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The Star lesson on leadership

By Vanita Kohli-Khandekar
August 12, 2008 11:25 IST
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How do companies lose and regain leadership? Last week's announcement by News Corporation chairman Rupert Murdoch of a Rs 420-crore (Rs 4.2 billion) investment in six Indian language channels set me thinking on this.

Star India, a NewsCorp subsidiary will launch Bangla, Marathi and Gujarati channels. If reports are correct, it has also bought out Asianet, a major broadcaster in Kerala.

Much of this seems too little and too late. The Rs 1,600-odd crore (excluding income from joint ventures) Star India has been in dull form for over three years now. From an aggressive leader that protected every shift in rating points, it seems increasingly like a defender.

Star (one of my favourite media companies) was the first foreign firm that showcased the Indian media market to the world. Its success triggered a few hundred million dollars worth of investment into the sector. So its 16-year old Indian saga matters. Besides, it is also a lesson in human resource management and business strategy.

From 1992-2000, Star was a flop. Sun and Zee beat Star which was left holding a 'no Hindi programming' agreement with Zee (its India partner then). When the break off with Zee happened in 2000, Star got cracking. It got an entry into Indian homes with <i>Kaun Banega Crorepati</i> (KBC). It then used this to build what looked like an unassailable dominance over prime-time.

From 2005 or so, things started going wrong all over again -  by all accounts a management failure. Here were a lot of bright managers who had just won. They now needed new goals. But they kept doing the same job, as Star clung onto its one-channel success. Soon the regional office in Hong Kong led by Michelle Guthrie started having problems with India CEO, Peter Mukerjea. (Mukerjea's equation with earlier Asia chairman James Murdoch had been great.)

In their wrangling, almost no new investments in new businesses happened, margins and ratings fell and worse, Zee bounced back. By end of 2006, when the mist had cleared, Guthrie had 'resigned' overnight. By 2007 Mukerjea, the architect of the Indian success, left (he'd been sidelined earlier) and Sameer Nair, his second-in-command (later CEO), also left.

Think about it -  in 2004,  Star India housed half a dozen managers, who within months of leaving, went on to become CEOs in other media companies. There was Mukerjea (INX Media), Rajesh Kamat (Viacom's Colors), Nair (NDTV Imagine), Raj Nayak (NDTV Media), Tarun Katial (BIG FM) and Tony D'Silva (Sun TV's DTH venture). In a high-growth market, tight on talent, losing so many good people is the equivalent of an HR disaster.

On business strategy, Star was plain lackadaisical. Take language channels, on the radar ever since KBC. On most days the Sun network, with its bouquet of Tamil, Telugu, Malayalam and Kannada channels has more viewership share than Star's Hindi and English offering. That is because Sun focuses on a prosperous chunk of the 700 million non-Hindi speaking Indians.

Star's first go at this market with Star Vijay (Tamil), in 2001, hardly caused a blip. When the DMK backlash against Kalanithi Maran's Sun Network happened last year, the time was ripe for Star to try again -  Kalanithi's brother, Dayanidhi, was India's telecom minister till DMK chief M Karunanidhi asked for his resignation.

One of the big deterrents earlier had been Sun's hold over cable distribution in the state. With the withdrawal of political support, Star had a fighting chance. However, its preoccupation with internal problems helped Kalaignar grab the opportunity -  Kalaignar enjoys the patronage of the ruling DMK in Tamil Nadu.

The reason Tamil Nadu, Maharashtra, Punjab and Gujarat, among others, are key media markets is simple. On per capita income, purchasing power and product consumption, these states do well, so advertisers want to reach these consumers.

While there is a lot of space in languages, the good ones - Bangla, Marathi, Tamil, Telugu -  have all been occupied. Tackling these markets now will take much more, not just in capital, but in programming effort and people talent. CEO Uday Shankar, who took over last year, has his job cut out for him.

Contrast Star with Network18. From a fraction of Star's size in 2000, it is now a Rs 1,000-crore (Rs 10 billion) group. It just swoops down on any deal in the market. Its ability to retain a bulk of its senior team means that these deals work because management time and attention is given to them.

Frankly, Network18 has shown more appetite and aggression than the (as yet) market leader, Star. That is what all businesses eventually boil down to.

In a recent CNBC interview, Murdoch admitted that the problem was of NewsCorp's making. Now, can Star unmake it?

Vanita Kohli-Khandekar is a media consultant and author of The Indian Media Business.

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