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