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Star India posts $200 mn EBITDA in FY16

MUMBAI: With eyes firmly set on the target of $1 billion operating profit by 2020, Star India has delivered an EBITDA of over $200 million in FY2016. This is inclusive of the company’s sports business.

21st Century Fox, Star India’s parent company, follows a financial calendar of 1 July to 30 June.

21st Century Fox CEO James Murdoch, who does not miss any opportunity to praise the India business, has said that Star India is on track to deliver $500 million EBITDA by 2018 and $1 billion by 2020.

255px-James Murdoch“So for this last fiscal year, the Star business overall inclusive of sports delivered just north of $200 million of EBITDA. And we think that puts us in a really good pace for our 2018 and 2020 targets. So, we’re really pleased with that performance. And I think as we see the investments really start to pay off there, and the velocity of the business continue—it’s on track,” Murdoch said.

In the previous fiscal year, Star had earned $300 million from its entertainment business, which was ploughed back into the sports business.

The sports business, Murdoch said, is also showing turnaround. “As you know in the previous year, we invested 100% of the profits of the entertainment business into the growth of the sports business. But that’s really turned now,” he told analysts.

Star recently said that it would invest $5 billion in India over the next three years. The company’s exuberance is not unfounded. It has been on an upward growth trajectory since 2008. In FY09, its revenue stood at $390 million. The revenue successively jumped from $500 million in FY10 to $670 million in FY11, to $725 million in FY12 and to $1,020 million in FY13 (including eight months of revenue from sports). It was expected to become a Rs 10,800 crore company in 2016.

Murdoch also said that the media conglomerate was past the peak investment phase and the India business is in the pink of health. “Profit growth at Star in India is accelerating. The business is in good health, and the peak investment years are behind us, as profitability towards our target progresses,” he asserted.

Talking about Star’s digital business, Murdoch said that video-on-demand (VoD) service Hotstar would be launched outside India this year. The VoD service has over 50 million active users.

“We’ll continue to invest in Hotstar, our over-the-top of mobile video service. With over 50 million active users currently, we see this as a key opportunity to achieve real leadership in an important category. In addition, we plan to expand its service beyond India this year, targeting the global South Asian diaspora,” Murdoch disclosed.

He also said that consumption on Hotstar is being driven by entertainment content. In the launch phase, the VoD service saw spikes due to live sports.

“With respect to a Hotstar, it’s interesting that we in the beginning saw a pretty severe sort of volatility and spikes, largely around sports viewership on a Hotstar platform, and when there was a big cricket tournament or something like that. But gradually, over the last year, what’s really built and gotten much more momentum is scripted programming,” he noted.

Dwelling on the point further, Murdoch added, “It is Indian scripted programming, in multiple languages. And that’s really driving—that’s been the most gratifying thing to see, the more consistent viewership of that. And that’s really a big, big part of the volume now. The fastest-growing part of the volume on a consistent basis is local Indian scripted programming, at a very high volume. So there are lots of shows, full series stacks, all of that sort of stuff, of the many, many thousands of hours that we produce there every year.”

Talking about the advertising scene in India, Murdoch pointed out that Indian e-commerce companies like Snapdeal and Flipkart had tightened their marketing purse leading to a drop in ad spend.

He also said that the e-commerce spend was largely driven by Amazon, which spent a large chunk of its sports spends on the Indian Premier League (IPL). Therefore, Star did not see the full benefit of spend by Amazon.

star india logo“At Star, we definitely had a sort of change in the marketplace there, a little bit where some of the e-commerce money that was spending very heavily in the comparison quarters, in the year before, notably Flipkart and Snapdeal, really reduced their spending quite dramatically. So, they had grown to be one of the top sectors in advertising there, and just went away. And the e-commerce money that continued to be spent was at Amazon, and that was really spread out more around sports assets. So, we didn’t get the full benefit of that. We have some in the cricket, but really the IPL got a lot of Amazon’s money as well. Hence, there was just a change there in the marketplace. We don’t think it’s anything more than that, just comparison with those big spenders ameliorating their spending,” Murdoch said while talking about the softening of international ad revenue growth.

Responding to a question on striking a balance between providing content to other OTT players while at the same time being invested in Hulu, Murdoch said that the company “wants to see the most competitive downstream market we can”. He cited the example of India and the UK where it owns stake in distribution platforms while at the same it provides content to competing platforms.

“So I think a good example is India where at Tata Sky we’re a significant investor there. But we distribute across all of the MVPDs, satellite, cable and telcos. So I think it’s consistent with our practice, and it’s always benefited us, and benefited customers fundamentally to have more competition downstream,” Murdoch said.

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