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@FICCI-Frames: Should We Really Blame The Analysts For The Mess?

One word appears to be resonating at FICCI Frames this year – Spreadsheet Capitalism.

G Krishnan, ED and CEO of the TV Today Networks let loose on financial and market analysts, blaming them for pushing media companies into taking a quarter on quarter approach to their business. 

“When in 2003, we got competition in the market – we were asked – how will you keep it going? Financial Analysts base their assessment only on numbers, and they don’t do their homework. I was told – don’t look at the bottom line, only look at the top line. We’re in this era of spreadsheet capitalism. It tells you a story about the advertising base you’ll generate, India’s untapped subscription revenue potential…Do we really get into the details of it? Certainly not. Is DTH happening or not? There’s no growth in advertising revenue, no growth in subscription revenue.”

“When we ask investors how they invest – they say they lok at a huge growth over 7 years. I say you should also look at the huge loss you would accumulate over those years. We are responsible to our investors as well. Last quarter, investors were happy that we kept cash. You have to use the cash, but you can’t just not have a business model, and ensure that you don’t make money. At the same time, if I were to do a business plan, would I be allowed to make a loss for 3 years. There is also a quarter on quarter way of looking at things. If Media companies in India are struggling, it’s because of financial analysts.”

At the same time, Rajesh Kamat, CEO of Colors, pointed out there’s an opportunity cost of sitting on cash: “While there’s a fair amount of excel sheets driving the business, but there’s a fair amount of gut as well. IF you are in the top two or three, the tide has turned for you.

Bhaskar Majumdar, Chairman and Managing Principal of Heath Ventures, UK offered an interesting perspective – “Last year, the whole concept of libraries had become analogous with land bank. Downloads, DTH, IPTV etc etc. It’s not a question of whether you’re a media person or an analyst.  In a downturn, the financial investors leave first. Strategic investors are here to stay. 

NBC Universal, meanwhile, will continue to focus on the long term with NDTV, said Peter Smith, President of NBC Universal International, UK — “We look for a bottom line in the long term. Vikram Chanda (of NDTV) told us that they’ll have losses for the short term, and said if you don’t have the stomach for this, don’t go in. Sometimes you do need to invest and take a slightly longer term horizon. ”

Our Take: Frankly, we don’t think the analysts are alone to blame. Analysts may have a quarter on quarter approach, but that doesn’t mean the company should follow suit. Many media companies eyed billion dollar valuations for their subsidiaries – some of them digital – and actually played along with the analysts, using their lack of knowledge of the space to fuel expectations, and valuations. Media companies rode the upswing, now they have to face the consequences, with no longer as much leverage as they had a year ago.

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