Why Murdoch's India empire is on safer grounds

Rupert Murdoch-led News Corp's strategy to operate under multiple brands may help the group shield its Indian businesses from any possible fallout of the crisis engulfing the group in the UK and US, experts say.

The media conglomerate, which owns assets worth $66 billion across the world, has a significant presence in India, including in the television content and distribution, publishing, films and news businesses. However, the experts believe that the Indian businesses may remain insulated from the phone hacking and police bribery scandals that have pushed the group into a deep crisis in its key Western markets.

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The Indian business might be affected only if the group's worldwide business comes under the scanner, they added.

The group operates most of its businesses in India through Star India Pvt Ltd, a wholly owned subsidiary of US-listed News Corporation.

Its portfolio here includes about three dozen general entertainment channels and three news channels including Star News.

The Indian business has been a key contributor to its global TV advertising revenues.

The group's TV channels are mostly operated under the Star brand in the country, while the Fox brand is used for films, Harper Collins for publication, Sky for satellite TV distribution and Dow Jones for financial market information services.

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While the queries sent to Star India remained unanswered, media buyers and planners said that a layman here may not even know that the Star TV channels in India were owned by Murdoch.

"I don't think it will have any impact on his India business. His India business is strong and growing and mainly focused on entertainment," said Madison World Chairman and MD Sam Balsara.

"People from the media and advertising industry are aware of the crisis, but the phone hacking controversy will not have any impact on routine operations here. Nothing will change for him here," another media advertising executive said.

Rupert Murdoch himself has described the group's Indian business as a "next generation" prospect.

A few months ago in March this year, during his visit to India, his son James Murdoch had also rued regulatory bottlenecks in the country, but promised to continue to invest in India as a priority market.

On his part, Murdoch Sr said in News Corp's last annual report for the year 2010 that Star India was being developed as a "next generation" business by the group and also as a "hedge against uncertainty" in other segments.

Much before the ongoing crisis broke out he said that businesses as large as his group were "no stranger to adversity or to instability."

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"We hedge against uncertainty by investing in diversified assets at all stages of growth. So as we strengthen our existing businesses, we are developing the next generation, like STAR India and new digital content models," Murdoch Sr said.

Robust advertising revenue growth from the Indian TV business has consistently found a mention in News Corp's annual and quarterly results for many years and the same was acknowledged by Murdoch also. "STAR India saw particularly robust advertising growth and we continue to develop market-leading capabilities in that important and burgeoning region," he has said.

The group's international cable operation revenues rose 18 per cent in 2010, primarily due to higher advertising revenues at STAR and higher advertising revenues at STAR was "primarily due to the strengthening of the advertising market in India."

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The experts also believe that India could be a key market for the group going forward.

Future Brands Managing Director and CEO Santosh Desai, who keenly watches the advertising market in the country, said that Murdoch can in fact derive a certain amount of comfort in India as "he is not the face of the businesses he has in the country, unlike in the West."

"His company also does not have a significant presence in the news segment. Especially in print media, his company does not even have any direct presence," he added.

Murdoch's group publication, Wall Street Journal, has a content-related partnership with the Indian business daily Mint, while Dow Jones Newswires has a small presence.

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"Since Murdoch's role in India and the level of engagement is of a different order compared to the UK or the US, there will not be any significant impact of the ongoing phone hacking issue here," Desai added.

He, however, cautioned that if "his businesses worldwide come under a scanner then there is a remote chance of the Indian operations also feeling an impact."

"There is a more gossip value to the entire issue than any principle damage to Murdoch's business," Desai said, adding that the trade partners were unlikely to stop working with Star India and advertisers should also not pull out in the wake of the entire controversy.

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Murdoch said in his letter to shareholders that the group was positioning itself to capture growth in fast-developing markets like India with its recent investments in Asianet and other regional channels in the country.

In January, 2009, News Corp formed a venture with Asianet TV to launch general entertainment channels in southern India.

It paid about $235 million in cash and assumed net debt of $20 million for a controlling interest in four of Asianet's channels.

In July, 2010, News Corp paid a further $90 million to increase its stake in this venture to 75 per cent.

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In other businesses here, News Corp owns a 26 per cent stake in Media Content and Communications Services Ltd, which runs Hindi news channel Star News, as well as a couple of regional language news channels.

The remaining 74 per cent stake is held by ABP group, as FDI rules cap the foreign holding at 26 per cent.

Murdoch has been waiting in the wings for a long time for the Indian government to open up foreign investment in the print media space, where his group owns some of the biggest titles in various international markets.

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There are no official figures available for the Indian business of the $66 billion group, as most of its businesses here are privately held and are not required to disclose their financials mandatorily.

But industry estimates peg the annual turnover for the group's TV business alone at over Rs. 2,000 crore (Rs. 20 billion), excluding businesses like book publishing and movie production and distribution, the latest in its Indian portfolio.

Some of the big movies with which the group's films business has been associated include My Name is Khan, Slumdog Millionaire and Avatar, while they have signed up with companies promoted by Shahrukh Khan and Yash Chopra for future projects.

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The group was at the forefront of the cable TV revolution in the country and since the entry of Star TV into India in 1991, it has established a strong presence in these past two decades across businesses ranging from TV content production and distribution to news, publishing and now films.

Star India also has a 20 per cent stake in DTH venture Tata Sky and the remaining 80 per cent is with the Tatas.

Star India also holds 40 per cent in a book publishing venture with India Today Group in Harper Collins India.

News Corp also has 50 per cent stake in ESPN Star Sports, which airs various sports channels in India, while Star India has a 50-50 joint venture with Den Networks for the TV distribution business.

It also has a 17 per cent holding in cable TV supplier Hathway Cable and Datacom.