On the contrary, we have seen astute businessmen such as Raghav Bahl, the promoter of Network18 Group, who in 15 years put together one of the country’s largest broadcast news networks, struggling hard to stay afloat. His business, comprising some of the market-leading channels such as TV18, CNBC Awaaz, CNN-IBN, IBN7, Colors, MTV and Nickelodeon, had accumulated more than Rs 2,100 crore losses on a group revenue of around Rs 1,600 crore. In the wake of Reliance Industry ‘s proposed loan of Rs 1,700 crore, which may go up to Rs 4,000 crore, to Network18 Group, it is being speculated in the market that Bahl might have sold out his stake to RIL.
The story of many of Network18’s rivals is not much different. The non-news players also have it tough as they operate in the midst of stifling competition and survive on thin margins. One of the country’s largest and most profitable broadcast companies, Rupert Murdoch owned Star India, for instance, had profits of only around Rs 600-650 crore on a revenue of about Rs 2,500-2,600 crore in 2010-11. Most leading media companies in the country would be clubbed with the largest corporations in terms of their influence and recall but in terms of the size of their operations and the weight of their balance sheets, they will be categorised with medium and small enterprises.
While the media and the entertainment sector has been one of the fastest growing in the economy, this has largely been a factor of the overall economic growth seen after liberalisation. The size of the entire sector, for instance, is only around Rs 65,000 crore, much less than comparatively new sectors such as telecom service providers whose current aggregate revenues will be in excess of Rs 1.5 lakh crore. And if one narrows one’s attention to only the print and broadcast sector, the pie shrinks to a mere Rs 49,000 crore.
Big Fish in Small Pond
Even as the industry remains small and scattered, there has been a gradual emergence of big players in the sector with a large mainstream footprint (see graphic). In the past five years, homegrown mainstream media owners have moved horizontally and vertically and established their presence across segments such as print, television, radio, digital and films. With no restrictions on cross-media holdings, the big media houses that were already well-entrenched in the business and had the on-ground intelligence made only incremental investments to build these new businesses.
Then it is the global media houses that have consistently built their mainstream, so-called national presence. With restrictions on foreign direct investment in the news and current affairs business, their focus has been limited to non-news broadcast and film entertainment segments (see graphic).
“The potential of one-billion-people market and the free media environment attracted Rupert Murdoch. These two factors continue to motivate the other big global companies besides the fact that globally, India is one of the very few markets left where media industry is still growing and is likely to continue growing,” says Uday Shankar, CEO, Star India.
The third kind of entrants, the most recent, have been the non-media domestic corporate houses making strategic investments in segments that fit in the overall scheme of their business. With convergence already making inroads, it has largely been telecom operators, such as Bharti Airtel, Tata Group, Reliance ADAG and now, RIL with its broadband venture, who have made such moves.
“The media and entertainment industry remained small despite the fast economic growth of the past two decades because it entirely depends on advertising for its survival, an oddity seen only in India. With their revenues constrained, the existing players never had the resources to grow at a faster pace, to expand and become bigger or develop newer sources of sustenance,” says Farokh Balsara, leader of media and entertainment practice at Ernst & Young (Europe, India, Middle East and Africa). E&Y, incidentally, was involved in the deal between Network18 and RIL. It is to this end that the emergence of big players is being hailed by the business community and the investment by RIL in Network18 has been welcomed by those in the business of business.
“It is a good development. One, it means a company such as Network18, which has created strong media brands, doesn't sink into oblivion but instead, gets a lifeline. That is good news for its own stakeholders and investors and also, the industry. Two, it leads to consolidation as after the deal, Network18 will have a pan-India footprint with news channels across north and south, which, again is good for the industry as it will see scale being build up in the sector. And three, it brings in a lot of optimism for the entire industry when a sound corporate house such as RIL enters the sector,” says Salil Pitale, executive director at Enam Investment Banking. Like Pitale, the stock broking community is happy that media stocks that have been wilting for sometime will see some sunshine now and attract more investors, which will ultimately reflect on the overall health of the industry.
Media business experts predict that these big media companies will not initiate the process of consolidation but begin moving into smaller media pockets in a significant way besides making aggressive efforts to wrangle out market shares from one another. “It is a natural aspiration of a businessman to grow. It is a natural progression in the evolution of any business,” says Abhijit Pawar, managing director, Sakaal Media Group, a Maharashtra-based leading media company that publishes several newspapers and has broadcast interests as well. “We ourselves grew bigger by acquiring Gomantak Times, Sakaal and Sakaal Times. Survival of the fittest is an established principle and those who deserve to be in the business will survive,” he adds.
The fear of the 'C' word
The consolidation of media interests, especially news, in the hands of a few big corporate entities is a subject that has been debated at length in the developed markets such as the US and the UK where media behemoths such as News Corporation and Time Warner own and operate ventures across the media and entertainment sector and have extensive interests across the globe as well. In India, this debate has yet to enter mainstream consciousness.
Unlike the print business, broadcast and radio are a new and emerging phenomenon. Regulations have ensured that news and non-news interests are housed separately. While the non-news mainstream broadcast space has already been claimed by big global players, TV news has had its own issues and challenges that have kept the industry occupied.
RIL's investment in Network18 is the first big intervention by a large non-news corporation (indeed, there are several real estate companies, politicians, and political parties running news channels but they are too small to call their entry the corporatisation of media. Besides, their entry, though with questionable objectives, has added to the diversity in the business and hence raised eyebrows.
“Media houses adopting corporate structures, processes and policies is the need of the hour. It's about being able to fit well into the overall economic and business environment,” says Ravi Dhariwal, CEO, Bennett Coleman & Co Ltd. “The same media houses consolidating their interests and expanding their footprint across segments is also understandable. Scale, after all, is important for not only creating value for stakeholders, such as advertisers, but it also helps in bringing efficiency and better utilisation of one's resources,” he says.
Dhariwal, however, raises the red flag over the entry of non-media corporations in the business. “Media companies do not have any corporate or political agenda. Whereas when big corporations with distinct interests enter the business, there is a risk of they influencing editorial decisions. Even if they remain hands-off, there will be a lurking concern or suspicion over the stands their news room takes on issues that concern them or their rivals,” says Dhariwal.
His fear, however, is dismissed by his own fraternity. “India is perhaps the only country of any size where there is zero cross-media restrictions...where a media group can and does, for example, operate a newspaper, news channel, radio stations, web platforms and also, sell their media for a price as advertising in the name of news,” says UTV founder chairman Ronnie Screwvala. “This has been happening for so many years, so there cannot be a fresh threat (corporatisation and consolidation) bigger than what is already there,” he says.
Pawar echos Screwvala’s views. “I do not see any conflict of interest in a big non-media corporation entering the business. Look at ToI's (Times of India) private treaties, HT's connection with the Birlas and Kotak Mahindra's stake in Business Standard.”
Going by the experience in the West and the larger business trends within and outside the country, corporatisation and consolidation of media interests seem a foregone conclusion. What is also clear is that the process will be examined, debated and opposed by those fighting for the society’s need for unbiased, objective and honest communication.
In the meantime, some are demanding the institution of an independent regulator that may check the excesses from either side.
“There is too much commotion and confusion in the industry. It is time we had an independent and strong media regulator,” says Subhash Chandra, Chairman, Essel Group.
News Corporation–Star India Pvt Ltd Owned by Rupert Murdoch, the company runs India’s most popular broadcast network with channels such as Star Plus, Life OK, Star Sports, Star Gold, etc. Produces and distributes film. Has a 26 per cent stake in the company that runs Hindi news channel Star News and also manages ad sales of news broadcaster NDTV. Has produced films. Owns a stake in one of the largest cable distribution companies Hathway and in DTH service provider Tata-Sky
Time Warner–Turner Broadcasting System Inc– Turner General Entertainment Networks India Pvt Ltd Owns and operates Hindi general entertainment channel Imagine TV; a world cinema channel Lumiere and film production house Imagine Film Company; Turner India Pvt Ltd that operates Pogo, Cartoon Network, HBO and WB.
The Walt Disney Co–The Walt Disney Co India After its proposed acquisition in UTV Software Communications Ltd will own Hungama TV, Bindaas, UTV Movies, UTV World Movies, UTV Action, and UTV Stars in the broadcast space. In the film business, it will acquire UTV's pan-India interests in script development, production, marketing, distribution, merchandising and syndication and its gaming business. It also has a stake in the company that operates ESPN Star Sports.
Sony Corporation–Multi Screen Media Pvt Ltd–Operates Hindi general entertainment channels Sony Entertainment, Sab TV, movies and special events channels SET MAX, Hollywood movie channels, among others. Sony Music Entertainment Pvt Ltd —an integrated music company. Sony Pictures Entertainment Films India Pvt Ltd—produces and distributes films and television content