“Liberalisation allows you to play in a much bigger field”

Ravi Dhariwal,  Picture credit: Afaqs.com

 

LIBERALISATION AND THE MEDIA SECTOR

 

Ravi Dhariwal retired in March 2015 as the chief executive officer (publishing) at Bennett, Coleman & Co. Ltd (BCCL), which publishes The Times of India and The Economic Times. Before joining BCCL, where heworked for 13 years, Dhariwal had had 12 year stints both at Hindustan Unilever and Pepsico. He is currently a senior advisor at private equity major, TPG Growth.

Edited excerpts from the interview:

 

You did not start off in the media but were in the FMCG sector. Where were you working in 1991-92, when liberalisation happened?

Dhariwal: I was employed by Pepsi Co. I was the head of the India beverage business at that time, and my views were shaped by what happened with Pepsi. It was a very difficult entry into India. There were a lot of entrenched competitors who didn't want a new multinational to come in. India was, as you know, a closed economy, when I joined Pepsi in 1988-89. There was a very strong opposition, partly ideological and partly competitive, from a lot of people, opposing the entry of Pepsi. So, I saw that whole period, you know 2-3 years when it was very tough to talk any good thing about the company. Then, after the launch, 1991, you know, the country was opening up, and we benefited greatly.

 

In your estimation, how has the media business changed overall in the last, say 20 odd years, especially during the time you were heading Benett & Coleman? 

Dhariwal: See, what liberalisation did was it opened our doors to foreign money, foreign talent, foreign competition. And i think a lot of the indian industry actually benefitted from that. We were a closed door arbitrage economy-if you got a licence, you did very well, if you didn’t get a licence, you get left out. We moved to a more competitive economy, we started competing with the rest of the world. The classic example is- look at what Infosys did or what Premji did or what HCL did. They actually started competing with the rest of the world. That same thing happened in the media. Star TV came in, Bennett Coleman started competing more and more aggressively; HT (Hindustan Times) got funded by a fund from outside India. So, I think we became far more competitive and therefore far better for the consumer.

 

What were some of the first changes that you began noticing in the media space (post liberalization)? And was there any resistance from within? 

Dhariwal: The first change that came about, I think, is that the advertising market became larger and more competitive, and it became national. You know, it moved beyond the two or three or five large cities. Because of that, newspapers and the media began chasing that market. Delhi belonged to HT, Bombay belonged to ToI (Times of India), Bangalore belonged to Deccan Herald, Chennai belonged to Hindu. It was very tribal. Each had his own ‘sultanat’ (sultanate). The moment advertising became national and we started moving to smaller cities,the industry said, hey, we need to compete.

So, Times of India competed in Delhi and I dare say, we dethroned HT from its perch. Same thing we did in Bangalore, same thing we did in Chennai, same thing we attempted to do in Calcutta, which is still a work-in-progress. HT came to Bombay and went to Punjab. So, people started becoming much more competitive outside their area of natural dominance. But, how do you displace an entrenched competitor? I think that changed the industry in another way. You know, newspaper prices actually came down. It was the only consumer product I know of, where the prices actually came down. Over years they had remained very very static. So,India followed a very remarkably successful model, keeping the cover price real down so you could get more and more consumers. And that whole period saw a very rapid growth of media.

 

What about the regulatory framework? Do you think it was slow to catch on to begin with? Or, was it way more intrusive than it should have been? 

Dhariwal: As far as media is concerned, I think where the regulator framework affected us, was largely around foreign direct investment (FDI). I don’t think the government plays a big role in the media. They may think they do, but I think their advertising money is very small. They try to influence media, but media in India is very very free, and I think they (the media) can resist that intrusion by the government if they were to do so.  So, I think the regulatory environment really centered around FDI. And, I think the government started opening up FDI by allowing investment in news media- 25%, in entertainment media- as much as you want. So, I think that also helped  industry grow- you know, Jagran, Bhaskar, HT- they did get foreign money and they expanded with that money.

 

Do you think it is time now to allow majority FDI in news media and also open up radio to news?

Dhariwal: Yes, I see no reason why they are so sensitive to opening up (private) radio to news. Even in news, I think Indian democracy is mature enough to handle any foreign “influence.” So, I see no reason why FDI limit cannot be expanded. As a first step, it can be expanded to 49%. As long as the editor is independent, there is Indian control, I think the national interests can easily be safeguarded.

 

Coming to Bennett Coleman, how did turnover actually go up seven times during your period and how far was the very process of liberalisation actually responsible?

Dhariwal: One, the advertising market grew dramatically by 12-13% per annum. Two, our advertising share grew, we were able to take this share away from a lot of our competitors. Three, because of private treaties and brand capital, we were able to make sure that our future is secure, in the sense that we did long term deals with our clients. We used to have just about 500 private treaty clients, each small, but together they added. And we signed multiple year deals with them, so they stirred both the advertising market and protected the future, because their advertising is reasonably guaranteed. Now, liberalisation helped greatly, because it fuelled competitiveness. One of the strongest reasons why advertising market grew was the market became more competitive. Because the market became more competitive, people needed to advertise. They needed an advertising medium, and we were the medium.

 

How far do you think private treaties helped the company’s turnover go from Rs. 1,000 crore, when you took over, to Rs. 7,000 crore when you left?

Dhariwal: I think private treaties were one of the most significant initiative or innovation that we did. Now, Bennett Coleman has been extraordinarily successful with private treaties. Today, I think it contributes approximately 15 odd percent to Bennett Coleman’s turn over and contributes to, probably, more than half its growth What it did was, it enabled new advertisers, who did not have money to advertise,to come and start advertising. Seeing their success, a lot of their competitors started advertising. So, the entire advertising pie grew. And, because we were dominant, we had 36% of the advertising market, a lot of this came to us. And, our market share over the last 10 years continued to grow year after year after year. Also, I believe, today, Bennett Coleman has perfected the system. It’s like building a jetengine, in the beginning, there are a series of trials and errors. And private treaties- or ‘brand capital’ as it is called now, went through a series of trials and errors. And I must give  lot of credit to the professionals who ran this, to constantly evolve a system, which did two or three important things- one, it gave genuine value to the advertisers; two, it made sure that our editorial values were totally protected, that our editors were not subject to any pressure whatsoever, with our clients; three, it used the excellent cash flows of the company to invest for the future. And nowhere in the world do you have an innovation like this.

 

But there is a perception that private treaties actually allowed marketing managers undue control over editorial decision-making in the newsroom, and that the trend began with the Times of India.

Dhariwal: First of all, let me tell you that the marketing people, or even... I was the CEO of the company, everybody reported to me, including all our editors. I think Times of India and Economic Times are probably the freest newspapers editorially in India, if not in the world. We follow a very simple system, it’s all about federal system. The editor is absolutely free to write what he or she wants to. I have the highest regard for two of our editors who worked with me- Jaideep Bose and Arindam Sengupta, who just passed away, and Rahul Joshi in Economic Times. We have never tried to influence or colour their work.We may have made some mistakes, we may have erred through human error,but I don’t think there are freer editors than them. For example, a position that Times of India takes is diametrically opposite to the position that Times Now takes, is different from the position that ET takes. We hire very good editors and we give them total freedom. It is an absolute misperception to say that marketing managers have influence over our editors. Forget marketing managers, while they reported to me, I never told them what to do.

 

Looking ahead into the future, with 4G coming in and convergence finally happening, if you were to crystal gaze, ten years hence, wheredo you actually see the media, both in terms of technology and interms of editorial content? Also, do you think we would have come thus far without liberalisation?

Dhariwal: I don’t think we would have come thus far. Liberalisation made the market more competitive. The moment the market becomes competitive, it starts attracting talent, attracting money. And, with better quality people, better professionalisation, more money, you grow. And I think that’s what happened in the last 25 years. It happened to media too. Media attracted great quality people. I dare say, the 2--3 companies I know very well- Hindustan Times, Times of India and Star TV- has attracted first rate people. They are also very well funded. So, I think that allowed them to compete more, and I think liberalisation was squarely responsible for that. That was probably one of the largest forces at play. Now, when you attract good people, they also want to do well. So, I think, attracting good people and putting more capital to use, also made the market grow, so it became a virtuous cycle. I think, that to me was a very important role that liberalisation played. Ten years hence, I think every media will co-exist in our country. I think print will exist with television, will exist with the Internet, will exist with radio. Having said that, I think the Internet will play a bigger role as we move forward. Why do I say that? Today, people spend a lot more time on the Internet than they used to, a few years ago, and with 4G and Jio and all this coming up, I think they will spend even more time. And, advertising follows time to a degree. 

 

Don’t you think companies as big as Bennett Coleman should list on the stock markets, if only for the sake of transparency? 

Dhariwal: I agree, Bennett Coleman should have listed. There was a plan to list it. Lot of the senior people in Bennett Coleman were given ESOPs (employee stock options) in the clear belief that it will be listed. Somewhere I think that the shareholders got cold feet.

 

Why?

Dhariwal: You know, the company doesn’t need money. They (the owners) don’t need money. The company makes enormous profits to fund their lifestyle (which is simple). And, no secret, they, would be very uncomfortable with outside influence. They don’t want other people tohave a say in their decision making. I think it’s good for the companythat it be listed. I say it is good for the two brothers too that it be listed. It’s probably one of India’s best run companies and it won’t last forever. I think outside influence always helps. Several times, I did recommend to the two brothers, they chose to ignore that or not listen to that recommendation. But it’s their company, it’s their call.

 

Was your own personal growth influenced entirely by the fact that liberalisation happened? Do you think that was an inflection point forpeople like you?

Dhariwal: Very much so. I think that was a huge inflection point for a lot of us. It made us global managers. We were earlier Indian MNC managers though Hindustan Lever, which I joined right after college, did send me overseas to Australia for a couple of years and was a fantastic company. Then I joined Pepsi. Those first 5-6 years of Pepsi were probably the best working years that I have had. It was very very competitive. Coke had also just come in and Thumbs Up was giving us a run for our money and we had to build a whole new company from scratch. The kind of people we hired, the fun we had and the business we built, was just fabulous. And it led to personal growth. I was moved from here to an international position in Pepsi. I lived and my children studied all over the world, actually lived in all the five continents.

 

Do you think there was a downside to liberalisation?

Dhariwal: I don’t see there was a major downside. My only wish is if this process is accelerated. I am of a very firm belief that India is a land of entrepreneurs. We can create things, we are well educated. Liberalisation allows you to play in a much bigger field.

 

Aman Malik is an Independent journalist