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Star India eyes $300 mn EBITDA from entertainment biz this fiscal

MUMBAI: Bullish on the Indian market, 21st Century Fox chief executive officer James Murdoch is eyeing a rich harvest from Star India’s entertainment business in the current fiscal.

Star India’s EBITDA from the entertainment business is expected to be over $300 million this fiscal, Murdoch has told investors. For 21st Century Fox and its wholly-owned subsidiaries, the fiscal year starts on 1 July and ends on 30 June.

255px-James MurdochMurdoch also said that Star has reached an inflection point with peak investments in Star Sports, the sports business of the company.

“I think the inflection point was really this year when we hit the peak sports investment. The entertainment business is already well on its way to go over $300 million this year in EBITDA,” Murdoch said.

Murdoch also revealed that the company is re-investing 100 per cent of the profit generated from the entertainment business in building the sports business after the ESPN Star Sports (ESS) acquisition. The addition of sports business has added scale to the India business. In 2012, 21st Century Fox (then News Corp) had bought ESPN’s 50 per cent stake in ESS for $335 million.

“So it’s really taking all that profit and reinvesting that into creating this new business in sports that we think really adds a totally new dimension and a real scale to the business there. The inflection point is when that peaks. And that peaked this year, so we see — this last year that just ended,” he added.

According to Murdoch, the continued growth of the entertainment channels and the softening of sports investments going forward will be a game changer for the company’s India business. He also sounded bullish on the India sports business which, according to him, was witnessing good progress.

“Last year (fiscal), was really the peak year of investment (in sports). So as we see continued growth in the entertainment business there and the cost spike in the sports business ameliorate pretty dramatically, you get a double whammy, and the growth for the Star business in terms of EBITDA will be substantial this year and for the next few years, as that sports investment backs out,” he explained.

Murdoch had earlier stated that Star India will deliver an EBITDA of $1 billion by the turn of the decade. Star India CEO Uday Shankar had earlier told investors in US that the India business will have $500 million EBITDA by FY18.

Murdoch also noted that Star’s entertainment channels have registered a double digital growth while Pro Kabaddi season 2 also witnessed a good growth in viewership.

“At Star, the entertainment channels generated double-digit revenue and profit increases on the strength of original programming. Pro Kabaddi Season 2 continued a successful run, with strong ratings growth. And we expect the business to make meaningful profit progress this year, in line with the goals we’ve discussed in the past.”

Star, Murdoch stated, was well on its way to achieve its ultimate goal of $1 billion EBITDA by FY20.

“So when we look at the future of that business, while I’m not going to say it’s a straight line, there’s always some ups and downs here and there, but the profit growth will start to be significant this year and will continue towards that $1 billion target, at the present conditions being consistent, towards the end of this decade or thereabouts,” he asserted.

While admitting that there is a lot of execution risk in achieving the target like in all businesses, Murdoch affirmed that he feels “very good about the products we have, about the brands, about the company there (Star India) and we want to aim high with it and we think it can really change our lives”.

Star broadcasts in Hindi, Marathi, Bangla, Tamil, Malayalam and Kannada, and has a leading presence in nearly every regional market with general entertainment channels like Star Jalsha, Star Pravah, Asianet, Suvarna and Star Vijay.

It recently fortified its presence in the South India regional market by acquiring Maa TV Network, which owns and operates Maa TV, Maa Movies, Maa Music and Maa Gold, for $375 million.

Apart from regional entertainment channels, Star also has a strong presence in English entertainment and infotainment genres with channels like Star World, Star Movies, Fox Life, and National Geographic branded channels.

Star also operates eight sports channels, including four SD (Star Sports1, Star Sports2, Star Sports3, and Star Sports4) and four HD channels (Star Sports HD1, Star Sports HD2, Star Sports HD3 and Star Sports HD4).

Apart from 42 TV channels, Star also owns and operates Hotstar and starsports.com.

Star Sports owns rights to several key properties including BCCI, ICC, Cricket Australia, England Cricket Board, English Premier League, Bundesliga, F1, Wimbledon, Indian Super League, Pro Kabaddi League, Hockey India League and Indian Badminton League.

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