This may sound like a ‘so what’ statement but hear me out. Indian media companies are getting bigger. In the five years since 2003, almost every one of the top 10 media companies has grown twice, if not three to four times, in size.
India’s largest media firm Bennett, Coleman & Co Limited (BCCL), grew from Rs 1,991 crore to Rs 4,282 crore in its financial year ending June 2008. Arch rival HT Media has grown to roughly three times its size in March 2004 to over Rs 1,220 crore. Almost every one in the top 20 has gone from being in one segment to having a presence across a mix of segments — TV, print, online, radio, outdoor and so on.
You could argue that in a booming economy, just good GDP growth is enough to sustain the momentum. Ad spends have a positive correlation with GDP growth and since 80 per cent of the revenues of the top media companies come from advertising, growth is a given. It is the simple result of 300 million-plus middle class Indians doing well and spending more money and time on media. That is what is bringing that 19 per cent compounded annual growth in this $-2 billion business. So what?
The impact and implication of this change matter. They signify not just the growth but the growing up of the Indian media business.
For years and years, Indian media companies fell in set clusters. The first was the Rs 50-200 crore revenue cluster, the second Rs 200-500 crore and the third Rs 500-800 crore. Most of firms had settled comfortably in their clusters.
Mid-Day Multimedia, for example, held steady at the same revenue level (around Rs 100 crore) for as long as five years. It seemed difficult, if not impossible, for most companies to move out of the bracket they operated in. It was even rarer for a company to make it past the Rs 1,000-crore mark.
Recently, however, the number of entrants into this club has grown — HT Media, Network18 (going by claimed group figures), Sun (the group) and Deccan Chronicle have just got into the Rs 1,000-crore revenue bracket, joining veterans such as BCCL, Zee Entertainment and Star India.
There are two things common to the firms that have breasted the Rs 1,000-crore tape — appetite and aggression. Network18 wanted to become a media conglomerate so badly that it went on an acquisition spree that most dubbed as overleveraged. The result — it grew from a minuscule Rs 44 crore in March 2004 to Rs 1,000 crore in group revenues. BCCL could easily rest on its legendary cash reserves for several years. But it set itself crazy targets every year and usually beat them. It is estimated that for 2008-09, just its ad revenue target is Rs 5,000 crore.
Now for the impact — a larger, more consolidated business will in the long run mean more power to the media owner and a more even negotiating hand. This signifies a huge power shift in this business. For years, the bane of the Indian media business has been its highly-fragmented nature. Even if you hang on to your rate, the next guy, with a circulation or viewership that may be very close to yours will happily cut rates. So, unless you are the largest company by far in a segment — like BCCL is in print or Star is in TV — it is next to impossible to charge a fair price for the audience you offer to advertisers.
Even while selling remained fragmented, most of the media buying in India got consolidated more than eight years back. About six large firms such as Madison, Group M and Starcom now buy over 60 per cent of all national media. For instance, Madison buys an estimated Rs 2,500 crore worth of media in a year. It is the turnover of several media companies put together. (Madison’s revenues would be only 2 per cent of the billed amount.) The dice, therefore, has always been loaded in favour of buyers.
Now, the sellers are consolidating. As they get bigger and have a better spread of brands, buyers will feel the loss of negotiating power. It will not be a nice feeling for the hundreds of men and women who have enjoyed watching media companies scurrying to their commands. The seller’s growth in size will also mean, hopefully, that the discussion between media buyers and media owners will move beyond rates.
If that happens, then the market would have truly matured.
Vanita Kohli-Khandekar is a media consultant and author of The Indian Media Business. She can be reached at firstname.lastname@example.org
6 months ago