Sucheta Dalal :Network18 lays off 350 more employees
Sucheta Dalal

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Network18 lays off 350 more employees  

February 5, 2010

Media and entertainment company Network18 Media and Investments Ltd, which has been pumping money into its cash-strapped, loss-making businesses to keep them alive, is finally taking a call on the situation. According to sources, the media company has laid off about 350 employees, mostly technical and production employees from its Web operations. It (the layoff) also includes some journalists, the majority of whom have now joined Zee Business.


According to a source, who wishes to remain anonymous, the company has not offered any increment this year. Even its Web-based commodities operations employees have not received any increment since the last one-and-a-half years, the source added. Network18 has also reportedly closed its technical analysis beat from the Web operations of and wants to outsource the same to cut costs.


In November too, Network18 laid off around 200 permanent employees as part of a restructuring exercise aimed at merging broadcast operations of its Hindi and English business news channels. According to a filing by the company to the Bombay Stock Exchange, the 'one time' restructuring cost it Rs4.50 crore on account of rationalising the workforce.


During the quarter to end-December, Network18 reported a consolidated loss of Rs21.30 crore from Rs44 crore, as total revenues increased to Rs370 crore from Rs222.76 crore, a year ago. It also swung into positive earnings before interest, tax, depreciation and amortisation (EBITDA) with Rs8.11 crore from a loss of Rs38.90 crore in the same period last year. Network18's operating profit margin remained poor at just 2%.


In a release, Raghav Bahl, managing director, Network18, said, “We are holding on to cash, equivalents and liquid investments in excess of Rs1,000 crore across group companies. If revenue growth momentum continues as projected, we hope to enter a strong profitability and cash generation phase in the next few quarters."


During the third quarter of FY10, Network18 also received cash infusion from Nokia and GS Home Shopping into its Web business. Nokia Growth Partners, an investment fund owned by Finnish mobile handset maker Nokia Oyj, has invested $10 million (Rs48 crore) in Web18 Holdings. Similarly, South Korea’s GS Home Shopping, the world’s third-largest home shopping network, has invested $18.50 million in HomeShop18, a Network18 subsidiary.


These investments have given Network18 a 'comfortable' position. "Both the Web and HomeShop businesses have welcomed strategic capital (from Nokia and GS Home Shopping) in Q3, putting both operations in a comfortable cash position to aggressively scale up their ambitions," Mr Bahl said in a release.


At the same time, the media company has been pumping money into its cash-strapped, loss-making businesses, to keep them alive. Unfortunately, several group companies and subsidiaries of Network18 are so heavily weighed down by losses, that their net-worth has been completely eroded. Belying their glitzy public images and continuing expansions, they are essentially sick companies.


The revenue model of media companies, especially those with a bouquet of TV channels, has always been under tremendous stress. Obscene salaries, lavish overheads and large dollops of equity options made these companies among the most expensive operations in India relative to their revenues. Quarter after quarter, we have marvelled at the ability of TV channels to survive the deluge of red ink that would have drowned companies in any other sector.


The launch of ET Now, a business news TV channel, by the deep-pocketed Times group has created more pressures for peers like CNBC TV18, NDTV Profit and Zee Business. With its 'complete package' for advertisers, including a business daily and TV channel, the Times group is snatching away a major chunk of ads from other media companies.


Moneylife had reported about this earlier (see here). The properties and titles of Network18 are spread across print, Web and television (news, business, general entertainment and music) and almost all of them are making losses. Last month, Network18 had to rescue its sister concern, Infomedia, the publishing unit of its group company TV18, by infusing liquidity through inter-corporate deposits of Rs58.50 crore. Network18 had also supported Infomedia when its rights issue failed in January.


Incidentally, Network18 has been busy launching and acquiring several new businesses with funding mostly through public money and later from bank finances. Virtually nothing has been funded through internal accruals, raising doubts about the inherent viability of the businesses.

Yogesh Sapkale


-- Sucheta Dalal