‘Medianet’ and ‘Private Treaties’ phenomena

The report of that 2 member subcommittee of the Press Trust of India, authored by Paranjoy Guha-Thakurta and Srinivas Reddy:

The ‘Medianet’ and ‘Private Treaties’ phenomena
In pursuing its quest for profits, it can be argued that certain media organizations have sacrificed good journalistic practices and ethical norms. Individual transgressions — reporters and correspondents being offered cash and other incentives, namely paid-for junkets at home or abroad in return for favourable reports on a company or an individual – were, until recently, considered more of an aberration than a norm. News that was published in such a manner was suspect because of the fawning manner in which events/persons were described while the reports gave an impression of being objective and fair. The byline of the journalist was stated upfront. Over the years such individual transgressions became institutionalised.

In the 1980s, Bennett, Coleman Company Limited (BCCL), publishers of the Times of India (TOI) group of publications started changing the rules of the Indian media game. Besides initiating cut-throat cover-price competition, marketing was used creatively to make BCCL one of the most profitable media conglomerates in the country – it currently earns more profit than the rest of the publishing industries in the country put together though as a corporate group, the STAR group has in recent years recorded a higher annual turnover in particular years. 

The media phenomenon that has caused considerable outrage of late has been BCCL’s 2003 decision to start a “paid content” service called Medianet, which, for a price, openly offers to send journalists to cover product launches or personality-related events. When competing newspapers pointed out the blatant violation of journalistic ethics implicit in such a practice, BCCL’s bosses argued that such “advertorials” were not appearing in newspapers like the TOI itself, but only in the city-specific colour supplements that highlight society trivia rather than hard news. (There was another, more blatant justification of this practice not just by BCCL but other media companies that emulated such a practice after BCCL started it. If public relations (PR) firms are already “bribing” journalists to ensure that coverage of their clients is carried, what was wrong then with eliminating the intermediary – in this instance, the PR agency – it was argued.

(Besides Medianet, BCCL devised another “innovative” marketing and PR strategy. In 2005, ten companies, including Videocon India and Kinetic Motors, allotted unknown amounts of equity shares to BCCL as part of a deal to enable these firms to receive advertising space in BCCL-owned media ventures. The success of the scheme turned BCCL into one of the largest private equity investors in India. At the end of 2007, the media company boasted of investments in 140 companies in aviation, media, retail and entertainment, among other sectors, valued at an estimated Rs 1,500 crore. According to an interview given by a senior BCCL representative (S. Sivakumar) to a website (medianama.com) in July 2008, the company had between 175 and 200 private treaty clients with an average deal size of between Rs 15 crore and Rs 20 crore implying an aggregate investment that could vary between Rs 2,600 crore and Rs 4,000 crore.

It is a separate matter that the fall in stock-market indices in 2008 robbed some of the sheen off the “private treaties” scheme for the BCCL management. While the value of BCCL’s holdings in partner companies came down, the media company had to meet its commitments to provide advertising space at old “inflated” valuations which also had to be shown as assessable taxable income for BCCL on which corporation tax is levied.

Even as the private treaties scheme was apparently aimed at undermining competition to the TOI, a number of the newspaper’s competitors as well as television channels started similar schemes. The “private treaties” scheme pioneered in the Indian media by BCCL involves giving advertising space to private corporate entities/advertisers in exchange for equity investment – the company officially denies that it also provides favourable editorial coverage to its “private treaty” clients and/or blacks out adverse comment against its clients.

While BCCL representatives denied receiving money for providing favourable editorial space, the integrity of news was compromised. In advertisements published in the Economic Times and the TOI celebrating the success of the group’s private treaties, on December 4, 2009, the Mumbai edition of the newspapers published a half-page colour advertisement titled “How to perform the Great Indian Rope Trick” and cited the case of Pantaloon. What was being referred was how Pantaloon’s strategic partnership with the TOI group had paid off. The advertisement read: “…with the added advantage of being a media house, Times Private Treaties, went beyond the usual role of an investor by not straining the partner’s cash flows. It was because of the unparalleled advertising muscle of India’s leading media conglomerate. As Pantaloon furiously expanded, Times Private Treaties (TPT) ensured that (it) was never short on demand. The TPT has a better phrase for it — business sense.”

In many media organizations, news is sought to be distinguished from material that is paid for, called advertisements or “advertorials”, by using different or distinctive fonts, font sizes, boundaries and/or disclaimers such as “sponsored feature” or even the letters “advt” printed in a miniscule font size in a corner of the advertisement – which may or may not escape the attention of the reader. However, in certain instances, even a fig-leaf of a disclaimer was done away with. Whereas BCCL representatives have often argued that the companies private treaties scheme is open to public scrutiny since the companies in which BCCL has picked up stakes is in the public domain and listed on its official website, the influence such companies wield on editorial content is a matter of contention and debate.