On December 5, 2014, a female passenger was raped in an Uber cab by its driver. This incident .
On December 31, 2014, in the aftermath of the rape, as , the editor of the Economic Times wrote an email to Uber cofounder Travis Kalanick, inviting him to the newspaper’s Global Business Summit to be held in Delhi on January 14-15, 2015. TheEconomic Times is published by the Times Group.
In the email, the editor told Kalanick that his presence at the conference would help “set the agenda for policy formulation in India and other countries”. It would also enable him to familiarise himself with “decision-makers in India”.
On the same day, Kalanick wrote to his associates, asking them to maintain a strong relationship with the Times of India.
Cut to March 23, 2015. The that Times Internet, the digital arm of the Times Group, was making a “strategic investment” of “around Rs 150 crore” in Uber.
As the first paragraph of the news report stated, Times Internet was “joining forces with one of the world’s hottest startups as it tries to make inroads into the lucrative but treacherous market in India”.
This raises quite a few points when it comes to the changing dynamic of how the media and the new generation of startups operate. Let’s look at these points one by one.
1) An editor’s job at a newspaper has always had a major managerial role built into it. It isn’t just about bringing out a good newspaper – it’s also about managing journalists well and managing the interests of the owner(s), given that the business interests of media owners in India are rarely limited to just the media.
But now, the scope of work has expanded even more. Other than delivering a good newspaper every morning, the editor also needs to work towards ensuring that good digital content is regularly put up on the website throughout the day. This is important, given that newspapers are trying to move towards a subscription-driven model. And prospective readers will pay for subscriptions only if they see enough value add through the day.
Until the subscription-driven model picks up, newspapers and magazines are trying to drive revenue through the conference model as well. This essentially makes the editor’s job even more demanding, given that only a well-networked editor is in a position to organise conferences that can be monetised. This also involves a greater amount of dealing with the marketing and sales departments of the media house, corporate communication professionals of companies, public relations firms, and politicians.
Of course, this changing business dynamic has led to the total breakdown of even the weak Chinese walls that existed between different departments of a media house. Ideally, what the marketing and sales department of a media house do should not have an impact on the way journalists report. For instance, just because a company regularly advertises in a newspaper, that shouldn’t stop a journalist from writing a negative story on it. But as anyone who has spent enough time in the media knows, these divisions are weak at best, and even that is breaking down now.
Ultimately, this is another manifestation of the gradual unravelling of the advertisement-driven business model that had worked brilliantly over the years. Media houses now need to think up new sources of revenue and that comes with its own costs attached. This has made the editor’s job more managerial than it ever was before.
Further, while the advertisement-driven business model has already set back the little investigative journalism that used to happen, the new model has killed even that.
A time may soon come where editors are all MBAs who have worked with corporates, not journalists who have risen through the hierarchy. Unless, of course, the current set of editors up their game when it comes to driving business for newspapers and media houses. Of course, this has its own set of ethical challenges.
The question is, will a pick-up in the subscription-driven model lead to a comeback in the weak Chinese walls that existed before? From the looks of how things are currently, that seems difficult.
2) This is not the first time the Times Group has invested in other companies. The strategic investment arm of the group is called Brand Capital. As the points out, it “leverages brand-led growth and value creation via unique and pioneering investment models and programmes”.
Brand Capital has invested in in the past. In that sense, the Times Group is not just a media house, it’s also a sort of a venture capital firm looking to invest in businesses it finds attractive enough. This has been known for a while.
Of course, there are other media houses that choose to run other businesses on their own with full ownership, unlike the Times Group which likes making small bets across many companies. Media houses in India own everything from shopping malls to real estate projects. As far as the Times Group strategy goes, it emanates from the oldest cliché in investing – don’t put all your eggs in one basket.
3) Interestingly, Uber’s Kalanick writing to his associates, asking them to maintain a strong relationship with the Times Group, is how things work with most modern brands. As marketing gurus Al Ries and Laura Ries write in The Fall of Advertising and the Rise of PR: “A closer look at the history of most major brands shows this to be true. As a matter of fact, an astonishing number of well-known brands have been built with virtually no advertising at all.”
This strategy requires a close association with the media and, as the Indian Express report pointed out, Uber seems to have done that not just in India, but across different parts of the world.
In fact, quite a few modern-day unicorns have been built around regulatory arbitrage or by stretching the regulations as they currently exist. Unicorns are startups with a valuation of more than a billion dollars. This strategy calls for a close association with the media.
Uber’s business model ran right into the existing taxi drivers all across the world. To break the stronghold of the incumbents required good public relations management, which is precisely what the company did.
Plus, like many other unicorns, Uber followed a cash-burn model in order to attract both drivers and customers onto their platform. This involved paying the drivers more than the existing market rates and offering huge discounts to customers, leading to losses. And if someone was willing to fund those losses for a stake in the company, it made immense sense for Uber to go ahead and do that.
To conclude, what has happened in the Uber-Times Group case is a manifestation of how business models have changed in the last decade. Of course, every time capitalism evolves, for good or for bad, it ends up raising uncomfortable questions. Something similar is happening here as well.
Vivek Kaul is the author of Bad Money.
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