Mumbai: Publishing group Bennett, Coleman and Co. Ltd’s, or BCCL, controversial ad-for-equity business model, Times Private Treaties, is changing the way it does its business of bartering ad space for a stake in a client company. For one, the company has started taking 40% cash and the balance in equity on new deals since cash flow is the primary concern now.
Ad barter: Times Private Treaties chief executive S. Sivakumar says Bennett, Coleman and Co. has been able to stir the advertisement market by selling ad space in exchange for a stake in a client company. Abhijit Bhatlekar / Mint
BCCL, the publisher of newspapers such as
The Times of India and
The Economic Times, aims to keep revenues from Treaties clients in the 15-20% range of the total company revenues. HT Media Ltd, which publishes the
Hindustan Times,
Hindustan and
Mint, competes with BCCL across markets and products.
In an interview with VCCircle, a Mint content partner, S. Sivakumar, chief executive officer, Times Private Treaties, talks about the concept of Treaties, how it has evolved over the last five years, and if the model is indeed working. Edited excerpts:
How has the slowdown affected Times Private Treaties?
Slowdown has really been a testing time. Our idea was to grow the advertising market, and get as many clients as possible. The challenge for media houses has always been “how do you increase the universe of advertisers?” In (the) Indian context, it’s far more challenging because India has for long been a market of cost plus players.
Treaties comes at the highest stage of risk for us. If there were a better way of raising capital (such as debt), an entrepreneur would have done that instead of parting with equity via Treaties. Somebody who has capital will obviously use his cash for his business—for advertisements, capital expenditure, machines, and so on. So we are the first point of leverage for him. If the market turns the way it has turned now, leverage and equity go out of fashion.
What do you look for in a Treaties client?
Anybody who wants to advertise—that’s the only prism we look at. We don’t necessarily approach them from a return on equity or return on a capital basis. It’s essentially about getting a new advertiser. We will get paid only when we are able to sell the shares. A cash advertiser pays us in 60 days as per the credit norm but a Treaties client payout happens only when we sell the shares.
You have been running (Times) Private Treaties for almost four years, so what has been the result in terms of exits?
We would have invested close to Rs4,000 crore and the exits would be less than 10%. The Rs4,000 crore is not fully deployed capital because it will be deployed only when the advertiser consumes the media. 25% of that Rs4,000 crore has been consumed. The exits are also a function of the exhaustion of the commitment by the client.
What does that mean?