HT Media genericMedia group Hindustan Times has hived off its digital content production business into a separate company, called HT Digital Information Limited. This includes the digital content production businesses of its publications Hindustan Times (English), Hindustan (Hindi) and Mint (English; Business daily). The idea, company executives said on its earnings conference call, “The content business of HT.com, Livehindustan and LiveMint, which was existing in the various parts of our print offering, have been taken out, so that the best practices can be shared and put into a separate company. The cost structure, everything will remain the same for all those three publications.”

It turns out that, combined, the digital content production businesses of Hindustan Times, made around Rs 35 crores in revenue, almost all of it from Hindustantimes.com and Livemint.com, with LiveHindustan contributing negligible money. HT Media declined to share the EBITDA of these digital businesses on the call, and said that it would do so at a later date. This digital content business has been valued at Rs 175 crores.

How the new structure works

HT Media and HMVL (Hindustan Media Ventures Ltd) will buy content from HT Digital Information, and sell advertising for them: “The revenue, in totality, of that entity is around Rs 35 crore. Revenue is going to get shared between the new company and here (HT Media Ltd). What’s going to happen is, the production of digital content is what is moving that company. HT, Mint (and Hindustan) will end up purchasing content from them. Advertising will also be sold and revenue will be shared with the new company. All the mechanics are being worked out.”

An investor asked the management whether “all costs of digital be with the new company, and the revenue be with HT Media, instead of sharing it?” to which they responded by saying “Anyway, it will get reflected… it will all get consolidated, and that is why I said it will be cost-neutral. ”

Investors were still concerned about the lack of clarity on the accounting of the new digital content entity: Another question, with respect whether HT Media Lt or HMVL will bear the losses: “Because it will be a loss making entity in the short term, who will bear the losses?”

The answer: “The effort is to not get any of the two businesses to take any losses. The finer details are being worked out.” “Rs 20 odd crores cost of HMVL, but not all of them are related to HMVL, and not all costs are related to the digital piece. It’s all in transition. Rs 18 crore loss in HMVL is not the right metric. It will all get clarified, give me a quarter more. No new cost will be loaded to anybody.”

Will HT Media raise money for this business separately?

“Maybe at a later date if the whole thing works out really well. Really at this point in time it is really with respect to best practices and efficiency.”

In response to MediaNama’s question, the company executives also said that they’re not considering hiving off particular domains for fundraising, the way NDTV has done with Gadgets360.

MediaNama’s take:

This is yet another move in the musical chairs that Hindustan Times has played with its digital businesses: remember that it set up a company called Firefly eVentures, which started Shine.com, bought Desimartini.com*, before Shine was shifted into HT Media Ltd, to offest costs from profits that HT Media was making in its print business. Firefly e-Ventures now contains two businesses – DesiMartini.com, which has become a movie reviews site, and HTCampus, an education focused portal. There’s a mobile division called HT Mobile.

Hindustan Times appears to lack a cohesive strategy across its digital businesses, with businesses being shifted between entities for accounting reasons, rather than bringing strategic direction. In all the HT Media conference calls I’ve been on, and the management often appears to be reluctant to go into details, and there has never appeared to be a sense of vision or direction for digital: only defensiveness regarding spends and losses. In that sense, because digital appears to be a secondary concern for Hindustan Times, it won’t be surprising to see it being disrupted. They still have time, though: the company is still likely to grow in terms of audience, because of the growth in usage of the Internet in India.

No more classifieds properties: Shine should soon reach break even

“Shine is still making a negative ebitda, and of Rs 13 crores this quarter, but for the whole year, it will not exceed 50-52 crores. We’ll try and restrict it below Rs 55 crore. Revenue has grown 45% this quarter (year on year), and we expect to do that we will grow 40-50% in the next quarter. With respect to breaking even, I would guess that would happen in the beginning of next year. The path that it is trending, we are confident that it should soon reach break even.”

“The losses in digital are more in the classifieds piece, not in the content piece”. This year, there’s a Rs 50-55 crore loss targeted for Shine, and in the digital space, HT Media expects losses to be below Rs 30 crore for the next financial year.

HT Media’s management said on the call that they will not look at any more properties outside of HT Campus, Shine and HT Mobile, but “Shine will reduce losses and HT Mobile will make money.”

Will HT Invest in digital media businesses?

“We do have a kind of a program for funding startups, along with a US based media company called North Base media, in which we encourage good startups and handhold them for a period of 6-9 months. Each company gets around $100k, around 50,000 from us, and 50,000 from North Base media. That is quite small”. “We’re looking at 3 deals. Investing is happening over the next fortnight.

Other notes from the concall:

Print advertising revenue from Ecommerce: just 3%

Investors on the call were astounded to learn that ecommerce accounts for just 3% of HT Media’s print advertising revenue, given all the front page jackets over past few months. “Ecommerce accounts for just 3% of revenue. Advertising grew 200%. It’s basically Paytm, Flipkart and all of these kinds. We hope it will grow to 5%.

Ecommerce advertising has done well for HT Media on radio as well.

“The sectors which have done well in terms of advertising for HT Media are FMCG, Banking and Finance, E-commerce and government. Real Estate and Education have not performed well. We find that ecommerce and real estate and FMCG have done well on Radio.

On whether pricing in Print is high, which is leading to real estate switching spends to Radio given that the sector is under stress? “Some of it, yes. But when things pick up, they will come back to print.”

Employee cost in Digital up 15-18%

Wasn’t able to address what has happened to Firefly in terms of employee costs. The employee cost in digital has increased somewhere between 15-18%. The increasing losses is more with respect to the employee piece and the TV commercials we ran in the first and second quarter.

*Disclosure: HT Media had bought Desimartini from my cousin Vivek Pahwa’s business.