Kalanithi Maran faced the biggest ever threat to his business empire in 2007. The most powerful political family in Tamil Nadu — that of Chief Minister Karunanidhi — fumed at a newspaper report hinting at competing political ambitions of the Marans. Karunanidhi unleashed the entire might of the government in a hot pursuit of Kalanithi Maran. He even got his government to start a cable TV corporation to weaken Sun TV group. The same political influence that had backed Maran in the past turned against him. And some critics quickly concluded that his career was finished.
Kalanithi Maran kept a stoic silence throughout that difficult phase. His politically ambitious brother, Dayanidhi Maran, made some noise but Kalanithi turned his attention totally towards protecting his entrepreneurial turf. Sun TV’s revenue and profits continued to grow. He launched radio channels and direct-to-home television service. He learnt to do business outside his stronghold of southern India. And he bided his time waiting for a patch-up.
The truce came eventually. Karunanidhi, great-uncle to the Marans, took them back in his wings and eased all constrictions around Sun. All the business relationships that had deserted him during the turmoil returned. And Maran was truly back in the game.
The episode revealed facets of Kalanithi Maran’s personality not seen before. Everyone had thought of him as the young warrior who took Tamil Nadu’s satellite TV market by storm in the 1990s, helped in no small measure by Karunanidhi’s political patronage. But here was a seasoned, mature businessman who needed no outside influence. He also showed the patience to win over rivals and the shrewdness to wriggle out of a tight corner.
Three years later, in June 2010, he made another move that showed him in an entirely new light. His two decades of experience in business had all been in media, but Maran made a bold move to enter aviation, by buying out low-cost airline SpiceJet. The decision baffled his admirers and detractors alike.
Now, the airline business is no easy territory. Even Warren Buffett had called it a ‘terrible business’ because of its uncertain economics and hunger for cash. By entering such a sector, Maran sent out a clear message that his ambitions were not restricted to media and he felt capable of building a diversified business group.
Aviation experts say the timing of his SpiceJet buyout was impeccable. Airlines are just recovering from a slowdown and passenger load factors are inching up. The low-cost model has become established. Maran got into the business before valuations flared up fully and cut down risks in a space unknown to him.
The Early Bird
Kalanithi Maran has a reputation for identifying the next big thing and latching on to it. In 1990, even as CNN’s coverage of the first Gulf War captured Indians’ imagination, he launched a monthly video-cassette magazine called Poomalai (garland). Three years later, as cable TV entered homes, he founded Sun TV as a general entertainment channel.
Today, Sun has grown into a giant network spanning 20 television channels, 44 FM radio stations, magazines, newspapers, cable distribution and DTH. The company made a net profit of Rs. 171 crore and revenue of Rs. 440 crore in the quarter ended June 2010. Its channels dominate the South Indian television market — Sun TV has a 68 percent market share in Tamil Nadu, Gemini 36 percent in Andhra Pradesh, Udaya 40 percent in Karnataka and Surya 33 percent in Kerala.
“In many ways, he was a pioneer in regional language TV market,” says Atul Phadnis, founder of What’s-On-India, a TV guidance company. “What Sun TV has done well is to manage the entire value chain of production, broadcasting, distribution and access,” he says.
Sun’s dominant position has given Maran significant bargaining power over content providers. And he has used it to put in place a business model with high operating margins. Typically, Sun TV sells 30-minute time slots to producers, against which it provides four minutes of ad time that they are free to sell. The result: The producers not only take on production costs, but also end up marketing for Sun. Thus Sun has operating margins of 75 percent and return on equity of 28 percent. It has cash reserves of $100 million.
The focus on returns applied to movie rights as well. Sun TV rushed to procure the television rights of movies that had popular actors. And it chose to wait and watch before going for movies that didn’t boast of big names. This cautious approach and a reasonable control over the distribution channels through Sumangali Cable Vision meant it was far ahead of its competitors. With more than 8,500 titles, Sun group has the largest library of films in south. It also buys the TV rights for 90 percent of all releases in South India.