Sleeping with the enemy

TWO RIVAL NEWSPAPER GROUPS ARE JOINING HANDS — AND IT’S A HARBINGER OF THINGS TO COME, FORECASTS SHUCHI BANSAL

To readers of Adam M. Brandenburger and Barry J. Nalebuff’s 1997 business strategy book Co-opetition, The Times of India group’s recent announcement that it was floating a joint venture company with arch rival Hindustan Times Media Limited should not come as a surprise. The company, it seems, has taken a leaf straight out of the popular American management book which extols the virtues of "co-opetition," a term defined by the authors as a revolutionary mindset that combines co-operation and competition.
Written by professors at the Harvard Business School and the Yale School of Management, the book dwells on game theory where co-operation among rivals must replace the "business-as-war" concept, the underlying thought being co-operation generally leads to expansion of the business pie and competition to a slicing up of the pie.
But the brass at Bennett, Coleman & Co. Limited (BCCL), the company that publishes The Times of India and The Economic Times has taken the "co-opetition" concept a step forward. It plans to launch a new daily with The Hindustan Times. Says BCCL’s executive director Ravi Dhariwal: "We believe in collaborating with other media companies. We will pool in our resources — printing, circulation etc — with HT to develop and launch a high quality compact paper in Delhi." (The term compact newspaper refers to a newspaper whose content is broadsheet and the size is tabloid. It’s called compact because its smaller size is convenient for reading by commuters on trains, tubes and buses.)
The announcement has both surprised and confused the media and advertising industries. It is, after all, for the first time that arch rivals in the Delhi print media market are joining forces to start a new product. "Such deals have happened in other industries but it is a first in the print media segment," admits a Times of India group source.
To be sure, the newspaper industry’s story so far has been very different. For years newspapers remained confined to markets they were born in and fought bitter battles with competitors on their own turf. In the last few years, however, the lines of control have been breached — newspapers have moved into one another’s territories. Dainik Bhaskar of Madhya Pradesh, for instance, led the pack when it moved into Rajasthan to challenge Rajasthan Patrika. Dainik Jagran of UP is now in Madhya Pradesh, Jharkhand and Punjab. The Times of India, meanwhile, went to Calcutta and Bangalore and Hindustan Times invaded Mumbai last year.
With increased competition over the years, non-competing newspapers started collaborating in pitching for advertising business. In the past, several regional newspapers have joined hands for ad sales. For instance, Deccan Chronicle formed Media 5 in the south to bid for business along with four other newspapers. Some time ago, Hindustan Times tied up with Amar Ujala for cross-selling space in the two papers.
Of course, nothing as major as The Times of India group-Hindustan Times joint venture to start a new product has happened before. It may not remain an isolated case for long, says media marketing consultant A.S. Raghunath, adding that "more alignments will happen and The Times of India group-Hindustan Times joint venture is just a harbinger of things to come." Adds management consultancy KPMG’s media practice head Rajesh Jain: "In the US such co-operation agreements are popular. The idea is that in a competitive environment, the market is protected to the benefit of the players." In fact, Jain insists that the print media industry will see a spate of mergers and acquisitions in the near future.
Yet many others view the Times of India group-Hindustan Times joint venture as a knee-jerk reaction to impending competition from a fresh crop of newspapers that’s slated to hit Delhi. Dainik Bhaskar and the Zee group’s one-year-old English daily, DNA, is said to be getting ready to launch its Delhi edition. The India Today group is also launching a morning newspaper. Confirms the company’s CEO Ashish Bagga: "Yes, we are looking at transforming our existing tabloid Today into the morning space."
"Clearly", says Malayala Manorama’s senior general manager and deputy editor Jayant Mammen Mathew, "the two English newspapers are scared of competition from dailies that will be launched in Delhi." Mathew says in the mature markets newspapers collaborate only on the back end — for printing, distribution or on the supply side, including sourcing newsprint at competitive rates. "I’ve never heard of them launching a joint product," he adds.
But Dhariwal dismisses the fear-of-competition theory. "We believe in working closely with people to give best value to our advertisers." As part of the same strategy, the group bought the Bangalore-based Vijay Times and Vijay Karnataka and picked up a small stake in Sandesh of Gujarat, explains Dhariwal. "We are in discussions with other newspapers as well," he adds. Dainik Jagran’s general manager Basant Rathore backs Dhariwal’s point: "The alliance is not about fear. A mature market must be segmented properly and products should be launched accordingly. The two players seem to be jointly hedging risks."
According to a Times group executive, the company is creating more choice for its consumers by launching a new product. They are particularly buoyant about the project as their experiment with Mumbai Mirror worked. The Times of India launched and distributed a free tabloid along with it when DNA was launched in Mumbai last year. The idea was that Mumbai Mirror could flank its core brand, The Times of India.
In fact, the first signs of co-operation between Delhi’s arch rivals Hindustan Times and The Times of India were seen in Mumbai. When The Hindustan Times was launched in Mumbai, The Times of India group lent its distribution infrastructure to the newspaper. The Birla-owned newspaper, in turn, printed Mumbai Mirror for The Times of India at its own printing facilities. The same alliance has been strengthened in Delhi for a joint paper. Sure, the new paper could eat into the existing dailies (The Times of India and The Hindustan Times) of the joint venture company. "But self-cannibalisation is better than allowing someone else to pick your market share and revenue," observes a Times of India group source.
Dhariwal says that had The Times of India and The Hindustan Times launched their own separate papers, as they had planned to, the two companies would have eroded each other’s resources. "This way there is no value destruction," he adds. The two companies have signed a no-poaching agreement with each other which will hold them in good stead when Hindustan Times Media launches its business paper.
If more media alliances, mergers and acquisitions are in the offing, it’s not difficult to see why. Newspaper companies need scale to survive, say experts. "It is important to have media products across languages as well as market segments," says Jagran’s Rathore. Why? Because then you can ask for the moon from advertisers, as a space selling expert puts it. Little surprise then that Dainik Jagran is ready to launch two new newspapers.
First in the pipeline is its new Hindi newspaper — tentatively and surprisingly called I. Rathore does not wish to comment on the brand name but says that the newspaper will address a completely new audience and not existing Dainik Jagran readers. Next will be a facsimile edition of the Irish paper The Independent which has a 26 per cent stake in Dainik Jagran’s publishing company. "The Independent will have a small circulation but it will give us exposure in the English speaking market as well," says Rathore.
Besides, like The Times of India, Jagran has approached several newspapers in an attempt to acquire them or pick up equity in them. About three years ago, the Dainik Bhaskar group also transcended the language barrier when it launched Divya Bhaskar in Gujarati. Last year, it ventured into the English language territory too through DNA. The group has not ruled out newspaper acquisitions either.
Observes KPMG’s Rajesh Jain: "There is a high level of interest in the media. Regional papers want to get into mainstream areas while the national guys want to go regional and exploit that market." The keenness to expand is not surprising since unlike in most other markets, newspaper advertising is growing by a healthy 13 to 15 per cent a year.
Needless to say, by early next year, action in New Delhi’s newspaper market will heat up. A slew of compact newspapers — from the Jagran group, the Times of India group and The Hindustan Times joint venture and the India Today group — would have been launched. Will it lead to overcrowding? Not really. Dhariwal says that English language newspaper penetration in Delhi and the National Capital Region (the area around the capital) is limited. One in every five households does not get an English newspaper.
If The Times of India group-Hindustan Times experiment works, others may buy the "co-opetition" theory.

Courtesy : The Telegraph, Kolkata, 22 October 2006