He built a media conglomerate in 10 years and thinks promoters need to learn to let go if the industry is to grow.
Haresh Chawla, CEO of the Network18 Group, hasn’t given an official interview in over four years. So I am quite looking forward to meeting him on a winter afternoon in New Delhi. A senior person from Network18 and I are finishing our lunch at the Aman when Chawla arrives. He greets me with a hug and we banter about our last meeting, a wine-laden gossip session in Hong Kong. Chawla, 43, is looking relaxed and more inclined to chit-chat instead of saying “Bol, kya bolna hai?” in his usual brusque manner. He has just put in his papers and is revelling in doing all the things that he hasn’t done in ten years, says Vanita Kohli-Khandekar.
“Last week I had my first lunch meeting,” he laughs. If that makes no sense to you, you must know that in 1999 Chawla joined a Rs 15-crore television production company, with one TV channel and 120 people. It was called Television18. What he leaves behind is a Rs 1,484-crore, 6,000-people media group that owns assets across print, television, films and the internet. During those ten-odd years he has moved at a speed unknown in owner-driven media companies in India. Network18 did whatever it took to grow — pick up debt, dilute equity, tie up, form joint ventures or acquire any opportunity that came its way. It now owns, among others, brands such as CNBC-TV18, HomeShop18, Colors, CNN-IBN and Moneycontrol.com. In the process the company has become the envy of other media owners and a worry for investors and analysts.
Almost all of them fret about it being overleveraged. The total debt of the group stands at Rs 1,400 crore and its operating margins are nowhere close to servicing it. There are now reports that the group is close to a merger with ETV (Eenadu), which is expected to be announced today. Shouldn’t Chawla be hanging on and consolidating instead of moving on? “Raghav [Bahl, the founder of Network18] is committed to finding a mechanism to deleverage the company via sale of assets,” he says. He reckons that with the addition of a regional bouquet (organically or inorganically) his job will be complete. Network18, “the youngest and smallest network” will become one of the big boys on a par with Zee and Star, both of which have a full complement of entertainment, news and regional channels. That readies the network for the future.
Chawla explains that once full digitisation, mandated now by law, is through, cable and DTH operators will get more powerful since they control anywhere from 5 million to 30 million homes each. In this situation, the networks with the maximum channels and viewership share are the ones that will rule. The game will change to negotiating power. It will no longer be about building something. This future doesn’t hold the same challenge for him.
Chawla is munching on chicken satay, while I recover from my sorse maach and rice. Maybe it is a ruminative moment, but why have mergers and acquisitions (M&As) and joint ventures worked for Network18? It is the one path to scale that the fragmented, hyper-competitive, owner-driven $17-billion Indian media and entertainment industry hasn’t managed to use well.
Network18, on the other hand, has used them in textbook style. Over the years, it has acquired Tata Infomedia (now Infomedia), Moneycontrol.com and others. It has joined hands with Forbes, with Viacom (Colors, Sonic, MTV et al) and GS Home Shopping (HomesShop18), Lokmat (IBN-Lokmat) among others or simply allied with companies such as Sun TV. Roughly 30 per cent of its news and entertainment business is led by acquisitions.
This is when Chawla gets out of the “I am so relaxed” mode and becomes involved. He talks more animatedly than usual. “We have a professional culture with no bureaucracy. It is not a culture designed for M&As. It is the way we work, but it is also why M&As have worked for us,” he says. His contention is that the whole media business is simple — there are no new business models waiting to be discovered. “It is all about execution,” he points out. That means that people and processes are key. The group’s style has meant “very little attrition” at the top, which means continuity and speed.
Network18 follows the strategic business unit (SBU) model very diligently. Once it decides to get into a business, the SBU head is free to do what he wants. All Chawla insists on is that they don’t go into it with half-baked stuff. For example, he points to Colors. The channel launched in 2008 was one of the biggest risks the group took. “Colors was entering a market dominated by Star, Sony and Zee controlling over 75 per cent market share between them. We had no choice but to make a blockbuster entry. We walked in with a war chest of $200 million. We ended up spending only a small portion of that, and the channel started throwing up profits within five quarters of launch,” he recalls. Colors is, along with CNBC-TV18 and CNBC-Awaaz, one of the top cash generators for the group.
Explaining the group’s philosophy, he says, “Whether it is Colors or Forbes, we know that there is entrenched competition here. We cannot enter with less money or programming. You get only one chance. We put everything at stake and then wait for growth to happen.” Over the years many of Chawla’s senior colleagues have referred to him as “superman”. They say “he largely lets you run your business and when there is trouble he comes to your rescue”.
The question is how much of this culture has to do with Chawla and his equation with Bahl and how much is institutionalised. Chawla is quick to react to that. “One has worked hard to ‘embed’ this culture and mindset into the Network over the last decade. It has become the operating philosophy — and, frankly, it is what has helped us survive and win against the odds. The team leaders are all aligned on this, and will carry it forward. So I don’t see any reason that things will change. Network18 is known for its nimbleness — and it’s a crucial differentiator for the group,” he says.
When TV18 signed on with CNBC in 1999, Bahl was clear that he wanted a professional CEO. He homed in on Chawla, an IIT/IIM graduate who had always worked for large, professional firms (HCL, Times Group, ABCL). The promise that bound them was that Chawla was free to run the company. Their first test came within months of Chawla’s joining. There was a choice between shutting the content production business and focussing on broadcasting or cutting costs across the board and doing everything. Chawla opted for the former. It was a painful and unpopular decision. “Ten years later we have been vindicated. If you look at the television content business, there is no scale,” he says. Bahl kept his part of the promise and Network 18 has grown, albeit somewhat precariously.
Chawla’s stint shows one important thing. That Indian media owners who are wedded to control need to let go if they want to grow. It is a lesson that American and European owners took equally long to learn. The India market place is littered with consolidation opportunities that never occur because nobody wants to give up control either to investors or professional managers.
To its credit Network18 took those risks and made those moves. Now if the top team sticks together and the business continues to grow and become debt-free, Chawla could say that he has done his job completely. So will those fretful analysts.