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Why Star and Zee dissolved MediaPro?

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Why Star and Zee dissolved MediaPro?

In a surprise announcement, both the partners of joint venture MediaPro, Star Den and ZEE Turner Network, split on April 11, 2014.

A joint press release issue on Friday, stated, “TRAI’s Telecommunication Interconnection Regulation, 2014 dated February 10, 2014, does not allow aggregators to bundle channels of multiple broadcasters in one bouquet. In light of this new development, Star Den and Zee Turner have decided to discontinue the distribution of their respective channels through the 50:50 distribution joint venture, MediaPro.”

Therefore, both the networks decided to split on grounds of regulations. Sources indicate that along with the regulatory inferences, another factor was also in play.

STAR’s massive investments in sports
According to sources, the split could have been postponed by a year or so, but sports genre is an important factor that made the split inevitable at this stage.

STAR’s heavy investment into the sports genre has led the group to launch four sports channels and two HD channels. STAR India has exclusive rights for all the BCCI matches till 2018. The investment stands at more than Rs 3,000 crore. Overall, the group plans to spend Rs 20,000 crore on the sports genre, including cricket, football, hockey, etc.

Zee, on the other hand, has also made significant investments in sports through Ten Sports. However, the scale of investments and stakes are not as high as STAR India.

The press release also stated that Zee and Star would set up independent affiliate sales teams for their respective channels. The latest tariff order dated March 31, 2014, which permitted the inflation-linked hike of 27.5 per cent in Reference Interconnect Offer rates (in two stages), is likely to provide a positive fillip to the subscription revenues.

Will other content aggregators be affected?
Industry sources say that the split is good for the industry. But does the split also impact other content aggregators? Will the regulator’s discomfort against bundling of channels of different networks and selling them together as a bouquet also affect other content aggregators?

Rajesh Kaul, President, The One alliance, which distributes MSM, Discovery and TTN channels, mentioned, “We are not planning to split in any form whatsoever. MSM and Discovery are in a strategic alliance. TRAI is against bundling of channels of multiple networks. We will ensure that we follow TRAI guidelines.”

Anuj Gandhi, Group CEO, IndiaCast Distribution, which distributes Viacom and Network 18 channels along with the UTV bouquet, also feels the same. “We are very happy with our strategic alliance and there is no plan or intention to split in any form whatsoever,” he said.

Distribution issues have plagued the industry for a long time. Even after digitisation, the conflicts have gone to a different level altogether. Broadcasters and content aggregators feel that carriage fee is still too high, while subscription revenues are too low. There is also a discomfort against addressability and non declaration of the final consumer.

The MSOs and the LCOs, on the other hand, feel that revenue sharing agreements are not fair and that content aggregators and broadcasters do not pay fair share of the money. DTH players too have been involved in a lot of rift with content aggregators lately.

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