Thursday, Aug 11, 2022

The New Media Moguls

For many businessmen, the driving force seems to be ego as much as political influence.


India is not the only country where television censorship has been practised indirectly through control of cable distribution networks. It is widely documented that during the path-breaking civil rights movements of the 1960s in the American South, most of the local press and television stations did not report the news of protests against racism accurately because of their owners' opposition to racial desegregation. They would often completely ignore coverage of the civil rights movement and sometimes black out — citing technical problems — telecasts by the national networks that focused on the issue.

The best example is that of the local television station WLBT in Jackson which would occasionally interrupt the NBC's national flagship news programme, The Huntley Brinkley Report, when it was covering civil rights. Sometimes, prior to news reports on the Today Show, a WLBT announcer would warn, ‘What you are about to see is an example of biased, managed Northern news. Be sure to stay tuned at seven twenty-five to hear your local newscast' — which naturally would either not include the undesirable news about the civil rights protests or slant it with its own bias.

The case for politicians is simple enough. Yet, it is the capture of news television by big corporates and businesses as well as the real estate and chit fund kinds of financiers that complicates the picture far more. Their dominance of the news space and the influence it gives them tells us a great deal about the new power structures of India.

Again, it is important to stress that there is nothing abnormal about businesses owning the news: somebody always pays the bills and business houses and news have always been intertwined the world over. Within India itself, some of the biggest newspapers have always been owned by industrial barons with deep pockets and multiple interests in other sectors — the Birlas with Hindustan Times, the Jains with The Times of India, the Goenkas with The Indian Express and so on. What is striking is the kind of businesses that have recently been getting into TV news in India and their similarities.

The first kind comprises companies with interests in real estate: construction, housing development, hotels, infrastructure. A large number of them also run chit funds and collective investment schemes. These are businesses which require either a great deal of political patronage, as anything to do with land in India does, and also generate a great deal of black money. ‘Ab to builder chala rahe hai news channels', builders are running news channels now, observes Arun Jaitley, now Union finance and information and broadcasting minister in the Modi government. This has serious implications for what the channels actually show. As Jaitley explained to me in an interview before his party came back to power in Delhi: ‘The economic model of news channels is still not adequate. Therefore — barring a few channels, or some channels which have a very large regional base, and a handful of national channels — news channels per se are not a profitable business. In fact most of them are making losses. That compulsion is pushing the concept of paid news and some recent cases are far more disturbing than even paid news.'

For many of these channels, the boundaries with politics are often so porous that they are almost impossible to map. ‘A news channel is a useful asset. It brings influence and access, and opens doors in politics and in government,' says one senior television manager. ‘A news channel is relatively cheap to launch, can further your business interests and also give you bragging rights.'

With technology getting cheaper, it is possible to set up a very basic, small, functioning channel with capital expenditure of Rs 50—60 lakh (excluding licence fees), and run it on a bare shoestring budget of Rs 1.5—2.5 crore annually. Of course, serious news channels cost a great deal more to run, some more than thirty times as much. But these are the average running costs of many functional local news channels in Punjab, for example. ‘It is that cheap,' says one channel head.

For many businessmen, the driving force seems to be ego as much as political influence. As one consultant who specializes in setting up these small regional channels told me, ‘Many of these investors have a keeda (literally, an insect; colloquially: an itch). They are all dying with ego (sic). It is not much money and they run a news channel like this for 2-3 years, finish their shauk (fad), then sell it forward to the next guy. It also brings them many other benefits in their business, like in real estate.'

The cost dynamics are entirely different in south India, where production values are generally higher and average capital expenditure on launching a news channel can be anything between Rs 10 crore to Rs 50 crore (not counting license fees) and average annual running costs are estimated to be well over Rs 20 crore. Much like the politicians, a lot of people invest in the news business because they see it as a tool for furthering their other interests.

As one senior executive who headed a TV channel launched by a real estate company told me: ‘Soon after I joined, there were elections in Uttar Pradesh. I was busy launching our channel in north India but found that my owner was doing all kinds of deals with candidates about coverage and a lot of money was flowing in without any accounting. They were even going to launch an IPO and I had to sign some papers. I showed them to my lawyer first, and he said, “If you don't want to go to jail, don't sign this.” I resigned the next day.'

The second category includes large corporate houses. The most striking example was the deal that gave India's largest corporate entity, Reliance Industries Limited (RIL) — through its Independent Media Trust (IMT) — ownership of one of the country's largest regional language news enterprises, Network18, and its subsidiary TV18, the listed entity which controls channels such as CNBC-TV18, CNBC Awaaz, CNN-IBN, IBN7 and IBN-Lokmat. In effect, it initially combined two major media groups to create what many thought was India's largest media conglomerate. RIL for its own part declared that this ‘acquisition will differentiate Reliance's 4G business by providing a unique amalgamation at the intersect of telecom, web and digital commerce via a suite of premier digital properties.'

It was initially forged by Reliance money through a complex financial arrangement that was permissible under the rules but raised as many questions as answers. By mid-2014, Reliance took full management control of Network18 by converting its optional debentures into equity shares.

To begin with, the fact that Reliance, India's biggest corporate entity, had moved into the news space in 2008 by investing in the country's largest regional news networks, Eenadu, remained hidden from public view at first. Early information came into the public domain when the widow of former Andhra Pradesh chief minister Y.S.R. Reddy filed a petition in the Andhra Pradesh High Court in October 2011 seeking a probe into the assets of Andhra Pradesh chief minister and Telugu Desam Party (TDP) chief N. Chandrababu Naidu, who was then in opposition.

Among other things, she alleged that Mukesh Ambani had bailed out Ramoji Rao, long-time Naidu backer and Eenadu Group founder who had run into financial difficulties. This was done through an investment of Rs 2,600 crore in 2008 through two separate companies, Equator Trading and Anu Trading, controlled by Nimesh Kampani and Vinay Chajlani, respectively. The Eenadu Group, of course, had been at the heart of the TDP's rise to political prominence in Andhra from the 1980s. It turned out that when it ran itself into a financial hole in 2008 and was struggling to pay its debts, it was indeed bailed out at first by Nimesh Kampani, chairman JM Financial. Later, Mukesh Ambani formally picked up the stakes.

Reliance denied all allegations of wrongdoing and in January 2012 put out a press release which for the first time detailed the financial structuring that gave it a powerful presence in the media. It explained both its shareholding in Rao's loss-making Ushodaya Enterprises that controlled Eenadu TV as well as its new arrangement with Network18/TV18. RIL disclosed that it already controlled various assets in Eenadu's TV empire (100 per cent in the regional news channels ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu channels; 100 per cent in the entertainment channels ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya and 49 per cent in ETV Telugu and ETV Telugu News). In effect, Reliance then transferred a large part of these shares to Network18/TV18, whose promoters received funding from the Reliance-owned IMT to acquire them through two separate rights issue of shares.

At the same time, in 2012, RIL — through IMT — invested around Rs 2,200 crore in ten-year, zero-coupon, optionally convertible debentures in six holding firms promoted by the promoter of Network18, Raghav Bahl. These debentures could be converted into equity shares of these companies any time at RIL's call in the next ten years from the date of such investment. The announcement raised a whole host of questions at the time. As Business Today magazine asked, ‘What was the rationale for the valuation of the Ushodaya deal?… Why didn't RIL disclose the investment earlier?'

Basically, Mukesh Ambani bailed out the debt-ridden Network18 and TV18, transferred his own sunk equity in the loss-making ETV (worth Rs 2,100 crores) to the former and in return secured preferential access to Network18 and TV18's now beefed-up content for his own 4G broadband services. Though RIL did not initially take any ownership of Network18 and insisted that it would have no editorial control, it gained, as India Today observed, a ‘vicelike grip on both Eenadu and TV18 operations' turning Mukesh Ambani into the ‘new media mogul'.

On 29 May 2014, RIL took over full management control, with its board approving funding of Rs 4,000 crore to Independent Media Trust, of which RIL is the sole beneficiary, for acquisition of control of Network18 Media and Investments Ltd, including its subsidiary TV18 Broadcast Ltd. RIL reported that the funds would give it 78 per cent control over Network18 Media and 9 per cent in TV18 and also allow it to acquire shares tendered in open offers.

Mukesh Ambani's acquisition of a big share in the TV news market — ostensibly to gain content for Reliance's mobile phone services — is not the only most powerful manifestation of a wider trend. In May 2012, another major Indian conglomerate with deep interests in telecom, the Aditya Birla Group announced that it was acquiring a 27.5 per cent stake in Living Media India Limited, the company which runs the India Today Group, including several channels such as Aaj Tak and Headlines Today (which the author headed briefly in 2013-14). In this case though, full control remained in the hands of India Today chairman Aroon Purie. Similarly, in December 2011, Oswal Green Tech acquired a 14.17 per cent shareholding in New Delhi Television in two separate block deals from the investment arms of Merill Lynch and Nomura Capital.

(The concluding part of the two-part book extract)