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Media And The Business Of Trust

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This column appeared today in Mail Today, on Pg 12, titled ‘Paid News Breaches The Trust Of Readers’

PAID NEWS is deceit. A publication that offers editorial space for sale in a manner that it is meant to look exactly like a news story is not just putting a “For Sale” sign on the sanctum sanctorum of editorial space, but is also peddling our trust.

Think about it: the reason any advertiser would want to buy “paid news”, is that there is little that differentiates it as an advertisement from legitimate content. The latter is what we read and trust as an independent effort of a correspondent, and an editor taking a judgment call on what is to be communicated to us, the readers.

Paid news, on the other hand, gives you no indication that what you are reading is sponsored content. In newspapers, there is no difference in typeface or background colour to differentiate it from regular news. On television, we rarely see the word “advertisement” on the screen whenever there is a sponsored show that looks like a regular news show.

Large media houses have also begun taking equity in firms that don’t want to pay by cash – a business model known as “private treaties”. These deals are usually advertising-space-for-equity barters. As media houses are in the business of news, it becomes an open case of conflict of interest when newspapers and television channels become investors in companies that they might report on.


Therefore, it comes as no surprise that the Securities and Exchanges Board of India (SEBI), the stock markets regulator, wants all media houses to disclose their private treaties investments in companies that are listed or are in the process of being listed.

This is a welcome move. If implemented earnestly, it will protect investors and readers from being misled by favourable coverage. The reader and the investor has every right to know about these private arrangements so that he is not fooled by media reports.

In paid news, the advertiser fundamentally wants to overcome “banner blindness”, the changing of channels during ads, and indeed a certain degree of defensive scepticism that one associates with the pitch that an advertisement makes. Print sells text, television sells sponsored shows and radio, even though it doesn’t broadcast news, sells what is euphemistically termed “anchor mentions”.

We may bemoan the quality of news being delivered to us but as readers, we don’t just buy a publication, or just watch a channel. Consciously or subconsciously, we put our faith in the notion that the intent behind information and opinion being served hasn’t been prostituted. But what if the advertisers are individuals or even firms who merely want to insure themselves against unfavourable news in the future?

We don’t expect the publication to be up for sale or for negative coverage to be a precursor to extortion from an election candidate; the words “caveat emptor” (Latin for “let the buyer beware”) probably don’t even occur to us. As any public relations executive will testify, they’re in the business of managing perception, and that a key part of that is to manage the perception of our gatekeepers – the journalists. This is not new: journalists are wined and dined, taken on international “junkets”, gifted “demo” products that are never taken back; as a result, some of them are more favourably inclined. But it can become ugly.

There is, for instance, a well-documented investigation by SEBI highlighting collusion between a major business publication’s journalist, a PR agency and significant shareholder of the Pyramid Saimira stock to manipulate its share price, by forging a SEBI letter, and then making public announcements to mislead investors, which were reported in the publication.

For some journalists, it’s about favour and trust; for some, it is about the lure of power and a Rajya Sabha membership. But we don’t know what happens behind the scenes, do we? What we perceive as readers or viewers is often our reality. This is the corruption of our beliefs at its subtlest, on par with the practice of rewriting history books.

Some media publications audaciously have rate cards, with the rationale: why not just do away with the middlemen – the journalists. According to a report submitted to the Press Council of India (PCI) by a task force assigned to investigate this malaise, it’s not that many media organisations are selling just your trust: during the 2009 general elections, many of them resorted to extortion. (Read the report here)

The report mentions allegations of publications denying coverage to politicians unless money was paid or, even publishing negative coverage. Some news entities are upfront about their political or ideological leaning; paid news, on the other hand, is about putting these leanings up for sale. Funnily enough, the PCI report cites instances of specific newspapers carrying reports of two opposing candidates being likely to win the same elections.

What this amounts to is indirect mass rigging of elections, and strikes at the very core of our democracy.

Private treaties, however, are even more dangerous.

Times Private Treaties, from the Times of India Group, won an award in 2009 in the “Innovative Business Models Contest” organised by the PubliGroupe and International Newsmedia Marketing Association. HT Media does both ads for equity and property deals; Network18 has Synergy18 for such deals. Business Standard had reported in 2008 that Dainik Bhaskar and Jagran Prakashan were also considering this model.

At its core, private treaties is much more than just a business model. While it is legitimate for media businesses to take a stake in any company, it creates a financial bond between two, and the linkages are far deeper than those between advertisers and publications.

It is the marriage of their risks and growth. For its own financial growth, it is in the publication’s interest to further the cause of the company it has invested in, since the value of its investment is directly dependent the growth or decline of the value of the company.

An example of how a private treaty model works is available as a part of a draft red herring prospectus filing from Planet41, a mobile value added services company. The filing (at http://www.sebi.gov.in/dp/planet41.pdf ) indicates that Brand Equity Treaties Limited (BETL) bought 2.88%, by investing Rs. 2.54 crore in Planet41, allowing the company to place advertising worth Rs. 4.8 crore, of which Rs. 80 lakh will be paid until the IPO.

The company would have to pay BETL 33% of the value of the advertising in cash, back, and post listing, 50%. Once listed, depending how investors perceive the company, the value of the 2.88% stake will change. There is no mention of coverage, but favourable news coverage does tend to push up stock prices, and unfavourable can pull it down.

While this merely suggests that media companies are corruptible, and not necessarily corrupt, let’s ask – Over 200 companies having done such deals, most of them covered by publications that have invested in them; when was the last time you read disclosure from the news publication, accompanying the story? Now take into account the scale of operations – media companies have cross holdings across platforms – Print, Internet, Radio, DTH and Mobile.

To be sure, no amount of government or regulatory threats to censure will work because the advertisers pay for your eyeballs. You can never tell if media houses haven’t been promised bribes as full page advertisements, in order to go soft on an upcoming, disastrous and corrupt international sports event.

Readers must therefore demand accountability from their publications, and choose those which disclose their interests. Advertisers need to be told that readers are more than just a constituent of a circulation figure or a TRP.

We also have much greater access to content from various global sources. Twitter and Facebook are fast becoming key sources of news, with people who we trust recommending news articles. Online, there’s always someone lurking to correct, critique or criticise coverage in the comments, holding the publication accountable. Sources that flaunt their disclosures and are open about their mistakes are those that value your trust as a reader. That’s an opportunity in trust for media businesses to pursue: to aggressively use disclosures as differentiator; else, the readers will make their own choices. And advertising will follow the reader, as it has done in the west.

Nikhil Pahwa is the Editor of MediaNama (www.medianama.com), an online publication on the business of digital media and telecom in India

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  • I actually quite like the Private Treaties concept, as long it is limited to standard ad formats and there is no encroachment of the arrangement into space occupied by editorial content. If that can be guaranteed, it is quite innovative.

    But I think the problem is really elsewhere. We have long lost sight of what is the actual business of media. I would say that would be to report on events and write stories and be self-sustaining while they are at it. Which is where the problem comes in. Doing that alone, it is impossible to have the industry at the size where it is today. And going into other areas will cause conflicts of interest, which no degree of disclosures or disclaimers will fix.

    At some stage on its growth curve, even Medianama will face the same problems. Given such a situation, would you turn down the opportunity to grow while trying to preserve integrity? Just curious.

  • Shyam, personally, I'm not worried about something like this because it's not even an option, and will never be under consideration. Integrity is also what I expect of each and every person who comes on board at MediaNama. I understand that not everything can be in my control, and chances of things happening behind my back will increase with scale. But never with my knowledge. As I've said before, I'd rather shut down MediaNama than sell my integrity. Hopefully, readers will see value in our content (we're trying our best), and advertisers will see value in advertising with us, which will allow us to scale both readership and the business.

    I have turned down offers for business and social media consultancy because I see a conflict of interest with my role as editor. A Venture Capitalist had scheduled a call with my to discuss a potential (undisclosed to me) investment that they were planning, and I told them that if I give my views to them and they invest, I will have to disclose that we spoke, to our readers; it wasn't a paid thing, but I'd rather be transparent. That conversation didn't happen.

    I don't personally get involved with front-ending ad sales at MediaNama, but it has been suggested that I should (making it clear that content is not up for sale). I'm still not very comfortable with that, so haven't taken a call. Personally, I'd rather keep editorial and sales separate, but we're a fledgling business, and resources are scarce, and we need people right now.

    But your'e right. There will be areas of conflict of interest – the black and white ones are easy, and the greys difficult. I'll try my best to navigate them, with the promise that my integrity will never be compromised.

  • Vineet

    Nikhil- I think you need to understand the "business of media" first before making such tall statements. If you think "Private Treaties" is the worst thing that happens there then God help you.

    It would be real analysis (or journalism) if you actually went beyond the cliches and brought out what the real life examples are both good and bad. Right now, you are just trying to sit on your high horse when in reality you are riding a donkey!

  • Vineet: I don't think Private Treaties is the worst thing that happens, but it is a very dangerous marriage. Do read the paid news report at http://presstalk.blogspot.com . There's paid news, there's extortion, there's private treaties and collusion, like in case of Pyramid Saimira. You'll find enough examples there – people have done great work bringing this information to light. What you've read above is my opinion, and I don't need to sit on a horse or donkey to say it.

  • Lord Haw Haw

    This is naive to say the least.

    Journalists have been corrupted by vested interests since time immemorial. I don't see you taking a stand there. Entertainment journalists, food critics have been partying for free for donkey's years. Corporate freebies, junkets have been around ever since newspapers and PR execs have existed. You can routinely plant stories because the journalists are lazy. Articles published word for word as provided by corporate PR departments.

    One wonders if Vir Sanghvi ever gets a bill?