Anil Ambani’s Reliance Group should buy British television channel ITV
By Lopa Patel, 8 March 2010

Indian business mogul Anil Ambani and his Reliance Anil Dhirubhai Ambani Group (R-ADAG) should buy British television channel ITV. This revelation, which came to me in a ‘Working Girl’ Trask-Radio kind of moment, would fulfill not only Anil Ambani’s dream to be a global media baron, but also deliver Indians in Britain the “presence” they have long craved. The fact that Rupert Murdoch’s Sky TV has been forced by UK regulator Ofcom to divest part of its 17.9% in ITV leaves the field clear for Reliance. The ‘fit’ is almost perfect, although analysts craving detailed figures will be sadly disappointed by this post. I have no idea how much it would cost. Given that Sky TV acquired 696m shares (17.9%) in ITV in November 2006 for £940m at 135p a share - a price that has plunged to a low of less than 20p, but has since rallied to around 52p per share today - the cost would probably still be a lot. But then, Reliance has deep pockets. The reasons why Reliance should buy ITV are entirely practical and emotional.

Audiences

Having invested heavily in Bollywood and Hollywood and lined up a stable of forthcoming releases produced by everyone from Nicholas Cage and George Clooney to Julia Roberts and Brad Pitt, it is going to be increasingly important for Reliance to have direct access to audiences. ITV, through its main channel ITV1 is recognised as the major entertainment channel in Britain. ITV2 screens a lot of films and digital channel ITV4 has just completed a sports deal to the screening rights for the forthcoming IPL cricket season. The combined share of all ITV channels and ITV.com would, therefore, deliver a large Asian diaspora and mainstream audiences for Reliance, allowing not only screening options for new releases, but also the entire back catalogue that Reliance Big Entertainment possesses.

If Reliance’s audacious bid for troubled US film company MGM (23rd January 2010) goes through, Ambani will also have the MGM back catalogue of 4000 movie titles including James Bond and Pink Panther films which it could leverage.

The ITV audience would give Reliance a major stake in the European market, where the demand for English-language programming is high. Mix it with a dash of sub-continent output from channels like ‘B4U’ and ‘Zee’ and Ambani’s audience base could readily start in Ireland and end in Dhaka without major investment in new programming content. The ITV platform would be worth a great deal, not only to Reliance, but also other smaller Asian Sub-Continent channels who could ‘lease’ slots in the schedule.

Advertising

As the major mainstream TV advertising channel in Britain, ITV offers Reliance a huge potential profit stream. ITV reported a small increase of 7% in advertising revenue for the first quarter of 2010 even though it remains cautious during the “worst television advertising downturn on record”. But more than that, the advertising channel is a potential route to market for a lot of Reliance products: from financial services and insurance to mobile phones, downloads and interactive games. The platform would also create new avenues for Reliance Games – currently a market dominated by the internet and mobile phones.

Management

ITV’s incoming management has a pretty good understanding of the “Indian way” of doing business. Adam Crozier, CEO at ITV was the Royal Mail Chief Executive and former FA boss and Archie Norman, Chairman of ITV, was formerly CEO of Asda, a retailer dubbed as “The Asian Supermarket”! Both men bring a practical approach to the channel and are likely to put business issues ahead of programming concerns. This means that Ambani is likely to find an Executive Team that focuses on managing the profitability of the business. In 2009, ITV slashed budgets to make cost savings of £169m and it shed 1200 jobs while winning back market share and increasing its international production presence.

ITV has won back its share of peak TV viewing figures and its share of the advertising market. Given the broadcaster’s current reliance on TV advertising as a major source of revenue, Sir Martin Sorrell, boss of the world’s largest advertising agency WPP, could well be a valuable boardroom asset to Anil Ambani. Sorrell needs a better foothold in India and Ambani needs Sorrell’s steady “hands on a thousand advertising budgets”.

Reliance ITV Cost Savings

The acquisition of ITV for Reliance (R-ADAG) could potentially lead to more cost savings. The channel which has been busy divesting itself of non-core services, like its share in Liverpool football club TV and its purchase of friendsreunited.com, still has some more savings to make in the pipeline. It could divest itself of ITV Studios and its UK and overseas production business – outsourcing the lot to Reliance’s Indian production companies. The cost savings could then be used to plug the £436 million ITV pension deficit and boost its online presence itv.com.

For Reliance ITV, the online business will deliver greater revenue once merged with Zapak.com – Reliance’s Games platform online and JumpGames – its mobile games platform; BigAdda – Reliance’s Social Networking Platform linked to entertainment and Bigflix.com its Hollywood & Bollywood film platform online. ITV.com video views online reached 215 million from 8.7 million unique users in 2009. However it trails competitors like the BBC whose popular iPlayer format it cannot access. The acquisition by Reliance would, however, give the group immediate access to over 100 million customers and done with skill, the integrated group – under the larger Reliance ITV umbrella, in largely an English Language format – could reach not only 55% of India’s population that is under the age of 30, but, also the same youth market across Europe, the Middle East, Asia, Australia and the USA.

Further cost savings could be made by closing ITV’s news functions and regional newsrooms and syndicating the content directly from channels like CNN, NDTV and Al-Jazeerah! If this sounds totally crazy, consider the issue of news reporting and quality of journalism. The BBC with its newly-tightened remit to improve news, documentaries and dramas is more likely to produce better news content that could be syndicated leaving Reliance ITV to refocus itself on entertainment programming: ‘mid-brow’ stuff that people really want to watch. Leaving expensive news gathering to other channels could lead to cost savings in the long term and a more international flavour to the ITV stable of channels. By sourcing news and entertainment content from other production companies globally, Reliance ITV could also improve its scheduling and reduce the number of repeat screenings.

Boost for Britain

The acquisition would also give a boost to Britain. TV regulator Ofcom can’t object to the acquisition given that Reliance isn’t currently involved in TV broadcasting. And even if it does, London offers Anil’s corporation countless lawyers, analysts and advisors who could “oil the wheels” for such a takeover. And frankly, Britain needs a third adversary to the sparring duo of Sky TV & Virgin Media who have both fought over control of ITV in the past few years. The City of London would get a welcome boost with an acquisition of this size and would probably raise the capital that Reliance would need to fund such a venture. Given that more than 90% of ITV shares are held by institutions, rather than private individuals, the acquisition could be relatively quick provided regulators like Ofcom and the Competition Commission and broadcasting unions are appeased.

British viewers want more entertainment and films

But what would the average viewer think? Given ITV’s penchant for strictly mid-brow TV dramas and soaps, most viewers would welcome more entertainment. Simon Cowell’s ‘The X Factor’, popular shows like “I’m A Celebrity Get Me Out of Here’, Ant and Dec and ‘Coronation Street’ is what helps pull in the viewers so maybe more of the same from around the globe would be a welcome move. Bollywood films, when subtitled in English are popular in countries as diverse as Nigeria and Brazil, so perhaps a loyal British following is not too far behind?

“If the last century was about meeting human needs, the new millennium is about matching human aspirations. We live in a world where the young are reaching higher, dreaming bigger and demanding more; a world that is challenging the limits of hope and possibility” says Anil Ambani in his Chairman’s message to Reliance Big Entertainment shareholders. Perhaps Reliance’s motto of: "Think big. Think fast. Think Ahead." is just what ITV needs.

About Reliance Big Entertainment

The Reliance – Anil Dhirubhai Ambani Group (R-ADAG) is among India’s top three private sector business houses on all major financial parameters, with a market capitalisation of Rs.325,000 crores (US$ 81 billion), net assets in excess of Rs.115,000 crores (US$ 29 billion), and net worth to the tune of Rs.55,000 crores (US$ 14 billion). Across different companies, the group has a customer base of over 100 million, the largest in India, and a shareholder base of over 12 million, among the largest in the world.

The interests of the Group range from communications (Reliance Communications) and financial services (Reliance Capital Ltd), to generation, transmission and distribution of power (Reliance Energy), infrastructure and entertainment. Reliance Big Entertainment Ltd. (RBEL) is the flagship media and entertainment arm of the Indian conglomerate, with significant presence in film entertainment (film production, distribution, and exhibition), broadcasting and new media ventures.

With investments over USD 1 billion in its Filmed Entertainment business RBEL's motion picture brand, BIG Pictures has built a formidable film production slate in Hindi, English & other Indian languages, which it markets & distributes worldwide. The slate has projects with leading production houses and marquee Indian directors like Vidhu Vinod Chopra, Rakesh Roshan, David Dhawan, Indra Kumar, Ravi Chopra, Farhan Akhtar, Sudhir Mishra. Shaji N. Karun, Shyam Benegal, Rituparno Ghosh, Buddhadev Dasgupta, M.S Sathyu & Amol Palekar,

On the Hollywood slate, BIG Pictures has development silos with Nicolas Cage's Saturn Films, Jim Carrey's JC 23 Entertainment, George Clooney's Smokehouse Productions, Chris Columbus' 1492 Pictures, Tom Hanks’ Playtone Productions, Brad Pitt's Plan B Entertainment, Jay Roach's Everyman Pictures, Brett Ratner’s Rat Entertainment and Julia Roberts’ Red Om Films.

For further information, please visit:

www.rbe.co.in
/www.relianceada.com
www.itvplc.com

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* Please note that that the author of this article has no links to Reliance Anil Dhirubhai Ambani Group , ITV Plc or any subsiduaries of either company.