Shocking: Did Reliance acquire CNN-IBN to blackout Kejriwal?

Of late, several conspiracy theories have been floating around “Ambani vs Kejriwal” especially after the acquisition of Network18 (the company which runs CNN-IBN along with several other channels) by Reliance. The most popular accusation is that Reliance bought the channel because it wanted to blackout Kejriwal & AAP. 

conspiracy
Source:
http://www.aamaadmiparty.org/why-ambani-was-desperate-to-take-control-of-network-18

While the above accusation can be dismissed even by a sensible high school student as a funny conspiracy, surprisingly, a significant part of educated Indian youth seems to have fallen for this funny & false propaganda. Firstly, it is to be noted that the Network18 media house is not some $1000 start-up which could be swiftly bought by another company like buying some cotton candy. Network18 is a public listed company (including the Bombay Stock Exchange) for several years now and acquiring it for trivial reasons like blacking out some party’s news is funny to say the least.

Secondly, CNN-IBN is not the only news channel in India which was broadcasting Kejriwal’s antics. There are hunderds of channels and some of them are now even mocked as “Krantikaari” channels due to their proximity and loyalty towards Kejriwal throughout the campaign.
krantikaari

So, just buying CNN-IBN to blackout news of Kejriwal’s dharnas is not sufficient because there are several more channels broadcasting it. Reliance must acquire hundreds of channels & newspaper companies if its intention is to indeed blackout news of Kejriwal’s theatrics.

Thirdly, those who are building such conspiracy theories & false propagandas are cautiously hiding facts about the messy condition Network18 was in for the past 4-5 years which actually led to this acquisition which is actually in the best interest of Network18 itself.

The story goes back to the year 2006 when Network18, a 10 year old company owned by Raghav Bahl, was at its peak with brands like CNBC & the recenly launched CNN-IBN becoming household names in India. Due to the satellite TV boom, the prospects of Indian channels going global was imminent.
RaghavBahl

Reliance had already set its eyes on this media house and had gradually begun to invest into the company. Raghav Bahl had deals with Reliance for funds as and when needed and in return, offered them significant stake in the company back in 2007 itself. When the company decided to go public, it was revealed that almost 1/10th of the company was owned by Reliance and its subsidiary companies like Reliancemedia, Reliance capital & Reliance vision.
2008_stocks
Source (page 41) SEBI report: http://www.sebi.gov.in/dp/network18final.pdf

However, everything seemed fine because it was boom time. Rajdeep Sardesai was riding on this boom to build his own image as well and earning hundreds of crores of rupees in the form of salary & bonus during the process. Under the editorial management of Rajdeep & Sagarika, the channel went into overdrive in terms of recruitment & spendings without keeping a check.

But the party did not last long because trouble started brewing when the worldwide recession had hit the entertainment industry badly. In Nov 2009, the company laid off 200 employees but did not touch the salaries of high level management (including Rajdeep, Sagarika and other senior management) who were together drawing hundreds of crores of rupees. Had they taken a paycut or restructured the management by firing 2-3 under-performing managers (who were drawing high salaries), they would have never found the need to fire those low paid employees.
nov2009
News link:
http://www.business-standard.com/article/companies/network18-lays-off-200-staffers-109112100090_1.html

As one would expect, that quick fix (firing low paying employees) did not solve the problem, but the company still refused to tackle the root of the issue. In Feb 2010, the company fired 350 more employees but the salaries of high level management remained untouched:
feb2010
News link:
http://www.moneylife.in/article/network18-lays-off-350-more-employees/3570.html

Over the next few months, the company continued to bleed due to losses. At one point of time in late 2011, when it was on the verge of bankruptcy due to severe debt, Ambani bailed out the company by lending a “tidy sum” to Raghav Bahl in return for a stake in the company.
bailout
News Link:
http://businesstoday.intoday.in/story/ril-network18-deal-conversion/1/21776.html

In early 2012, Reliance invested Rs 1,700 crore into the company, which in turn was used by Raghav to save the sinking ship. It was very clear that Ambani would turn into the owner of the company and in fact it was said by analysts back in 2012 itself (much before the inception of AAP)
reliance_moghul_media
News link:
http://indiatoday.intoday.in/story/bailout-for-raghav-bahl-network-18-signals-mukesh-ambani-willing-to-bet-big-money-on-media/1/168680.html

Although Reliance had a significant stake in the company, it still allowed the existing management (under Raghav, Rajdeep, Sagarike and others) to continue. However, due to immaturity & mismanagement, the company continued to bleed. Once again, the company in 2013 fired 300 employees but the management structure & their salaries remained untouched
aug2013
News link:
http://www.business-standard.com/article/companies/layoffs-at-tv18-group-113081600628_1.html

This mismanagement did not go down well with Reliance who started to demand Raghav to restructure the top level management instead of constantly firing low level employees. The problem with the company was that while Rajdeep, Karan Thapar, Sagarika and others were great news anchors, when it came to management, they faltered. But they were not ready to step down from management because doing so would drastically reduce their salaries (they would just become normal news anchors and would be paid salary accordingly in that case) which they did not want to happen.

The tussle between this pseudo-management and Reliance continued for a few weeks and finally Reliance began to flex its muscles. In a bid to streamline the company and turn it profitable, Reliance had decided to acquire and take control. Several top level executives were fired starting from Feb-March 2014 and one of the earliest victims was Karan Thapar. Most of the non performing top level management understood the signals and voluntarily resigned and some of them had to be fired. By May 2014, Raghav Bahl was asked to step down but was retained as non-executive board member.

Finally, when it was the turn of Rajdeep & Sagarika, they could have chosen to step down and become normal news anchors but that would not only be a blow to their ego & reputation but would decrease their salary as well, due to which both of them resorted to emotional tactics citing journalism issues to tender their resignations.

To summarize: Network18 was a highly ambitious company owned by Raghav Bahl with significant stake owned by Reliance as well for several years, but due to bad management and lack of planning, it faltered several times, resulting in huge losses & massive layoffs. Few years ago, Reliance bailed out the company and in return it could own a large stake of the company but it chose to allow the existing management to continue. The management did not learn its lessons and the company continued to bleed under loss and this time instead of bailing it out again, Reliance acquired the company itself and fired its non performing top level management.

This was the whole story of Reliance acquiring Network18 (CNN-IBN comes under it). If someone claims that all these things happened from 2008 just because Ambani wanted to blackout protests of an activist-turned-politician in 2014, it just shows how easy it is to spread propaganda and take people for a ride.

However, not all businessmen are saints and even Ambani family has its own dark sides which have been exposed in an earlier article here:
http://guruprasad.net/posts/the-polyester-prince-rise-of-dhirubhai-ambani/

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