Friday, January 18, 2008

News (and its Readers) for Sale!

A friend sent me an article News for Sale by Sucheta Dalal which starts with the statement:

"If you are an investor who depends on India’s largest-selling economic newspaper for unbiased news, then you must know and understand the concept of “private treaties” (PT). Since The Times of India (TOI) far outsells every other English newspaper and The Economic Times is by far the market leader in the economic news category, the concept is of universal interest."

What are these Private Treaties which Times Group - Bennett Coleman Co Ltd (BCCL - have?

As their website explains:

""Private Treaties helps clients undergo a paradigm shift in their self - perception and their marketing plan. Using the Times Group's acclaimed ability to create brands, it transports the Treaty partner to a higher corporate plane. It achieves this by:

  • Risk Sharing: transforming client's 'commodities' into 'brands' by creating synergy between the client's business model & our dynamic & ever expanding reach

  • Innovating: imparting, and helping implement cutting-edge solutions which also create tremendous financial value

  • Value Enhancing: PT reinforces the wisdom that, within the next three decades, the success of any enterprise will depend on its ability to use its intangible assets, not its ability to amass and control physical ones. The Group is eminently places to help its partners make this leap into the future."

    The mechanism of this partnership is innocently simple:

  • the Times Group/BCCL picks up equity in young fledgling companies (as a '05 article in Business World explains, "these companies are in their growth phase and have other working capital priorities."

  • the company ploughs back that same money for advertising support in Times Group/BCCL (as the head of Times Group Head of Private Equity explained, this arrangement aims at "helping emerging companies realise the power of advertising")

    Everyone wins... And after all there is no law that says that a media house cannot also be an equity investor in its advertisers!

    so what is the catch?

    Not that one needs to guess that, but as this article in Busines Standard explains:

    "The “private treaties” can be defended in theory — on the basis of the claim that journalists in the publications concerned are free to write what they want about any company, and are not duty-bound to sing the praises of the companies whose shares the publisher holds. The bitter truth is that this is hogwash —the Chinese walls that used to separate editorial and business departments in most newspapers have become porous, and in some cases have been demolished without ceremony. Evidence that has surfaced supports the view that journalists in the affected publications are being asked to play the piper’s tune. So from a journalistic standpoint, there is nothing to be said in defence of space-for-shares barters."

    In more concrete terms, as to what this means, Sucheta Dalal's article however quotes a mail (accessed by her magazine, MoneyLife) by the Economic Times Editor:

    "At ET, we are carving out a separate team to look into the needs of Private Treaty clients. Every large centre will have a senior editorial person to interface with Treaty clients. In turn, the senior edit person will be responsible, along with the existing team, for edit delivery. This team will have regional champions along with one or two reporters for help -- but more importantly, they will liaise with REs (Resident Editors) and help in integrating the content into the different sections of the paper. In this way, we will be able to incorporate PT into the editorial mainstream, rather than it looking like a series of press releases appearing in vanilla form in the paper."

    Times Group/BCCL, however is not alone in this race. In fact, the Indian media is catching up with this model, e.g., check this article:

    HT, Bhaskar, Jagran eye shares-for-ad divisions

    Which somewhat vindicates a posting I had made some years back on my other blog:

    What Does Mainstream Media Sell? and to Whom?
      "Though somewhat dissonant, I find this a more logical way of looking at the mainstream media, and the business model it follows.

      The conventional way of looking at media is that it serves a valuable social purpose in the free society. It frees the content - news, views, entertainment - to reach it to common man. One assumes also that this information, provided by media, helps the common man to make more informed decisions.

      But, often we tend to forget that media - specifically, the mainstream media - is also a business. It creates, packages and sells a service to its customers, and gets paid by them for the quality of service provided.

      It is this perspective which turns the conventional view of media on its head...

      ... most of us tend to believe - somewhat naively - that when we buy a magazine or a newspaper, or watch a TV channel, we are the customers, because we pay for it (even if nominally).

      We tend to ignore that the media revenues come, not from subscriptions paid by its readers/ audience, but from advertisements paid for by businesses.

      So, perhaps, a more rational way of looking at media should be like this: Media sells its subscribers/ audience/ spectators/ readers to its primary customers - the businesses, and gets paid for that service!!!
      "

  • 2 comments:

    Prometheus_Unbound said...

    Always suspected something like this. This post

    Prometheus_Unbound said...

    Always suspected something like this. This post confirms earlier suspicions.