Special: Raj Nayak: Art of the sale

Reinventing myself @ 47. Same passion, same energy, same team, same office, everything remains same only the vision is new & the name is new. That was Raj Nayak’s tweet on April 2, soon after he launched Aidem Ventures, a media buying and consultancy firm, after parting ways with NDTV.

As entrepreneurs go, Nayak is not exactly a new kid on the block. Seven-and-a-half years ago, when the Roys (Prannoy and Radhika, promoters of NDTV) wanted him to head the sales for NDTV, Nayak had his own plans. He wanted a free hand and thus was launched NDTV Media, a 74:26 JV between NDTV and Nayak.

Now, despite everything remaining the same - he even has NDTV as a client - as Nayak heads off on his own, the usual questions about entrepreneurs arise. How is Aidem going to chart out its course? How long will NDTV remain a client? How does Nayak himself see the test ahead?

Brand Raj

Nayak has history backing him. And himself, especially his reputation as a ‘game changer’. At STAR, he handled both specialised as well as mass channels. He was also the first person to start selling one-day cricket in India during his stint with ESPN-STAR Sports. At NDTV Media, he specialised in selling news and helped grow the genre, especially English news. A head of a large media agency says, “If English news as a genre has seen so many players, it’s because of Nayak who has taught the industry to buy airtime for value, and not just on the basis of mere numbers.”

Nayak’s people skills have helped him. As a senior executive of a channel puts it, “If a buyer has to choose from multiple channels which reach out to the same kind of audiences and command similar viewership, a decision will be made on the basis of the relationship with the seller.”

Consider these cases. For Sahara One, Nayak corrected the price, streamlined the processes and arrested its downward slide. Markand Adhikari of Sri Adhikari Brothers for which Aidem handles Mi Marathi, believes it would have been a different story altogether had SAB, the comedy channel, been contracted to Raj and his team from Day One. “But we were in the final stages of negotiations with Sony Entertainment Television, when we met Raj,” says Adhikari.

The NDTV days…

Outsourcing of media sales, is not exactly a new thing for the Indian market. Nearly two decades ago, STAR India outsourced its ad sales to Mediascope Associates, owned by Marzban Patel and the late Rohinton Maloo, which also handled the ad sales for Turner India for a few years. Later, there was Lalit Modi and his team at Disney who handled a chunk of Zee TV’s sales.

But this business model could never achieve scale because most big broadcasting companies weren’t brave enough to outsource a stream that brought in 80 per cent of its revenues. In fact, the outsourcing companies put together accounted for less than 5 per cent of the total advertising pie.

But NDTV went off the beaten path when, after it broke its ties with long-time ally, STAR India, it turned to STAR’s head of ad sales, Nayak. In the seven-and-a-half years of its existence, NDTV Media’s strength grew from 20 people to 200 with a turnover that touched Rs 350 crore (more than 70 per cent of this came from the majority stake-holder, the rest came from properties such as the SaharaOne Network, Mi Marathi and MSN).

…and after

What worked as an advantage in the initial days became a hindrance to its growth in the later stages as NDTV?Media couldn’t take up competitive businesses. For instance, it had to give up Nick (Viacom’s kids' channel) when Viacom entered into a JV with Network 18, an arch rival of NDTV. Nayak realised that “people didn’t see us as neutral and we lost new business opportunities.” Nayak’s dream for NDTV Media lay in scaling up, acquiring clients and launching other verticals. This was not in sync with NDTV’s ideology. Moreover, NDTV had gone public earlier, new partners came in and many of the equations and the vision, for Nayak as well as NDTV, changed.

The big blow, for Nayak, came when NDTV Imagine (now Imagine TV), the GEC launched by NDTV, preferred to go independent with ad sales. Also, the strained relationship between Nayak and Sameer Nair (head of NDTV Imagine), while at STAR, had a part to play.

Aidem is secure with the NDTV business in its kitty, but it is anybody’s guess how long that net will be in place. Some in the industry think that in a year NDTV could form its own sales team. Others feel that it won’t be that easy for NDTV to set up a sales team in such a short time. Though industry watchers were quick to affix the marriage-of-convenience tag to the arrangement, Nayak feels that “as long as we are able to deliver value, I see no reason why they wouldn’t want to continue.”

The plan

Survival tops Nayak’s agenda. The immediate goal is to add businesses, pay salaries on time and break even. Business-wise, while Aidem will enter into commission-based deals with established players, the arrangement with new and smaller players will be part-cash and part-equity. Aidem will also monetise print, radio, cinema and internet.

Nayak is in talks with international channels that want to come to India but can’t afford the entry costs. Aidem will handle distribution, ad sales, business plans and launches. Aidem will also create four signature properties (events) and own its IPRs. Consulting for broadcasters is also on the agency’s agenda in the areas of marketing, uplinking, ad sales, distribution, research, traffic operations and management, management information system, scheduling, on-air promos. He expects that 80 per cent of Aidem’s revenue will come from ad sales and 20 per cent from others.

The opportunity

The opportunities, if media pundits are to be believed, are immense for a media-outsourcing model. There are more than 500 channels but STAR, Sony, Zee, DD and Sun get 40 per cent of the Rs 10,000 crore of ad revenue that goes to television every year. The mid-sized networks take away another Rs 2,000 crore. It’s unlikely that these networks will ever opt for an outsourcing model.

Commercially it makes great sense for many regional channels which want a slice of the national media plan. Right now, for Aidem, TV is the staple diet. Within TV, regional is where growth will come from. So building a portfolio is crucial.

A balanced portfolio

Aidem will have to build up a non-NDTV portfolio which delivers business of the same value. That is easier said than done but the biggest challenge for Aidem will be to convince brands about why they should outsource sales. Nayak and his team will also have to persuade and demonstrate to clients, other than NDTV, that they will not be treated as second-class citizens.

Nayak hopes that Aidem will generate ad sales of Rs 800 crore in three years. To do that, it has to handle competitive brands across genres and put in place a transparent system. Separate teams have to handle different media and separate genres. As a senior media professional says, “The way you sell news and the way you sell a GEC is different. You can’t have a single team selling both the genres.” Does that make outsourcing a sustainable business?

The threats

Media analysts fear that once a brand or channel builds scale, outsourcing no longer remains a need. Consider this example. Voltas, a Tata company, was launched to distribute brands like Rasna, Amul and Nutrella. It was believed that Voltas, with its retail expertise, could build clout and save costs for brands. It worked well, but Amul, which had scaled up, moved out because the owners felt insecure about Voltas doing justice to it. Success could become an enemy. It could happen to Aidem, too. To avoid this, Nayak plans equity deals with new, smaller companies, where the latter agrees to buy back the share (or goes public), subject to deliveries by Aidem. That keeps the partner’s interest in the deal, alive.

There is a danger that, once Aidem succeeds, others could pick up this model, but Nayak doesn’t seem too bothered by this. At present, competition to Aidem comes from MediaSys Solutions run by Kacon Sethi, Tapan Pal and Indira Ganguly who manage ad sales for Sahara Samay.

Welcome move?

In India, seven large buying agencies control 70 per cent of the industry. The volumes are huge in Indian television, but value is low as it is grossly undersold (the highest-rated property, IPL, is sold at Rs 15 lakh for 30 seconds. A Super Bowl event in the US, on the other hand, is sold at $3 million).

While media owners fight, buying agencies eke out the best deals. Spatial Access’ Meenakshi Madhvani hopes that outfits like Aidem will “clean up’ the business by making it transparent.” In an industry where deals are based on sweeteners or because they offer better margins and not because they add value, transparency has a vital role to play. Will there be enough takers?

Nayak claims that four people wanted to invest in his company within 48 hours of the news of him starting up Aidem went out. But he would prefer to build the businesses and then look for funds if necessary, but not from another media company.

(Based on interviews with Sam Balsara, chairperson, Madison World, Vikram Sakhuja, CEO, GroupM, Shashi Sinha, CEO, Lodestar Universal Media, Rohit Gupta, president (network sales), Meenakshi Madhvani, co-founder, Spatial Media Access, Multi Screen Media, Avinash Kaul, CEO, SaharaOne and Markand Adhikari, MD, Sri Adhikari Brothers)