Raghav Bahl, founder of Network 18 and now a non-executive director on its board, talked to Vanita Kohli Khandekar at the Mumbai event TV.NXT on 3 September, 2014 about his learnings in the media business, the mistake he made which led him to lose control of the company he founded, and the future of digital media. The Hoot is carrying a transcript because we believe it is of interest to our readers.
VKK: Did you want to exit?
RB: Who would want to exit, which parent would forsake a child unless it is economic… I don’t think there is anything called wanting to, I’d say…unlike the sexy e-commerce businesses…
VKK: Which are built for the valuation…
RB: Yeah, which are built for valuation, which are essentially more sort of technical turn-ons for the entrepreneurs…you know,“I am gonna be the next Amazon”. So I think those are different businesses. Media is much more a labour of love. Especially news media. Because news media – the world outside thinks it’s power – I can tell you from the inside that it is one of the most thankless businesses to be in. You simply never make a friend. You only end up making enemies.
VKK: Why do you say that?
RB: Whenever you do a negative story, you are in the wrong. You are playing at the behest of somebody. You are on the take. You are…especially in the world of business. [Being a] business journalist is the most thankless job in the world. You write something good, you are on the take. You write something bad, it is a hatchet job done at the behest of someone. So, it is a thankless business. It looks very glamourous on the outside.
VKK: You should read some of the comments I get on email.
RB: I can absolutely imagine. So I think it’s a lot of all of that that got mixed up in our case. So want is a very different thing. I was very clear and I have not made any bones about it that it was a contractual commitment that was declared on day1. On day one, we had said that it was a convertible instrument and as long as I exercise the voting right, I am in. The day I am not going to be exercising the voting right I am out. And it was as simple as that.
| “News media – the world outside thinks it’s power – I can tell you from the inside that it is one of the most thankless businesses to be in. You simply never make a friend. You only end up making enemies.” |
VKK: You know this is a very interesting time to be in this particular business; especially because (I am not using the word broadcast loosely...I am saying television industry) you just had two years of digitisation, you are seeing some of the fruits coming in, and some of the themes of this conference are online video taking off and the whole consolidation, of which Network 18 is also a part: five networks are having control over almost 70 percent [of TV viewership]. Finally, you are seeing some of the pieces of this business which will help it become the world’s second largest television market…means bugger all if you cannot make money from it. And you are seeing the pieces fall in place…
RB: Let me see...
VKK: Help companies like Network 18 monetise…
RB: You are seeing people make a lot of money, actually. Look at Zee. Zee has one of the strongest balance sheets in the country. I can tell you Network 18, couple of years out, is going to be a very, very strong balance sheet. Network 18 is still in the expansion phase where, just in the last four months, we launched six channels at Network 18. Six channels in four months. So it is still in the investment phases, in the new channel business. Now with Reliance’s ownership they will probably be in the investment phase, because they would like to expand faster because there is more need for expansion. There is no shortage of capital in that sense. So I think we will be in the expansion phase. Look at our BAU, our business as usual, our ongoing channels at Network 18. They have begun to throw up very fabulous sums of money.
VKK: So how do you think the business is placed? Where do you see Network 18, and television industry in particular, two-three years down the line?
RB: Oh television is just the conversation that you had. I mean I fully agree, I think pay-bills of a 1000 rupees to 1500 rupees are not far away. Zee is already there; if you look at Zee’s BAU, or ongoing channels, I think they are at a 40 per cent operating margin? I mean that’s astonishingly large for a business. I can tell you from Network 18 that our ongoing channels are now close to 20-25 per cent and climbing. So these are businesses, which throw up enormous amounts of cash. So the broadcast business is in the pink of health. Now it is your choice how much you want to reinvest that capital. And how much do you want to return to shareholders. I think Network 18 has taken a call to probably be stronger in the investment – to stay reinvested. Once again there are some strengths of Network 18, which are way above anyone else: for instance in the news business; I don’t think anyone in the news business even comes close to Network 18. Today they would have close to about 17-18 news channels – revenue base of about 800-900 crore rupees.
VKK: But largely truncated into a couple of them? Or three of them?
RB: No, no! Again, you can lose the picture in an aggregated sense but if you drill down, it is about 700-800 crore rupees of top-line news with a beta margin of about 150-200 crore rupees. It is just being reinvested so aggressively, that’s what I said. Six channels in the last four months. You know ETV Haryana, Bengal…Odiya is going to come in…Kannada – these have all been launched in the last four months. So you miss the woods for the trees, but at 800 crore rupees, and 200 crore of Ebita (earnings before interest, taxes and amortization), it is a very healthy business. Rupees100 crore of that Ebita comes from the CNBC stable. So some things about Network 18 are so unassailable that it makes sense for them to go and really cover the country. So we become the largest. Our nearest competitor would be about 200-300 crorerupees in valuation. So we are three times the size of [our nearest competitor], and then Colours is doing very well. So I think Network 18 is in a very strong position, particularly the news business. It’s also very loosely written that news doesn’t make money. I can tell you from the inside that news makes a lot of money. Globally, as well as in India.
VKK: Globally, it looks like a patronage business to me, frankly...
RB: No! Look at CNN!
VKK: Unless it is subsidised by entertainment...
RB: Look at CNN’s P&L. CNN makes a lot of money. And it is the number three network in the US.
VKK: These are P&Ls we don’t get to see.
RB: (Laughs.) So they make a lot of money. You know for the industry as well, I believe, the next five seven years will be very, very healthy
VKK: Challenges, to your mind?
RB: Digital. The challenge is digital. Not in the next four to five years, but in the next 10 years the real challenge for broadcast would come from digital media businesses. As we are seeing now in the US as well. And India always lags the US for about four to six years. The structure of India is very similar to the US: big retail market, democracy, plurality of media. So we lag [behind] the US but we will mimic the US and I believe therefore the real challenge for broadcasters will come from digital media.
VKK: Some of your thinking – because we have read a lot and heard a lot that mobile and digital would be the next space that you’d be looking at. Some thoughts on that, and then I am going to ask the audience to join in so we’ll have a couple of more questions.
| “When I exited, it was too early to retire. The real challenge for an entrepreneur is if he can make a second innings more successful. So when we looked around it was very clear what you should be in.” |
RB: So, you know… we are out of the broadcast business. This is the first time I have come to your TV conference, when I am no longer in TV. So we can afford to be dispassionate observers of what happens in the business. When I exited, it was too early to retire. The real challenge for an entrepreneur is if he can make a second innings more successful. So when we looked around it was very clear what you should be in.My first love has always been news and public policy. That’s why TV18 also started from the world of news. And in the world of news – as I have discovered in the last eight to nine weeks – with the amount of innovation that’s happening, that it is mobile first. So the whole world of mobile-first news is so exciting. The amount of innovation that’s happening is immense. And when I say innovation, the next-generation news companies are not going to be just content companies. There will be a very huge element of technology; in fact, the next-generation news company is going to be 50 percent content and 50 percent technology. And by technology, what you mean is the way you serve content, the way you target content, the way you personalise content, the way you curate content: all those algorithms are going to be extremely important. The way you integrate advertising technology into your product…
VKK: That’s what I am saying, isn’t Google all of that right now?
RB: Google doesn’t do original content: Google aggregates. So if you are an original content – so the NYTs of the world, the companies that have made a successful transition to digital, have now learnt that, they actually have to get the soul of a technology company inside the soul of the content company.
VKK: In the morning when they were talking about redefining journalism, they were saying that eventually the quality of journalism matters. The technology is the (enabler). So they were talking about Vice.com and some of the other products that were there; and they were saying that they may be good technologies but essentially they are telling good stories. And bringing out good journalism. And that’s what eventually matters.
RB: No question, no question of that. Content will always matter, but I am saying 50 percent of your content will now have to be wrapped around very high-grade technology. The analogy I can give you is [of] Walmart and Amazon. Both are retail companies, but Amazon is actually at its core a retail-cum-technology company: it knows how to target consumers, it knows how to personalise consumers; it knows how to have a very algorithmically driven recommendation engine. Media companies will have to learn that.
Questions from the audience:
Rajiv Gambhir (from Den Networks): We talked about business changing in the digital world, as we moved forward: we understand the advertising side, the programmatic, and the RTB technology will commoditise advertising. It is not going to be the same that we see today. On the delivery side the business models are going to change. Subscriptions, the way they come today, might change to a different fashion in the online world. Thirdly, the barriers to entry in this industry might be lowered. So how do you rate these three challenges in this industry?
RB: So ultimately, barriers to entry in the digital don’t exist because anyone today can get up and say I am a publisher. And he is a publisher! I mean [he may have] 10,000 followers or may have 10 million followers [on social media]. But the barriers to entry will come, again from two factors: One, content,which is going to be the most powerful thing and therefore you will have to look at Vice.com.Vice invests a lot in its content. Those documentaries that it makes are very high-quality journalistic documentaries. But also the ability to invest in technology. Those are high investment commitments but also new commitments. I mean today the challenge that we have in our new business is how to get the soul of technology inside our heads. Because content-wallahs are always [thinking that], you know, the engineers know nothing. I think you have to change that mindset and say that the engineer is as important as the editor. You have to get the engineer interested in joining you. Because the engineers today have so many opportunities today in e-commerce, in big data, in FMCGs, that for them to come to a media company... I think those are challenges we are grappling with right now.
| “Content will always matter, but I am saying 50 percent of your content will now have to be wrapped around very high-grade technology.” |
VKK: You are saying that there are no barriers to entry...
RB: These two become the barriers...
VKK: But there are four companies which control the internet: Google, Amazon, Facebook, and Apple. These are four companies which control devices or access of the world.
RB: Access is open...
VKK: But [in terms of] revenues – when you want to monetise, eventually – these are the four tunnels through which you will pass...
RB: But these are tunnels [which] are not allowed to block...
VKK: To monopolise, anti-trust legislations works...
RB: Correct, they can’t block you: entry is easy. But the investments in content, the investment required in technology, are the barriers to entry. As we are seeing in the world of media now, whether it is Vice, whether it is Vox, or Quartz, or even very, very small apps such as Circa – which is rapidly gaining traction in the US, it is only a mobile app; it hasn’t even built a website, but it is gaining traction. So very exciting things are happening in this world.
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