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The story of how cnn-IBN was formed has a distinct James Bond ring to it. On 15 April 2005, two of NDTV’s pillars — news anchor Rajdeep Sardesai and finance whiz kid Sameer Manchanda — electrified the media and investment community by announcing their split with NDTV promoter Prannoy Roy. Evidently, a senior TV18 official had moled into NDTV and lured the top duo away with an offer they couldn’t resist — ownership. “We left because we wanted to be entrepreneurs,” says Manchanda, now joint managing director of TV18’s subsidiary Global Broadcast News (GBN).
The rest is history. Within a few weeks of the stunning move, CNN-IBN, owned by GBN, had become India’s No.1 English news channel.
In a matter of few years, TV18 has grown like a baby on steroids, from a single-channel operation with Rs 15 crore in revenue in 2000 to a Rs 1,000-crore media behemoth that today boasts news channels, music and entertainment channels, finance websites, newswires, print publications, a tele-shopping venture and a publicly-floated film company. It has aggressively acquired companies, formed savvy partnerships, poached some of the best talent in the country, and promoted a uniquely entrepreneurial culture across all of its properties.
But the fairy-tale ride could hit nasty, unseen speed-breakers. The vast spectrum of investments — an advantage today — could become an unwieldy corporate sprawl during industry meltdowns. Allegations about the company’s unethical advertising practices have also begun to get louder.
In the 1990s, the merger mania in the US gave birth to a new buzz word — synergy — that was appropriated by companies worldwide and printed in thousands of annual reports to justify the conjoining of properties that made millions of dollars for its bankers and top management, but seldom for its shareholders.
Today, ‘synergy’ has been replaced by ‘convergence’ as the new hot concept. TV18, now called Network18, has become India’s most diversified and ‘converged’ media company, and is well on its way to make an international mark. However, convergence is not simply a fashionable idea for Network18. It is one of the few companies that has been successful in monetising its real-time news content by making it available across television, the wire and the internet.
I Want My (M) TV
The man behind this phenomenal growth story is Raghav Bahl, managing director of Network18. Impeccably dressed in a classic pin-striped blue shirt, he strides about the buzzy CNBC newsroom posing for pictures, supported by his trusty cane. “He was a brilliant student, who won all the debates and always topped the class,” recalls Brian Paes, his classmate at St Xavier’s School in Delhi’s Civil Lines. “The kind of student a school produces once in five years.”
Bahl — who was an anchor for Doordarshan in the late 1980s because it paid him Rs 250 a session — began assembling and producing business shows for television in the early 1990s. He anchored the Indian Business Report for the BBC and another one for Star — thus becoming one of the primary providers of business content for television from India. However, Bahl soon realised that the future lay in the broadcast business, not content production.
The Elegant Opportunist
Bahl’s decision to build a media and entertainment powerhouse has proved to be both enormously prescient and exceedingly lucky. He decided to ride the media boom. “The Indian entertainment and media industry continues to outperform the Indian economy, and yet again, is one of the fastest growing sectors in India,” says a 2007 PricewaterhouseCoopers (PwC) report. The report projects the television industry cornering the largest share — around a 20 per cent — in the Rs 75,000-crore media and entertainment pie. It is expected to grow annually at a rapid 22 per cent clip from its current Rs 19,100 crore to Rs 51,900 crore in 2011. No surprise, then, that Bahl looks like he’s willing to scarf up every available media property in sight.
Most other media companies have preferred to guard their monopolistic turf without venturing into alien territory. Network18, however, has been like an octopus, using its tentacles to seize every part of the media pie. For instance, around the time of CNN-IBN’s successful launch, the group was also working on a business plan for a Hindi news channel to complement its new English one. When the floundering Hindi news channel Jagran TV came up for sale, Bahl quickly grabbed a 46 per cent controlling stake from Jagran Group’s M.M. Gupta family — and was able to hit the market at the time of CNN-IBN’s initial high with a Hindi sister channel, IBN 7.
About the middle of last year, Network18 pulled off another coup. Viacom was in trouble and on the hunt for a reliable Indian partner. In the first instance of an Indian media company buying into a subsidiary of a foreign media major, TV18 snapped up a 50 per cent stake in MTV Networks India for Rs 200 crore. In one stroke, Network18 added two music channels — MTV and VH1 — to its broadcasting repertoire as well as acclaimed kids’ channel Nickelodeon. Network18 now boasts seven TV channels — CNBC-TV18, CNBC Awaaz (Hindi business), CNN-IBN, IBN 7 and the Viacom three. It has two immediate launches in sight — IBN Lokmat, a Marathi news channel JV with print group Lokmat, and a retail shopping channel, Home Shop 18. An entertainment channel is also in the works.
Wired To Win
Way back in 2000, when TV18 was a small company with a measly Rs 15 crore in revenues, Bahl made bets on the internet that are serving him well today. He set up e-Eighteen Dot Com, and then picked up an ailing personal finance portal, Moneycontrol.Com. Next, he tied up with online brokers such as ASK Raymond James to offer transaction capabilities.
Many of those internet bets have translated into resounding wins. Today, MoneyCon- trol.com, with 7 million users, has grown to become India’s biggest business portal, and a perfect online partner for the group’s flagship business channel, CNBC-TV18. “It’s a Rs 45-crore brand,” says Network18’s group CEO Haresh Chawla, who claims the group’s internet business generates Rs 60 crore a year.
From the internet, leap-frogging into the news-wire space seemed like a logical move. In late 2006, Network18 acquired Crisil MarketWire, a real-time financial news wire service from Crisil. Calling it NewsWire18, the company broadened the service into an integrated information terminal and now has 600 terminals in the country. Network18’s convergence strategy has not gone unnoticed. “The group is building an effective synergy between Moneycontrol.com and NewsWire18 to compete with Bloomberg,” says Ashok Jainani, an analyst with Khandwal Securities.
The strategy of being present in all segments is obviously not just for the arithmetic sum of the revenue these streams generate. “The objective is to keep the media consumer within the Network18 cluster,” says Group COO B. Saikumar. “Our aim is to connect television, the internet and print to keep the consumer within our basket.”
Filmi Forays
In a country that is obsessed with its movie industry, a media company without a film division is like a Queen without a crown, and Bahl’s group didn’t have one. For Bahl, sitting on the sidelines of a booming multiplex market was not an option. His solution? Poach and build. Bahl lured away Sandeep Bhargava from Sahara One Motion Pictures, who defected with his entire team to set up shop in the backlanes of Mahalaxmi Race Course, a stone’s throw away from Famous Studios.
Confronted with the challenge of scaring up a large sum of money to begin their bets on film, Bahl and Bhargava set up The Indian Film Company (TIFC) in Guernsey, listed it on London’s AIMs exchange and raised $100 million (Rs 400 crore) about 18 months ago. This move has given Studio18, the group’s front for its film business, a lever for raising an equal amount of debt, too, arming it with a war chest of Rs 1,000 crore. Flush with cash, Bhargava has moved forward with a three-pronged strategy: financing in-house films, co-productions and acquisitions. Studio18’s first slew of in-house films, including ‘Fruit and Nut’ with Boman Irani and Cyrus Broacha, are mid-budget, in the Rs 8 crore-10 crore range. The company’s acquisition strategy has also engineered some savvy deals. Bhargava managed to flog the telecast rights for the hit film ‘Jab We Met’ to four channels — 9X, Zee Cinema, Max and Bindass — simultaneously on a non-exclusive basis and for a specified number of airings. No one had done that before. “This got us Rs 12 crore,” says Bhargava. “If we had sold exclusively, we would have earned at best Rs 8 crore.”
A Few Good Men
Perhaps, Bahl’s most astute investments are those he has made in people, such as Bhargava and Sardesai, to run his businesses. Bahl has relied heavily on ‘human brands’, and has handed out the sweet lure of hefty equity stakes and ESOPs in order to bring some star power into his team. Quite a few eyebrows went up when he gave Sardesai, Manchanda and Chawla collectively a whopping 26 per cent stake in GBN — worth around Rs 650 crore on current valuations. But the unprecedented sweetener was vital if Bahl was to take on the might of NDTV. “He (Bahl) has grown aggressively by harnessing entrepreneurial talent, and then empowering them in an autonomous structure,” says Enam Consultants’ media analyst Salil Pitale. Where most media companies are hit by a regular exodus of talent, industry watchers point out that Network18 has managed to win the loyalty of its top managers.
The Great Gamble
When Bahl decided to chuck up his highly successful show with BBC in 1996 to chase a broadcasting joint venture where the risks would be much greater, his directors and shareholders were alarmed. Content was king at the time, but Bahl remained steadfast. He convinced them that margins in the content business would soon be under severe pressure.
His first broadcasting venture was a flop. Bahl formed a union with Singapore-based Asia Business News (ABN), a Dow Jones company that offered TV18 a joint venture partnership. The venture, however, soon collapsed because of poor audience response.
The next round may have gone the same way. “We told CNBC that 22 hours of international content and two hours of Indian news just won’t work,” says Bahl. “You can’t survive on international content. They (CNBC) said you take the risk; we said we will take the whole company.” In Singapore, ABN merged with CNBC Asia, and CNBC launched in India as a 51:49 partnership with TV18 in 1999.
The takeover risk played out in 2003 when the government restricted foreign equity in news broadcasting companies to 26 per cent, and Bahl emerged flush with funds from a rights issue. Forced to dilute, CNBC Asia virtually exited in exchange for a 15-year brand franchise arrangement. In the swap, TV18 upped its holding from 49 to 90 per cent in CNBC-TV18.
Black Holes
The one missing piece in Raghav Bahl’s media empire is print, an arena sharply competitive, saturated, with established monopolies and high entry barriers. Among the regional business dailies, competition has already moved to outflank Network18’s plans to launch a regional Hindi business newspaper. Anticipating a Jagran-Network18 blitz, both potential rivals — The Economic Times and Business Standard — have launched a slew of editions in Hindi and Gujarati from several centres.
Moreover, attempts by Network18 to buy out the daily Business Standard have failed, and now the company says it would launch its own business daily. Though insiders are tight-lipped, Bahl is believed to be pushing for a tie-up with UK’s Financial Times after its arrangement with Business Standard broke down.
Bahl’s initial strategy for print was to pick up a 53 per cent stake in a niche vertical such as Infomedia, better known for its Tata Press yellow pages, for Rs 178 crore. Infomedia gives Network18 a substantial printing capacity for a slew of specialist magazines the group is aiming to launch. However, it has been performing badly and is a difficult business to turn around quickly. For the first nine months of this fiscal, Infomedia’s sales grew dismally, by about 5 per cent to Rs 105 crore compared to Rs 99 crore for the same period in 2006. Its bottom line did worse, dipping from a marginal profit of Rs 1.4 crore to a net loss of Rs 7.5 crore for the current year’s first nine months (see ‘Watch The Numbers on page 40’).
Bahl wants print entities to complement his other media properties. Network18 has made a start with a JV with Forbes Media to launch a fortnightly in India. However, the larger question is: does the company have the cash and the stomach to endure the long and painful grind in a market saturated with established leaders?
Two other ventures threaten to undermine Network18: entertainment television and tele-shopping. Entertainment was the one major element missing from its bouquet but now that the group has allied itself with Viacom, Bahl feels that he finally has the right partner to enter the space. A team headed by Rajesh Kamat, from content company Endemol, and Ashwini Yardi, the programming head poached from Zee TV, is ready to launch the group’s channel. But are they too late?
Quite likely. Much like in the print arena, the channel will have to duke it out in a very crowded ring with well-entrenched heavyweights such as Star Plus and Zee TV, as well as newcomers such as 9X and NDTV Imagine. The competition for entertainment television is especially stiff considering that it draws about 60-70 per cent of advertising spends.
Bahl’s move to enter the tele-shopping arena is also fraught with considerable risk. Network18 is about to launch HomeShop18 helmed by CEO Sundeep Malhotra, on a 24-hour television platform. HomeShop18 hopes to reach a vast array of products and services across 1,600 cities and towns in India. But earlier attempts by Zee TV and UTV to popularise tele-shopping flopped. The Indian penchant to test the look and feel of a product before they buy it has defeated attempts to popularise this alternative way of hawking products. But, if it clicks, Malhotra feels it is a business format that has no plateau point, unlike most others.
Ethically Speaking
If these concerns weren’t enough, Network18 is now being accused by some media watchers of acting in unethical ways, specifically in its ‘private treaties’ programme. Pioneered successfully by the Times group, it involves picking up minority stakes in various companies in exchange for advertising. On the face of it, there is no editorial barter; but there is increasing concern that promises for giving a leg-up to private treaty clients involve brand building and positioning through editorial content as well. Often, ads are made to look like editorial content. If it goes out of hand, the programme could severely damage the reputation of a company.
Network18 has a private equity acquisition programme through its investment arm Capital18. Saikumar says the general formula is that 70 per cent of the investment would be cash or equity, while 30 per cent would be traded off against subsidised advertising airtime. Bahl defends private treaties. “It is a legitimate business investment strategy; it does not involve any trading for editorial content,” he says. “Unlike the Times, we have a few tens of crores in investments in just four or five companies.”
Corporate Concerns
These allegations seemed to have had minimal effect on the group’s impressive performance. The group, from revenues of Rs 135 crore in 2004, is expected to touch Rs 1,000 crore in FY2008. It has emerged as the fourth largest media group along with HT Media after the Times Group with estimated revenues of Rs 4,000 crore, Star India Rs 2,500 crore and the Zee companies together clocking Rs 1,500 crore. Network18’s two listed flagships, TV18 and GBN, have galloped along at a 50 per cent and a 70 per cent clip, respectively. TV18’s profits ballooned almost four-fold to Rs 22 crore for the nine-month period ending 31 December 2007, while GBN’s losses were pared down to Rs 8 crore for the same nine-month period, from Rs 35 crore in the previous period.
Its corporate structure is a labyrinth of companies with criss-crossed equity holdings and complicated joint ventures that can confuse investors. At the top of the heap is the listed holding company of the group, Network18 Media & Investments, in which Bahl holds a controlling 51 per cent stake.
Network18 in turn controls 51 per cent in two other listed subsidiaries — GBN and TV18. Besides these, the group has a host of unlisted corporate entities including Web18, HomeShop18, Capital18 and the cable distribution arm, Setpro18. And finally, there are the JVs that include Viacom18 and the partnership with the Hindi print giant, Jagran Group (see ‘Network 18 Group Structure’ on page 37).
“The group’s properties are distributed over too many companies,” says Jagdish Malkhani, country head of broking house Taib Securities. “It is too complex. What I am buying, I want to put my arms around.” Media watchers also point out that the group has a maze of brands that have little recall value. Those that are recognised are those that have been adopted from the group’s JV partners such as CNBC and CNN-IBN. Perhaps in recognition of this criticism, the group has launched an aggressive branding campaign to give the group’s properties a brand identity through the number ‘18’.
Interestingly, a report from HSBC has marked down TV18 from ‘Overweight’ to ‘Neutral’ and has put a ‘hold’ on the share because of higher than estimated expenses. The report says though the revenues were healthy, there was no margin expansion as marketing expenses grew a massive 373 per cent in FY2008.
Investors have a right to be a bit confused. Just when you think you’ve got your arms around it, Network18 hares off in a different direction. Chawla has recently bought the marathon telecast rights from Procam. It signals the start of a new company — Sports18 — for acquiring sports properties. Which way is the group heading? What is its focus? “We are in the business of creating ecosystems through a network of media properties,” says Chawla. “We will move in whatever direction that takes us.”
Saikumar puts it more succinctly. “Five years down the line we may be an internet company; or we may be known as a film company.” For a company passionate about convergence and growth, it could be heading for the sky.
source: businessworld.in
In a short span of 10 years, Raghav Bahl, managing director of Network18 Media & Investments, has built India’s fastest growing media empire, with a finger in every pie. He spoke with BW’s Gurbir Singh on how the growth story evolved. Excerpts:
What does the number ‘18’ — carried on most of your companies — represent?
It is just a lucky number. Most people don’t know the number of businesses we are in. It is a conscious branding exercise to increase our visibility.
You launched ABNi in 1996, but it collapsed soon.
Indeed, we are the first business news broadcasters. We were also the first private content company with a business show on Doordarshan — the Amul Morning (AM) show. ABN (Asia Business News) then was broadcasting out of Singapore, and launched in India in 1995. ABN held a 51 per cent stake, Hindujas had 26 per cent and TV18, 23 per cent. Both the channel and its head, Paul France, were ahead of their times. ABN merged with CNBC, and CNBC launched in India with us providing the Indian content.
How did your joint venture with CNBC play out?
They (CNBC) said you take the risk; we said we will take the whole company. Though there was a joint venture broadcast company in Mauritius, it was just a shell company. In India, the entire assets of the channel were built and owned by TV18. In 2003, the 51:49 structure in favour of CNBC collapsed after the government restricted foreign holding to 26 per cent. They offered us a stake; we preferred to buy them out.
You have ‘treaties’ that give you stakes in companies in exchange for airtime.
We do not compromise editorial. If you want to compromise content, you don’t need the torchlight of a private treaty to do it. It need not show on your books either. We do have a policy of private treaties, but what is wrong with a business plan that monetises our media reach? What difference does it make if we pay for a stake in a company in cash or kind? It is true that the companies we invest in get access. It is also true they may try and influence us, but that is the occupational hazard every journalist faces.
You have grown quietly and rapidly…
We are self-made professionals. We are close to a Rs 1,200 crore if we factor in the value of the films on the production floor. But the tag of a small company, the initial perception, has stuck to us. We fancy ourselves as the guerrillas of the media industry, successful guerrillas. The first time we saw money was in the year 2000 when we did the IPO. I still remember the date — 14 February — as it was the day when the Sensex hit the highest. We managed to raise Rs 55 crore.
Your senior colleagues have stuck by you when poaching is rampant.
I have always considered myself primarily a journalist. We have invested in our people through ESOPs and stakes. We have worked hard to retain people such as Senthil and Udayan.
