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Bennett & Coleman & Co Ltd (BCCL), the largest media group in India, is considered a pioneer of the Private Treaties model, taking equity in ventures in exchange for advertising inventory. The Times Private Treaties Portfolio has between 175-200 companies, some of them listed on the bourses. The apparent success of this model has led other media companies, including HT Media, Network18, NDTV, Dainik Bhaskar and Dainik Jagran to set up their own Private Treaties division.

However, some questions have been raised about whether editorial content is a part of the Treaties deal; Sucheta Dalal had quoted an email from Economic Times editor Rahul Joshi, which mentions editorial “support” to treaties clients. There is also the issue of BCCL bloating valuations of companies, and investing in several companies in the same segment. In a candid interview with Medianama.com, S. Sivakumar, Principal Secretary and CEO Designate of Times Private Treaties, spoke about these issues, and outlined the investment philosophy behind the Private Treaties model.

Read the entire transcript here.

Excerpts from the 34 minute long interview:

On Valuation Of Deals
We don’t have to value the deal, because…there’s a rate card for each of our media vehicles, and he (the entrepreneur) makes a plan – over the next 3-5 years – because brand building is a long term initiative. We have media planners and advertising and branding promotions as value-add – who support by defining target group, SEC, make an assessment and make out a plan. That determines the deal size. A cash client pays in the space of 60 days. In case of a treaty client, I hope to get the payment when the company gets listed. It’s an event that has at least a 3 year time-span. This (Treaties) actually helps an entrepreneur leverage the strength of BCCL without straining his balance sheet from a cash-flow point of view.

On Bloated Valuations
Essentially it is the company that expects the next round to come at a similar view on valuation. The onus is clearly on the entrepreneur.

On Value, Competitive Advantage (And Lack Of)
Q. Let me take the example of Travel space, where you have invested in TravelMasti, TravelChacha, Ezeego1, TravelGuru and HolidayIQ. Where is the competitive advantage established by you since they’re competing with each other?
Very good point. Actually it’s very simple: the whole purpose of advertising is to bring out differentiation. For each of them there is a clear differentiation. For TravelGuru, his whole USP is the strength in the hotel space. Each one has a differentiation. To a layman, everything appears the same. That USP is brought out through the use of a powerful medium as ours.
Q. So you’re giving them space, and how they use the space is their problem?
No, I didn’t say that. There’s a set of people with us who will also tell them how to utilize the space. It’s not vanilla space selling. They have established their business because they have certain differentiation. In a niche space, you don’t need advertising. So you have to first work with the client, understand his strategy, understand his USP and add value.

On Whether Editorial Space Is A Part Of Private Treaties Deals
When a large advertiser can not influence editorial, how can this tiny specter of 200 clients, each not contributing more than Rs. 5-10 crores over 3 years. Point two is that the purpose of treaties to reduce the dependency factor. Third thing is – there are champions for…there’s a banking editor, SME editor, a tiny-sector editor. The mail (that Sucheta Dalal quoted) that you are talking about is talking about a sector focus. It is completely normal. When a senior editor goes on a leave…and the mail only talks about a sector focus. But there’s a mail addressed to each of the sector heads, and only mail addressed SME and Tiny sector has been picked up and quoted completely out of context. Because you have an agenda. You know Sucheta (Dalal) was working with us…I don’t know whether you know it or not, but she was working with us and I didn’t want to talk about the Harshad Mehta scam, since you are recording, I didn’t want to go on about that. There’s a lot of background, and under what circumstances she left the organization.

On Lack Of Disclosures
If there’s an action possible for the reader to make an investment decision – suppose there’s an IPO is going to happen in a certain period. During that period any article our publication has a disclosure.
Q. You mean in case of Future Group you had given disclosures?
In Future Group, the investment was post the IPO. Coming to TravelGuru and all these companies you’ve mentioned – our coverage is 10-20 percent of any other media company, whether you take Business Line or Mint. It has almost become like a crime to carry any news of a Treaties client just because you are invested, which is not fair on our reader.
Q. When there’s a disclosure it’s fair…there’s no disclosure…
(Interrupts)There is a disclosure when there’s an action possible. (In case of) TravelGuru, you can’t invest.
But Private Equity and Venture Capitalists are also reading the news. In case of SatNav ($7M from Sequoia)
You’re doubting the wisdom of Sequoia, of Private Equity guys.
I’m not doubting the wisdom of Sequoia, but I’m doubting the integrity of editorial content.
It’s not about editorial content – SatNav got noticed because of the advertisements we placed, which is what he leveraged. The purpose of Treaties is to give a platform to the advertiser for him to talk about his product. When a mobile phone is advertised, we may decide to buy or not buy. It’s up to Sequoia to buy the product, or buy into the company.

On Competition From Other Media Companies In The Private Treaties Space
What is treaties? It is the more effective, efficient and economical method for customer acquisition. Only if an entrepreneur sees that he can acquire his customers much faster with Treaties, he will do it. Each of the media you’ve mentioned has their own strength. All of them have to support their new generation of advertisers because a whole growth of the medium depends on it. The newsprint cost which was $360 a few years back has become $1000. The televison space might see over 500 channels. Our bread and butter is advertisers. We need to continue to demonstrate that a medium works, and what better method than the Treaties model – where a client comes to you only if advertising works for him. It is certainly an innovative method for a certain segment of entrepreneurs to acquire their customers without straining their balance sheet since capital has conflicting priorities. The category has gotten established. Advertiser can advertise with us or any other media. There are two currencies for advertising – cash and Treaties.

Read the entire interview here.

Note: Please refrain from making defamatory/personal comments. We dont want to moderate comments, but will be forced to remove anything libelous. Our idea was to elicit information on the specifics of Private Treaties and not to be drawn into any controversy on differences involving individuals. Lets hope that this is the end of it at Medianama, so we can focus on the business side of digital media.

The following is a response from Sucheta Dalal, followed by a clarification from S. Sivakumar, both published verbatim. Comments for this post have now been closed.

From Sucheta Dalal:

Hi Nikhil

Thought I will send you my response to Shiv Kumar’s half-semtence comments about me. Please ask Mr.Shiv Kumar what he means by “I don’t want to go into the Harshad Mehta scam” (for which they awarded me Femina’s Woman of Substance) or “circumstances under which I left the organisation”. I find both statements defamatory and will have to take recourse to action unless they are clarified. In fact, it is a well known that Times of India does not do any investigative work anymore. More importantly, I have a letter from the company to say “we treasure” your association with us when I left the Times of India. Do they hand out such letters to all and sundry? It may also interest people to know that Mr.Ashok Jain, the late Chairman of the Times Group, had asked me to draft a Code of Ethics for journalists — maybe that too was part of their poor judgement.

Will Mr.Shiv Kumar please explain what are the circumstances he refers to in connection with my exit? What I remember is Mr.Samir Jain making it very clear that Times of India as a group did not want to do any investigative work or offend anybody — this was said very clearly at a two-day conference of senior journalists at a time when H.K.Dua was the Editorial Advisor. In fact, soon after that, in line with this thinking, the Times of India tried to get Harshad Mehta to write a column in the paper (since Medianet was new those days, I am not sure if the late scamster was going to pay for the piece — maybe Mr.Shiv Kumar can clarify, he was very much with the paper those days). The issue was taken to the Press Council by the Consumer Education & Research Centre of Ahmedabad, where Times of India defended its action.

Will Mr.Shiv Kumar make his allegations about me in writing or on the record? Please ask him this question and inform me. I would really appreciate that. Meanwhile, since this interview fires from my shoulder and my article, please use this email.

Finally, I must mention that Times of India and Bennet Coleman & Company have been completely silent about my piece which has been published all over the Internet. Instead of these below the belt half truths and half sentences, the company should have done the honourable thing of responding to the email.

I have not gone public with many of the issues that came up during my nine long years at the Times of India — after all, my biggest news break happened there, before their policies changed. But if the Times wants to play dirty through its senior managers, I have no option but to speak out.

I am told this blog has started today, all the best with you new venture.

Sucheta Dalal
Consulting Editor, MoneyLIFE Magazine

From S. Sivakumar:

Dear Nikhil,
As a policy we never comment on any of our employees either currently  working with us or had worked with us in the past. I merely said that  we did not want to comment on the subject and I did not want to go on  about it. We as an organisation respect all journalists and Sucheta herself being a senior journalist is no exception. Trust this clarifies and request you to immediately delete the above sentence.
Thanks,
Sivakumar S

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