Buy depth in one language before reach across five

Every few months a banker brings a regional broadcaster the same idea in a new deck. Combine our channels with theirs, the slide says, and the merged company will reach viewers in five or six languages, offer advertisers a single national buy and negotiate with distributors from a position of size. The map on the slide is usually coloured state by state, and the more of it that turns one colour, the more persuasive it looks.

I have been shown that map often enough to distrust it. In 2022 I argued against a stake in a Hindi channel cluster that would have turned much of northern India on our map the colour of our logo, and for a much smaller purchase of a Marathi broadcaster in Pune. Four years later I think the argument applies more widely than to our own case. In Indian regional media, a company should buy depth in one language before it buys reach across five, and most of the deals now discussed in our industry get the order the wrong way round.

Reach is the number that flatters a bidder

Reach is easy to add up. Every channel brings its own audience, and a merged company can report the sum. What the sum conceals is that viewers do not experience a network; they experience a channel in their own language. A Telugu household choosing what to watch at nine in the evening compares Telugu channels with one another and with the phone. It does not care that the company behind its third choice also owns a Kannada music channel.

Advertisers behave in much the same way. Large consumer companies set regional budgets language by language and buy the channels that lead each one. A channel ranked fifth in its language is bought at a discount, if it is bought at all, and a broadcaster that owns several fifth-placed channels in different languages owns several discounts. The single national buy that bankers promise does exist, but in my experience it helps mainly the smaller advertisers who lack the staff to buy each language separately. The largest advertisers, who pay most of the money, prefer to buy each market on its merits.

What depth buys under channel-by-channel pricing

Distribution makes the point more sharply. Since TRAI's tariff framework for broadcasting took effect in 2019, each pay channel carries its own declared price, viewers choose channels individually or in bouquets, and a channel priced above a regulatory ceiling cannot be included in a bouquet at all. Distribution platforms build their packs around the channels their customers would complain about losing. A channel that leads its language is in those packs. A channel that does not can find itself sold only to the few viewers who seek it out, and its subscription income falls accordingly.

This is why depth earns money in a way reach does not. When we bought Ghatmatha Entertainment, its two Marathi channels already held 18 per cent of Marathi entertainment viewing and were in the main packs of every large platform. Bringing them into our own negotiations lifted their subscription income within a year. The Hindi cluster we declined was fifth in its genre. It would have spent years, and several hundred crore rupees of losses, trying to become a channel that platforms had to carry, and nothing in the arithmetic suggested it would get there.

Depth also changes content economics. A company with an entertainment channel, a film channel and a streaming service in the same language can use one library across all three, and each film or series earns hours in several places. Writers, directors and production houses working in that language come to know the company as a reliable buyer, and the best of them bring their ideas to it first. Across languages, very little of that carries over. A Tamil fiction hit does not become a Marathi one by being dubbed, and the producers who make one rarely make the other.

The strongest objection to my argument is concentration. A company deep in one language is exposed to one state's economy, its film industry and its politics. I take the objection seriously, which is why I do not argue for one language alone. Ilavenil is deep in Tamil and Telugu, reasonably placed in Kannada and, since 2022, deep in Marathi. That is a portfolio of positions, each worth something on its own. It is different from a footprint of weak channels assembled because a map looked better coloured in.

Questions I now put to every acquisition paper

When a consolidation proposal reaches our strategy office, I ask for five things before anyone discusses price.

First, the candidate's share of viewing time in its language over at least three years, and its rank among channels in that language. Rank matters more than share, because advertisers and platforms buy by rank.

Second, the share of distribution packs, platform by platform, that include the channel. If a channel is carried only à la carte on most platforms, its subscription income is fragile whatever its ratings.

Third, the hours of library the company owns outright and the hours it merely licenses. A library that must be bought again in three years is a cost, not an asset.

Fourth, the commissioning relationships: which writers, directors and production houses work with the company, on what terms, and how many of them would leave if the founders did. In regional media the people are often most of what is being bought.

Fifth, what we would centralise and what we would leave alone. Distribution negotiations, advertising systems and rights management benefit from scale. Commissioning and talent rarely do. I learnt that at some cost when we moved Ghatmatha's commissioning approvals to Chennai in 2023 and lost two of its best writers.

None of these questions forbids a large deal. A merger between two companies that each lead a language could make sense, and I would expect to argue for one if it came along. What the questions forbid is paying a premium for reach that neither advertisers nor platforms will pay for again.

For directors of regional media companies, the practical test is simple. When a proposal arrives with a map, ask how many of the coloured states the merged company would lead. If the answer is fewer than half, the map is describing reach, and depth is what the company will actually be paid for.