launch, Colors promoted Balika Vadhu heavily and built other engaging content around this programme. Anita Nayyar, CEO of media buying agency, Havas Media says, “Colors offers a great package with refreshing content like Balika Vadhu, Mohe Rang De, even Big Boss, which is a completely different take on reality.” From its beginning Colors has focused on experimenting with fresh content (like the Indian version of Fear Factor – Khatron Ka Khiladi with real Khiladi, Akshay Kumar as the host) and it has worked well for them.

So can Colors actually displace the invincible Star Plus from its number one position in coming times? Well, Colors surely promises that. Even Star Plus’ Adhyanthaya agrees, “We are aware of the fact that Colors has launched well and has been growing on a week-to-week basis.” He further iterates that Star Plus has faced such situations earlier too and there have been various contenders to the channel’s leadership from time to time, but it has held strong. “Star Plus has been in this position with Zee last year and successfully managed to come out of it,” he explains to this magazine.

But first Colors needs to sustain its position over a period of time to be in any leadership rank in the GEC segment. Experts feel that the biggest challenge for Colors is to sustain over 200 GRPs for the next few weeks. Once that is done and they become a clear number two, they can be a serious threat to Star. K. Ramesh, VP- Mumbai, Mediadirection – Specialist Media Services Group of R K Swamy BBDO – offers kind words of caution, “Colors has done extremely well in their launch phase compared to other new players in the category and that’s why it becomes even more difficult for them to sustain it over a period of time.” Havas Media’s Nayyar argues, “Neither Zee nor Star Plus is going to keep quiet. They’ll constantly upgrade content. So it’s too early to comment on whether Colors can overtake Star.” And this has already started happening, with Star Plus’ Kahaani... going off air and Kyunki... to soon follow suit. The channel is revamping its programming, with new shows to replace the older drab ones. “We are coming up with content, which will have relevance & potential to change the GEC game further,” adds Adhyanthaya confidently.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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The Detroit debacle…

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With GM ready to hive off its Hummer operations, Chrysler no longer showing much interest in its Jeeps business and Ford rethinking its F series vehicles, there is serious shift in American car buying patterns. It was just a few months back that the Detroit three were still so much infatuated with the SUV dream. Today, after back breaking losses year after year [GM, FY 2006 largest global loss making company; Ford, FY 2007 largest global loss making company], a future based on SUVs is beyond the realm of even dreams. Of course, the Audi Q7, Porsche Cayanne Turbo S, Cadillac Escalade range of SUVs would continue ad infinitum, for the obnoxiously snobbish class they attract would continue to demand these cars, irrespective of fuel prices. But a mass strategy with SUVs? I’ll then need more space on my shuttle. Since the first quarter of 2005 [when the US SUV sales plummeted a whopping 20-30%], sales have only been declining!

There is a fare amount of insecurity among the end consumers, who have found their money incomes depleted with respect to the purchasing power. As per a survey by National Association of Convenience Stores, 45% of American consumers reported a decline in their spending power because of rising petrol prices. While 19% wanted to buy a more fuel efficient car, an astonishing 13% had already reduced their driving on the back of $3/ gallon gasoline prices! As a result of the earlier oil shocks, consumers have increasingly adapted an ‘aftermath attitude’ and eventual demands for automobiles have sagged significantly through out the world.

Even though the idea of hybrid cars is generally believed to be more of a lifestyle concept rather than being that related to fuel efficiency, a total of 38,214 hybrids were sold in the American market alone in March 2008, proof that even fashion is now related to oil. Hybrid SUVs such as Ford Escape Hybrid had initially gained popularity but not for long, since better alternatives are beginning to hit the market. Though oil prices will eventually come down [on a downward spree, they had broken the $90 mark per barrel on October 6, 2008], the mentality of consumers – who were once used to $50 per barrel prices and who would be extremely averse to future vagaries of oil price hikes – would remain focused on fuel efficient cars. While the Japanese per se have succeeded with their fuel efficient taglines and the prejudices they had been associated with through out their history, the Americans still seem to be reading the Big Moose chapter in Archies too many times for comfort. But if misery loves company, one should say there’s at least one tubelight in the land of the rising sun fighting to switch itself off... er, whatever! Basically, if Mitsubishi Outlander is a top seller, I’ll eat my cook’s food... Is this going to be printed?!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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When will the future come, Sir?!

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Next, let’s talk about competition. The scenario for AEBC is not getting any easier in the country with all multinationals and national players like Citi, Standard Chartered, ICICI Bank, SBI et al eyeing the large untapped credit card market pie. To first talk about the national banks, ICICI Bank has established a huge reach by issuing credit cards across 125 cities. SBI being the largest bank in the country with over 19,000 branches, has its credit card business spread across 110 cities across the country. Amongst MNCs, Citibank is the most widely present with its operations spanning 40 cities. The bank further plans to take the count to 94 cities in which group company Citi-financial operates. In this regard, AEBC faces an uphill task with its strategy of focusing on just the high-income segment, with offices only in ‘four’ cities preventing it from reaching out to anyone beyond audiences in the Tier I and Tier II cities. While this puts a constraint on AEBC’s growth, the other players in the market are merrily grabbing larger chunks of the market while at the same time poaching on AEBC’s customer base. So is the giant planning to move beyond to smaller towns as well? Not soon, as Dutta professes, “As of now we plan to concentrate our operations only in the four cities – New Delhi (including Gurgaon), Mumbai, Chennai and Bangalore. In the coming future we might plan to take our services to Tier I and Tier II cities...”

When will the future come, Sir?!

The competing banks have not only raised the bar in terms of both quality and customer services, but they also have formulated aggressive growth strategies to bag-in higher spending on cards. Moreover, keeping aside the segment they cater to, AEBC has a lot of catching-up to do where customer base is concerned (Refer box titled ‘Plastic... Dangerous?!’). Operating as an restricted entity, AEBC’s role has been limited to just marketing and distribution of co-branded credit cards with little exclusive identity of its own.

When it comes to marketing plans, the entity has some in its bag. It has developed a closed-loop ‘global’ network with 1,700 locations in more than 130 countries, which enables it to effectively design global marketing programmes and benefits for card members in association with merchants. It has clubbed its products and services with various facilities like Protection Package, Membership Travel Services, Membership Rewards Programme et al to attract more eyeballs... “We did an in-depth study to understand the mindset of affluent customers in India. We used these insights to tailor our products and services,” explains Hennin. Well, here the player does not lack what some of its competitors do. Its ads are loud and frequent, therefore ensuring maintainence of the ‘trusted’ brand appeal for AEBC. The player is also looking to build the most extensive network of sales, service infrastructure and collection mechanism for credit cards to boost its services.

Though officials claim negligible credit defaults in India, the increasing outstanding on credit cards (which went up by a massive 87% to touch Rs.265.96 billion by May 2008, as per RBI) clearly threatens to spoil the party for AEBC. This also further threatens to worsen AEBC’s earnings India-specific (and global thereof) figures in the short-to-mid term; a repeat of what happened in the most recent quarter (Q2, 2008) when its earnings fell globally by 37% q-o-q to just $653 million after it was left with no option but to ‘set aside’ earnings to cover up for credit losses on worse-than-expected consumer defaults.

“The darker side of the story says that in course of utilising the facilities provided by credit cards, one keeps on postponing the payment, due date after due date. Many of these users then finally refrain from any future payment, thus hurting credit card players where it hurts most,” explains Robin Roy, Associate Director, PwC. To add to this, AEBC also lacks retail banking facilities, as other players can back their collection activities through their account holders’ deposits and savings. Thus it becomes imperative for players like AEBC to keep an eagle eye on its customers. With McKinsey predicting that by 2010, India would have $7 billion in credit cards outstanding, AEBC has to be more than careful in choosing its clientele! For now though, it’s got to expand beyond just four cities! Four might be even, but it’ll not help AEBC get even with challenges and challengers!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Google Chrome, rather than a stand alone strategy, seems to be another step towards making Windows more irrelevant, says arun roy

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Harry S. Truman, former US President, once said that he preferred one armed economists so that they would not be able to say, “On the other hand”! But let’s not blame economists for the way they insure themselves from the embarassment of being proved wrong in their assessment. Predicting the future with certainty isn’t exactly a walk in the park for anyone.

Take, for instance, the uncertainty surrounding the fate of the internet browser Chrome, Google’s latest salvo at Microsoft. Industry experts have started discussing of its future and aspirations. A number of tech bloggers have already started analysing whether Google Chrome will be able to dethrone Microsoft or kill Mozilla. There’s a general consensus as to what Chrome means, namely, it is Google’s way of eroding Microsoft’s dominance in the browser market. An analyst has quoted Google as an 800-pound gorilla, and when an 800-pound gorilla jumps in the pool, it tends to makes ripples. But will Chrome really give IE8 and Firefox a run for their money?

Google Chrome, a “fresh take on the browser”as the company claims it to be, does have some interesting features, differentiating it from other browsers available in the market. The most important feature it offers is its high level of user friendliness and keeping each tap in an isolated “sandbox” to prevent one tab from crashing another, and improve protection from rogue sites. The browser’s JavaScript engine enables the software to run the applications in a faster mode compared with other engines.

In an era, where Internet has become the primary medium to get connected across the world or real-time access to information, the importance of the web browser industry remains inevitable. “Google’s foray in the browser industry depicts more of its vertical expansion strategy. The dominant factor will be decided by the business models or long term strategies that Google would adapt to dent Microsoft’s dominance in the industry” avers Shushmul Maheshwari, Chief Executive, RNCOS E-Services Pvt. Ltd.

Some experts feel that this is merely a part of a larger strategy by the search engine giant. “Google only dominates in one area and that is in online ad revenue due to their search engine. Chrome isn’t initially designed to dominate the browser industry; it is designed to be a front end for an emerging application class,” says analyst Rob Enderle, Enderle group. Chrome’s main target is more Windows and Office than it is Internet Explorer (IE) initially. Chrome is designed to help make Microsoft Office obsolete and make Windows irrelevant.

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Break-ups hurt. But who?

The Star-Balaji affair has ended. Ekta Kapoor will have to rejig her plans

Till some time ago, the mirror on the Indian teletube wall always said that Ekta Kapoor’s K-recipe was the fairest of them all. But times have changed. Falling TRPs of her ace serials are leading many to conclude that the charm of Balaji’s kitchen-politics was wearing off. So now when we hear that Star Network and Balaji Telefilms Ltd. have broken their 2007 JV to launch regional channels together, the development demands attention. What’s more, Star has also announced an exit for its 25.99% stake in Ekta Kapoor’s production house, valued at Rs.1.23 billion. Clearly, something is brewing.

Says R. Karthik, CEO, Balaji Telefilms: “It was an investment which has been called off. It was a strategic move which had to be realigned.” But this tragic love story would certainly hurt Balaji, at least in the short run. For one, a majority of Balaji’s revenues were coming from Star, thanks in part to the prime time exclusivity agreement that the two shared. Balaji currently airs six shows on STAR Plus and derives around 65-70% of its revenues from the channel.

On its part, Star has nothing to lose from this break-up. “There are multiple content providers in the country, from which content can be sourced anyway. Moreover on the competition front, while Star faces intense competition in the GEC domain, it continues to maintain its strong market leadership with GRPs in excess of 300,” asserts Salil Pitale, Head-Media & Telecom, Enam Securities.

And although Star CEO Uday Shankar says that the “relationship between Star and Balaji as broadcaster and content provider will not be affected,” fact is that the end of their contract allows Star to re-negotiate the premium rates it pays to Balaji. Given that Ekta’s soaps are no longer ruling the charts – Bidayi, Star’s highest TRP grosser in recent times is not a Balaji production – the respite for Star will come in the form of not shelling out premium rates to the under-performing production house. In fact, 2009 may turn out to be an immensely challenging year for Balaji, as the production company has also launched a very high production cost shows - Mahabharata - and in the absence of premium revenues from cash cow Star, its margins are likely to be impacted.

However, all is not so bleak as it sounds. There are some positives for Balaji too. As per Angel Broking, Balaji will post a CAGR of 12.5% and 10.35% in consolidated top line and earnings driven largely by volume growth. Counting on such numbers even Jagat Dave, Director- corporate finance of Ambit Corporate Finance (exclusive financial advisor to Balaji) asserts, “Balaji Telefilms is a cash-rich company having around Rs.2.2 bn of cash reserves, as on March 31, ‘08, and it continues to evaluate various strategic opportunities in the Indian Media & Entertainment industry.” In the current scenario, wherein all broadcasters are vying with each other for premium content, Balaji Telefilms, with its track record is uniquely positioned to cater to this demand. Rumour has it that Anil Ambani’s ADAG may be up there in the race to net Star’s abandoned equity. Confirms a source in ADAG: “Yes, we are definitely looking out for production houses to add synergy to our channels and Balaji’s stake would definitely provide an edge to us.” And why not! This step by the company will provide aid to ADAG, as it plans to launch 20 channels to supplement its DTH venture (Big TV) and this deal will provide them an exclusivity of content to their channels.

If Anil Ambani’s ADAG hops on board, Balaji will certainly be able to tide over this unique quagmire that it finds itself in. And not to forget, the leading lady of Hindi soaps may still be able to make good on her dream to rule the regional content space.

Neha Saraiya

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Rise till they drop!

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Price hike isn’t a way out for durables industry

Cash registers kept ringing in for them until last year. The flourishing optimism not only had a positive impact on their earnings but also prompted the consumer durables sector to crave more. In fact, according to a survey conducted by FICCI in 2007 the consumer durables market in India was projected to grow at about 12% this year.

However, with inflation touching a 13-year high of 11.42% coupled with an expected downturn in the economy & exchange rates, this seems to be almost like an unfulfilled wish for durable biggies. Forget the growth, the Rs.250 billion consumer durable industry is now finding it hard to pull back from the 20% fall in the sales that it witnessed during the first quarter of this year (FY 2008). All thanks to the rise in input costs! While the price of steel has gone up by 40%, copper and aluminum too boast a 20% increase. Even the price of oil (the basic material for all plastics) has shot to the roof ($144 a barrel). In fact, the average bill of materials (BOM) of an appliance has increased by about 15-25% across categories. This has left the durable biggies including LG, Godrej, Mirc electronics et al with no option but to hike the prices of their products by about 5-7%. Certainly an age old strategy to pass on some burden to consumers as George Menezes, COO, Godrej & Boyce Mfg. Co. Ltd. puts it, “What has been passed to the market is just about 3-5% increase which is a minuscule part of the overall cost impact.” But here comes the million dollar question. Will this increase in prices would be of any help to shrinking margins of manufactures (considering the segment sales are already on the verge of sinking)? “The price increase always comes with some objectives as you cannot do business at a loss and this slowdown is a temporary jiff which will soon fade away,” a top Electrolux official has been quoted as saying.

However, analysts believe that the major reason for the slowdown in this segment is the Euro’s meteoric rise against dollar. This in the last three months has alone taken up the cost of imported material by about 5-8%. “With interest rates likely to go up soon, further increase in product prices will adversely affect consumers,” avers Kalyanmoy Chatterjee, CEO, Consumer Research, GSK Mode. And this is not all! What seems as a solution for the companies - the price rise - is actually a curse in disguise! After registering negative sales in the quarter even big banks and finance companies have stopped funding aam admi for the purchase of such products.

But, remaining on a positive side, manufacturers still hope to tap the market amid rising prices. They plan to do it by creating a unique differentiation in the value proposition of their products “I believe manufacturers will try the age old practice of launching promos and schemes to cash in on whatever they can,” adds Chatterjee. But, what when everyone starts following the same? So, considering the current macroeconomic scenario, the only respite one can expect is from the government, else we can only hope that the durables prices don’t end the fate of fuel prices!

Neha Saraiya

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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