Why Mukesh Ambani’s Reliance may be looking to exit the media business

Selling his media assets makes sense for India's richest man.

ByAnto T Joseph
Why Mukesh Ambani’s Reliance may be looking to exit the media business
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Five years after Mukesh Ambani’s Reliance Industries Ltd took over Network18 Media and Investments, one of India’s largest media companies then run by Raghav Bahl, through a brusque boardroom coup in May 2014, the richest Indian looks open to selling it.

Ambani, who wanted to “differentiate” his fourth-generation telecom service business by amalgamating “telecom, web and digital commerce” in 2014, is said to have struck a different strategy now, and is receptive to the idea of selling his media assets. A recent Bloomberg report quoted an RIL spokesperson as saying the parent company of Network18 evaluates opportunities on an ongoing basis but declined to comment further.

While news about a potential sale of the media assets of Network18 has gained traction, subsequent news about a potential deal between the RIL and the Times Group was denied by both parties. Bloomberg reported that Ambani “is in talks to sell his news media assets to India’s Times Group, as Asia’s richest man plans to unload a business that’s been losing money”. 

The RIL promptly denied the report, describing it as a “false and baseless rumour”. The Times Group also put the speculation to rest as “false rumours”. “We are not engaged in the claimed discussions. The Times Group is focused on building the most trusted and sustainable media platform in India, and to this end, we will explore all strategic options as they present,” it said.

Interestingly, the day news about the RIL’s plan to offload its Network18 stake trickled in, the RIL’s shares touched a record high market value of Rs 10 lakh crore, about $140 billion, the highest ever for an Indian company. The RIL’s investments in media are just a fraction of the company’s business.

A week before Bloomberg reported about the RIL’s plan to exit the media space, it had reported that Sony Corp was in talks to acquire a stake in Network18’s entertainment division that encompasses several movie and music channels. As per the report, the Tokyo-based company had swung into action and was conducting due diligence on Network18. Subsequently, The Economic Times reported that Sony would own the majority 51% stake in the proposed joint venture while TV18 would own 49%. Though there is no confirmation yet, reports suggest the deal is likely to be announced in a week. 

The news about Ambani seeking to sell his media assets comes at a time when Bahl’s 74:26 joint venture with the global news and data giant Bloomberg LP is set to start a business TV channel to rival Network18’s cash cow CNBC18, after nearly four years of continuous efforts to seek a television licence from the Indian government. Christened BloombergQuint, the venture has already created a strong footprint in the digital space rivalling Network18’s Moneycontrol. Though valuable time has elapsed since the joint venture was floated, Bahl is confident that as soon as their broadcast licence is approved, they would be able to replicate the success he and his team had achieved with CNBC18 some years ago. 

Five days after Bloomberg broke the Network18-Times Group deal story, Moneycontrol ran an exclusive report on December 3 claiming Bloomberg LP’s venture with Bahl’s Quint was all set to collapse. The report suggested Bloomberg had approached other Indian media groups for a possible tie-up given Bahl’s inability to secure a TV license and the shadow cast by allegations of tax evasion and bribery against him. 

In a message sent to the BloombergQuint team soon after, Bahl described the report as a “ham-handed get-back” at the Bloomberg article on Network18’s sale. “Some nonsense has just been published by our competitor who is getting very nervous about our imminent TV launch. Our application is coming up for a final order on December 9, and prospective investors are queueing up to invest with us. They have seen the enormous/pioneering success of our digital franchise, and are rather nervous about how we could disrupt their flagship operation,” said Bahl, referring to CNBC18, which is owned by Network18.

Confusion at Network18

Heavy cost cutting at all levels, freeze on increments and fresh hiring have added to uncertainty and confusion at Network18. Insiders told Newslaundry there’s “utter confusion” across various companies and platforms within the Network18 Group. “Overall economic slowdown and lack of advertisements across various platforms have taken the wind out of the sail. There are no increments this year, especially for middle-to-senior level people,” said a journalist at Network 18, requesting anonymity. 

Cost-cutting has taken a heavy toll on their platforms that primarily depended on freelancers. “For instance, at Firstpost, a general news portal, the number of contributors has dropped to 10-15 from the earlier 200. Freelance budgets have been slashed heavily,” said another journalist.

BV Rao, who replaced R Jagannathan as the editor of Firstpost after RIL’s takeover in 2014, is the first editor to leave the group as the uncertainty mounts. While its digital edition continued, Firstpost launched a weekly English language newspaper in January 2019, in Mumbai and New Delhi, only to suspend publication within six months as the slowdown hit the industry.

Insiders believe more editors are likely to leave the group soon.

A Mumbai-based media watcher said, “Ad revenues are not looking good at all. There is an overall realisation that for RIL, the game is not in news content.” He added that Network18’s regional channels could not make much of a dent in an otherwise fragmented market.

Another analyst, however, said Network18 online properties have managed to record substantial growth in terms of free readers since 2014. “But most of them have yet to turn financially viable,” he said.

Network 18 Group, founded by Bahl, owned several TV channels such as CNBC TV18, CNN-IBN and CNN Awaaz; websites Moneycontrol and Firstpost; magazines, including the license for Forbes India and Overdrive; entertainment channels Colors and MTV; and online retail venture Homeshop18, among others. 

RIL’s change of mind?

Five years ago, when the RIL invested money in the Independent Media Trust to take over Network18, it said in a statement that the acquisition was meant to “differentiate its 4G business by providing an amalgamation of telecom, web and digital commerce”. Is a change being effected in the strategy now?

There are no quick answers to the RIL’s change of heart. Probably, if it was one economic slowdown that forced Bahl to look for a white knight in the RIL five years ago, another slowdown is forcing the RIL to sell the company now. 

A questionnaire sent to the RIL by Newslaundry has not elicited any response so far. This article will be updated as and when we get a response.

By the end of 2011, with a consolidated debt of around Rs 1,400 crore and losses mounting amid falling advertising revenues as a result of the prolonged economic downturn, Bahl had no other way but to get a deep-pocketed investor on board. But on May 27, 2014, Bahl and his colleagues had to step down in a sudden move as the RIL board approved funding of Rs 4,000 crore, or $730 million, for the media company.

The funds were routed through a newly-created vehicle, the Independent Media Trust, of which the RIL was the “sole beneficiary. In a statement sent to stock exchanges, the RIL said at the time, “IMT would use the funds to acquire control over NW18 and TV18 resulting in ownership of about 78% in NW18 and 9% in TV18 and to acquire shares tendered in the open offers.”

The acquisition of Network18 gave the RIL control of a diversified media portfolio comprising news, publishing, entertainment and education TV channels as well as e-commerce and film platforms. While many argued at the time that it gave the RIL adequate power to change the public perception about the company and its activities, the RIL insisted the acquisition was meant to “differentiate its 4G business by providing an amalgamation of telecom, web and digital commerce”. This was in line with the global trends.

Some argued that acquiring Network18 would help the RIL synergise telecom with news and entertainment as the company was putting all its might behind its telecom arm, Reliance Jio. The idea was to use exclusive content to drive traffic as Jio went on to expand its customer base swiftly at the cost of other service operators. While a telecom service provider could push exclusive content to mobile subscribers, government rules prohibited broadcasters from airing exclusive content, which has to be shared with all platforms such as cable TV or DTH. 

Now, though, analysts believe it makes more sense for Jio to be a content aggregator rather than a platform providing exclusive content. “If you are a big player, you can source quality content at a competitive rate and can enjoy a cost advantage. Moreover, it doesn’t make economic sense to supply, for instance, CNBC18 content exclusively to Jio customers. CNBC18 remains a cash cow to the group because it is a successful TV channel today,” said an analyst who asked not to be named.

In the United States, content generation may be a big play with Google, Netflix and Facebook investing billions of dollars in it. But the RIL may want to focus on its core strength rather than spend heavily running news channels and generating content.

Some analysts argue that going forward, a merger with an Indian news company would make sense for the RIL. “A merger will be a win-win for both, rather than an outright sale. Only an Indian strategic player will fit the bill as there is a cap on foreign ownership.” Foreign ownership in newspapers and news and current affairs periodicals dealing is capped at 26% and in news and current affairs TV channels at 49%.

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