Star India Counts on Star Power

News Corp. figures a Bollywood celebrity game show host and new soap operas will get its entertainment channel back in the groove

The excitement was palpable at Studio 7, a film production center in a distant Mumbai suburb. A throng of animated fans had assembled to catch a glimpse of Shah Rukh Khan, the dashing, well-coiffed, and highly acclaimed Bollywood actor and host of Kaun Banega Crorepati. That's India's version of the popular, cash-prize game show Who Wants To Be a Millionaire?

The show appears on News Corp's (NWS) Star Plus entertainment channel, the dominant cable service in India's fast-growing media market. And everyone from CEO Rupert Murdoch to local Star executivess in India is counting on this show to revive the fortunes of Star India. This is the most crucial competitive arena for Star Asia, the wholly owned subsidiary of the $26 billion-a-year News Corp. media and entertainment sprawl.

Since its launch in 1991 with just five TV channels, Star Asia has expanded and now reaches 300 million viewers in Asia, broadcasts in nine languages, and controls 20,000 hours of Indian and Chinese programming, plus operates the world's biggest modern Chinese film library with some 600 titles.

Still the Leader

However, the India operation, which delivers more than 70% of Star Asia's revenues and profits, has been slipping. Star's quarterly earnings for the period ending Dec. 31 fell 36% as Asian "subscription revenue growth was more than offset by a decline in advertising revenue at Star Plus in India" the company announced on Feb. 7. (Overall, News Corp. reported strong results, with a 24% jump in operating income to $1.1 billion.)

Although the Star India operation has slipped a bit, executives are confident the recent setbacks are just a passing squall. The Star franchise—which includes programming channels offering Bollywood and Western films, sports, music videos, and news in Hindi and Bengali—is still the one to beat, says departing Star Group India CEO Peter Mukerjea. "Nowhere in the world has any channel had a leadership position for years," he says.

Still, Star has to get some of the programming magic back in India, and that's where Khan comes in. The energetic and personable celebrity has been signed on for 52 episodes and is expected to resuscitate Star Plus. Star India's other programming channels include music video channel Channel V, Star Movies, Star News (a 24-hour Hindi news provider), and Star One for English-language entertainment.

Speaking the Language

However, Star Plus is the main event, and pulls in more than 90% of the Indian operation's revenues, according to one company source. It has also lost traction with viewers thanks to some poor-performing soap opera dramas, the departure of Mukerjea in late January, and Star Entertainment India CEO Sameer Nair's expected departure in March. "It appears that they no longer have the pulse of the viewer," says Meenakshi Madhvani, head of media rating agency Spatial Access.

Even so, Star is unlikely to sit back passively with the massive $6 billion India entertainment market growing at 20%, and with the country's 1.1 billion population and some 300 satellite programming services up and running. At the start of this decade, Star shifted the lion's share of its programming to the Hindi language to reach out to the masses—and, more critically, advertisers. Since then, Star has had a dream run and outperformed both domestic broadcaster Zee Television and Sony Entertainment Television (SNE).

Both rivals think they can erode Star's lead further with better programming, particularly when it comes to family dramas. Zee has introduced new shows in this segment, and neither thinks Star's dominant position is unassailable. "Television is a cyclical business," says Kunal Dasgupta, CEO of Sony Television.

Making matters worse for Star, its unit has been the scene of its own messy, managerial soap opera that was only recently resolved with the departure of Mukerjea and Nair. Early last year the India operation was split in two, and Mukerjea was moved to product development while Nair headed up the critical Star Plus channel. The two, once drinking buddies, then had a massive falling out, according to insiders.

Too Many Cooks

The split roles sowed confusion and divided executives loyal to Mukerjea and Nair into uncooperative camps. "You cannot have two captains running the ship," says Raj Nayak, CEO of rival NDTV Media and a former head of sales at Star. To make matters worse, their boss, Michelle Guthrie, Star Asia's Hong Kong-based CEO, also resigned on Jan. 12.

Paul Aillo, a former Morgan Stanley executive who joined Star in Hong Kong six years ago, has replaced Guthrie as CEO of Star Asia and has been spending plenty of time in India in recent weeks to settle things down. He even paid a visit to the set of Kaun Banega Crorepati. "It is great to have someone like Aillo visit my sets," says Khan. "It shows Star's commitment to the show."

The good news is that Khan's latest installment of the millionaire show is pulling in strong ratings. And Star Plus is launching two new soap opera dramas (one of them produced by Fox Entertainment) next month.

Star India is also trying to do a better job of promoting its other channels that have good shows but no marketing budget. "Star Plus is one entity, and the rest are poor cousins," says Nayak with rival NDTV.

The task ahead for Star India is to keep its managerial melodramas to a minimum and get refocused on putting out some great entertainment in India.