Business Houses- Adventures in Media!

article for e4m, impact…

The strangest thing about media is that its mind share is way, way larger than its money share. More often than not, it is lots of sound and fury for relatively tiny returns. But time and again, large corporations that have SBUs (specialist business units) larger than the size of the entire media business in India are magnetically drawn to it. The past two decades are sprinkled with such events.

Tata Sky is a good example of a partnership that works. Raheja & Hinduja have cable, movie & publishing interests. Bharti Airtel and Videocon chose to invest in the distribution side of media, aligning their telecom interests. The ADA Group bought Adlabs and then proceeded to build Reliance Big Media Group with interests in radio, television, movies and digital. Earlier this year, Reliance Industries merged Eenadu with Network18 Group. The Aditya Birla Group, that tested water in the space with Applause in 2003, has picked up a 27.5 per cent stake in Living Media, India Today Group’s holding company. A whole new breed of company tasted blood with IPL investments. Others too, big and small, have different media plays.

This is all very good news.  The media business is hyper competitive. Old media is entrenched, new media is disruptive, consumers are fickle, geography is dissolving and technology is the new connective tissue. Media is mutating. To compete effectively, media will require more financial firepower – the kind that giant industrial conglomerates can easily bring to the party!

But there is this matter of Industrial DNA versus Media DNA.

Media finds its genesis in a very B2C core. Large industrial houses are fundamentally B2B. Matters of assets, volumes, inventory, discounts, vendors and sales are critical. Products are tangible – they have specific input & output values attached to them. It is all very physical in nature.

Media is sensory. It is an idea. What consumers like is not tangible. You don’t like the paper, you like what’s printed on it. You love the TV set you bought, but after a while the super HD flat-screen LCD monster that you paid a fortune for becomes part of the furniture. What matters is what’s on tv. Even distribution platforms can recede in absolute recall. Content is the fuel that drives the engines.

This sensory business has its nuances, quirks and pitfalls that can befuddle the best. The amount of money spent on a product does not necessarily guarantee its quality or even purchase. The product has little inherent value apart from its ability to be consumed. Plant, machinery, land and such assets are minimal. Real & imagined entry barriers, value of talent and competitive interplay are complicated. An expression of freedom, media constantly attracts new ideas and that makes it ever changing.

Industrial houses can find these shifting sands disconcerting. They are more comfortable in their steady state R&D to create products, mass scale manufacture and then powerful marketing to win an unassailable position in the consumer’s mind. Having done that, it’s all about genetic reproduction and fighting to maintain mind and market share. Variations and evolutions occur and once in a way, a mutant shows up and distorts the marketplace but these are over greater arcs of time.

In media, you continually recreate your product. It is an extremely mutative process and the brand keeps evolving with time. The product is animate and builds a fan following. With the singular exception of Apple, no physical product commands a fanatical fan base of consumers. In media, it’s pretty commonplace – from the movie star to the downloaded game to the daily soap.

Media is not bought, it is consumed. Sure, you buy a movie ticket, a newspaper, a magazine or download a game on your iPhone – but then you consume the content. And the value you get is intangible – knowledge, enjoyment, fun. Consumers always seek new things to consume – news, music, movies or sports. Media creates an idea, a franchise, an addiction or a platform and then constantly keeps feeding the monster-consumer with newer, better and bigger variants.

Media is the only business where customers don’t actually pay in full, and arguably don’t pay enough for what they consume. One of the few places where a distinct monetary transaction occurs is a movie, when you buy tickets – that’s why movies flop, because people can choose not to buy tickets. Unlike any other business, media has two or three revenue streams. It spends its energy in ‘informing, entertaining, enlightening’ customers and for the most part, makes its money from advertisers who use it as a vehicle to reach these customers. Subscriber revenues are annuity packages, often bundled with other services.

To build a media business requires companies and individuals to have in equal parts steel, blood and luck, inlaid with a fibre of perseverance and deep pockets. Build is always cheaper. But it is hard. It takes time. Success in building a media company can be like a nauseous roller coaster ride – twists, turns, ups and downs before gaining critical mass, attaining escape velocity and guaranteeing a steady ROI. It is this nature of the media business in its early years – the inability to accurately estimate outcome – that has dismayed many industrial houses.

Buy is easier. It is very expensive but you can buy a mature business with stable revenues that are accretive to the bottom line. Left in the hands of professional media executives, with appropriate blood-letting periodically to infuse new thought and ideas into the corporation, you can have a solid, growing business that can incorporate all the standard management & finance measurement metrics. For the major industrial house, a buy, at whatever overpriced premium, is often better than a build.

It is great for media that giant corporations are investing in it.  It brings capital that will result in scale. But companies making such investments need the long view. After the buy, comes the long haul and emotional volatility. Build or buy, patience is a key virtue. The danger always is that the investment doesn’t deliver as per plan and the corporate house loses interest. But the competition (read pedigree media houses) never lets up. Real media houses have no other option except to be media. Corporations should enshrine that in their entry strategy – exit is not an option. Chop, change, re-structure, downsize, merge, diversify, re-focus, whatever – but no exit. Then you create stellar brands and win media wars!