Title: Managing Director of Mid-Day Multimedia
Education: Business Degree from the University of Notre Dame, USA.
Interests: Japanese, Ceramics, Boxing, Jazz and his twelve year old daughter Alya.
Presently wrestling with the question as to whether the Internet will make all traditional media obsolete faster than we expect.
How will the transition be for Mid Day Multimedia Ltd., a family owned company, post the share swap deal with Jagran Prakashan Ltd.? And what shall be your role in the near future?
Let’s first understand the share swap deal – it takes place at the holding company level. There is a listed holding company called Mid Day Multimedia Limited where my family owns 51 percent. The holding company has two operating subsidiaries, one for our print business and the other for radio. We first divided the holding company into two each of them holding one subsidiary each – one holds the print business, while the other holds the radio business under it. In each of these holding companies our share holding remains the same i.e 51% percent. Now with the current deal the print holding company merges into Jagran Prakashan. So the print operating company remains as it is, but simply moves from being a subsidiary of Mid Day Multimedia to become a subsidiary of Jagran Prakashan.
So the 51% my family owns gives us the shares of Jagran in the ratio of 2:7, we get 2 shares of Jagran Prakashan for 7 shares of our print holding company.
The other thing that happens is that the Mid Day print business shall still be run as it is. It’s not merging into Jagran Prakashan operationally. Yes, legally it has merged at the holding level but it still is an independent business unit for Jagran. And this is also what Jagran Prakashan wants, an independent operating business operated by the current management team including myself. They’ve made it very clear that “we would like you to continue with this business”.
Of course then there is the question of whether and how this will happen. But unlike other people, I have no other interests…this is what I know and do. You’ll never see me racing speed boats or cars or flying planes, I don’t do all that. So yes they would like me to continue, but more importantly the present Mid Day team will continue to operate the business.
And why did you do this deal?
Part of my job is to look into the future and plan for what this company will be like in 5 years from now. That’s what I get paid here for. And when I looked at what is happening at print business here and other parts of the world, development of broadband penetration, 3G and multimedia phones, a few things became very clear to me. Number one the share of advertising coming to print is going down. The total percentage of advertising coming to print is declining. And the last two years of downturn has hit newspaper business very hard. Yes, all media was hit but the newspapers were hit harder due to escalation of newsprint prices, increasing cost of talent and advertising revenues coming down. So share of advertising is coming down, talent is becoming more expensive and now beyond television, the online business will pick up and hire more talent. Also, if you look at the latest number of IRS, then you see that English metro papers are losing overall readership to. The growth in Indian newspaper readership is coming from vernacular papers like Dainik Jagran and Dainik Bhaskar in smaller towns.
On the other hand, the penetration of other devices like a cheap laptop or a multimedia phones combined with 3G and broadband will make delivery of content on these devices much faster and economical. So while I am not negative about future of newspapers but I believe that there are some challenging times ahead for the newspaper business. And everybody will have to make investments in the delivery possibilities of the new devices with no clear idea on the return on investments as of now. Today you design an application for iPad but tomorrow there shall be 30 more new tablets. So with many devices coming up, you still need to take these bets and make challenging investments – some big some small – and for that you need to have the resources. So the newspaper business is going to be about having the resources to transition the challenging period. All the newspapers have a challenging five year period to transition, but news papers will survive. What format? I don’t know. But in order to navigate the five year period, you need to have the resources to throw at it.
So when I talked to my family, I asked do we have the resources to throw at it? And I told them that we have three choices:
1) Either you have the resources and you throw at it, but there is no guarantee on the return on investment on these bets.
2) You can say I don’t have the money but I shall continue to run this business and hope for a miracle, for some killer idea or app that we shall come up with and be able to transition the challenging period.
3) Let this business be a part of a larger enterprise which is excited about newspaper business, which gets a benefit from your play in terms of their original play, and ensures longevity to your business.
So to my mind this option works better and lets us give better shareholder return.
But your business did have those resources at some point of time and you made attempts to grow your business in radio, films and TV. In hindsight, do you think they were before their time?
Yes I think some of them were before their time. We expanded in outdoor, we made one film and we expanded in radio. While radio is a longer gestation business but outdoor is so disorganized and dishonest a business that we a publicly traded company were not temperamentally suited for it. So yes we did try different things to grow the business but we were not able to. And we lost money, so decided to get out of outdoor and films while radio will need more time to make revenues. Some of these things are about timing and getting it right when the tide is high.
And were you looking for a strategic partner for a while?
I have had this view for a long time that future of newspaper business is with those with deep pockets, who have the resources and the stomach to invest in the transition. Therefore I was open to anybody who walked in through the door and said “Let’s work together”. I’ve never closed the door on anyone and said bugger off. But every time somebody came and talked to me, the media got into a frenzy and interpreted that I am trying to only sell out. But my agenda was not only that. This is why I get annoyed with journalists sometimes. They make it sound as my singular agenda. Like this one is a cashless deal. So if it was a sellout am I gaining anything from it? Do I get any money, am I going to buy a yacht with it? No. And there is no cash in this Jagran Prakashan deal.
Why didn’t you go for a cash deal, ‘cause you could if you wanted to?
This made more sense, I’m more happy with it and my family doesn’t need cash right now. Yes technically Jagran shares are listed on the market, so if I want the cash I can sell it. And there’s no binding on me, and like all shareholders of Midday we all get fully tradable liquid shares of Jagran Prakashan.
So for now you personally are ready to continue here and play a strategic role in the print business?
Well my intention is to also invest in the print subsidiary (Midday) and I have made this offer to the Jagran team. And by investing I shall also have a skin in the game and am not just floating by and giving advice operationally. I am happy to invest.
Once again, as I said earlier, I have no intentions to buy yachts or planes with my money. Media business is the only business I know, and I’m not going to start a steel plant, no. So I am happy to invest it back here.
How easy or difficult was this decision for the family and for you to convince them for this deal, because it’s your own baby that you had to part with?
I had to walk my family through it. I had to hold their hands. My family has been in this business for 70 years so it was not easy. But the strongest argument really is that if you want long term viability and sustainability for this business then this is the path to it.
And while on the baby front, well if you have a child and you are convinced that its future well being is better guaranteed with someone else than with you, what would you do? Would you say no I must hold this child until I can’t provide for it or until it suffocates? Or do you say I am more interested in having my child flourish in the future. So it doesn’t matter whoever owns it, I will always be emotionally attached to it. And I say it to my team here. Luckily the new owners would like me to continue to be a part of it, so what better than this. I said this to my family – be clear, be practical about this, be pragmatic. Again my family doesn’t need money so it’s not about the money. Everyone is settled in their own careers, I’m the only one operationally involved in this business. So they said, well what you say makes sense. Do what is right.
Until up to 2005 there were only two very big English news papers in Mumbai i.e Midday and Times of India (TOI) and then the other players such as DNA and Hindustan Times arrived along with the Mumbai Mirror. But TOI did not lose much of its circulation while Midday was affected a lot. Yet there weren’t any significant steps taken from your side to mitigate the competitive risk. Why?
You are asking me a lot of questions about the past. And look there were indeed some things that we did at that time, some steps were indeed taken. But think about it, we were a small newspaper company and we were hit with three big national players entering the market. Imagine the size of the competition it increased and look at the resources they pumped in, so to a certain extent as a small player what is your competitive response? I mean can you throw those kind of resources or can you try and hang on by your finger nails and hold on and try and figure out the game? Which is exactly what we did, our strategy was to hold on in the game. Somehow manage to keep in the game.
A lot of media people like to say that Oh! Midday got written out. But no, we are still operating, we are still alive, we still sell a 1.5 to 1.6 lakh copies a day. And we’re still here. Our results this year have been spectacular compared to the last year. And we’re still returning 45 to 50% return on capital. So it’s still a viable business.
And if you look at total readership (TR) as per latest IRS we are still the number two paper in Mumbai. So people might be quick to write us off, but guess what – whatever we did in the last three or four years – we were able to hang on by the skin of our teeth. (Laughs!)
On your talent pool, you lost many of them to competition, why didn’t they hang on with you?
Lot of our talent went. We were a small company and at one time we were running it at 50% increase in our wage cost year –on-year. Could we do more than that? No. When someone comes in and offers my people three times their salary, can I match that? So yes we did lose talent.
Now it’s great to say could you have done this or that, but look at what resources we had. So we had to take a call on whether we can win this game or do we need to survive this game first.
Where do you think is the change in newspaper formats and its reading habits headed to?
I think that newspapers from being mass will first try and satisfy specific niches. There is already a niche of economic/business papers and non-economic papers. In the non-economic papers i.e the general category you will start seeing some slivers. Compacts will be one sliver and within compacts we are positioned as a fun paper and if the Mirror starts becoming more serious as their Business and World pages then that will be a different kind of compact paper. So you will start seeing more of this, and it’s already started. For instance Indian Express is seen as more a serious and nation building paper.
But will they survive? Is it possible to survive with such a limited circulation?
Will they survive? I don’t know. But can you survive with a very large circulation if advertising starts moving in different directions? And that’s what happened last year. Then what happens? So I think it could go in many different ways. My belief is there will be two things: a) Papers will begin targeting a segment of audience little more sharper and b) The digital delivery will be key.
(This article is excerpted from the latest Forbes India 02 July, 2010 issue which is now available at news stands and book stores. You can buy our tablet version from Magzter.com)