How music brought 9X Media back from the brink of bankruptcy

When Pradeep Guha took over as Managing Director of 9X Media in March 2009, he had an unenviable job before him. The company's founders - former Star India CEO Peter Mukerjea and his wife, Indrani - and the entire senior management had left the company. The three-year-old media network had accumulated losses of Rs 800-crore and a Rs 100-crore debt as well. And many employees were being shown the door. "When I was approached to take charge of the company, it didn't make any sense to me," says Guha. "People were being retrenched almost every week and the mood of the existing staff was pathetic."

Investors too lacked confidence in the company. The Mukerjeas had sold their around 30 per cent stake to four private equity (PE) players - New Silk Route, Kotak Equity Fund, Temasek and New Vernon. Temasek and Kotak were in a hurry to exit. New Silk Route, which then had a 20 per cent stake - and which, in fact, approached Guha - was the only exception. Guha realised the broadcast business, especially general entertainment, wasn't up a PE investor's street. "One needs to have a strategic player with deep pockets. A PE has a period within which he has to take his money out, while in general entertainment nobody has ever made business plans with targets."

The first thing he did was sell the network's loss-making flagship Hindi general entertainment channel, 9X, to Zee Entertainment. The PE partners had already sold the network's news channel, INX News, to Indie Media. The only winner Guha saw in the sinking business was its music channel, 9XM. "Awareness of this channel was high and the audience had taken well to the concept of having animated characters as VJs. My prescription to the investors was to focus on one genre," says Guha. "India being young, I was confident music could never die. Since 9XM had animated characters as VJs, they could be replicated in any language."

But, apart from New Silk Route, the other investors did not buy Guha's restructuring plan. In 2010, New Silk Route increased its stake to 80 per cent, while Guha picked up 15 per cent. The investment was in line with his entrepreneurial ambitions after he left Zee Entertainment in 2008. "When he joined Zee in 2005, the flagship channel had tanked. He took over that ship which was sinking and completely transformed it. Guha has a knack of turning around sick businesses with ease," says Atul Phadnis, CEO, What's On India, a television programme guide, In just four years, Guha has done the same with 9X Media, turning it into a profit-making Rs 200-crore network. He has launched four more music channels - 9XO (international music), 9X Jalwa (all time Bollywood hits), 9X Tashan (Punjabi) and 9X Jhakaas (Marathi). "Guha literally folded his sleeves and started the clean-up act bit by bit. The moment he came on board the low morale of the company suddenly grew high," says Phadnis.

Guha began by empowering the second line of leadership in the organisation. For many years, he held senior management positions at Bennett, Coleman & Co (publishers of The Times of India) and says that experience taught him how to fix problems. His one-time colleague at Bennett, Coleman, Bhaskar Das, now Group CEO, Zee Media Corp, says one of Guha's greatest strengths is his willingness to give staff a free hand. "Guha never micro-manages a business. It was the same at 9X and all of us can see the results." Guha also moved his office to suburban Mumbai from plush South Mumbai. "We pay much the same rent per year now as we were paying per month then," says Guha.

A key investment in the broadcast business is distribution. The network's erstwhile general entertainment channel, 9X, had shelled out close to Rs 60 crore a year on distribution. But it no longer had such deep pockets, prompting Guha to focus on the digital platform. He says 9XM was the first Hindi music channel in India to have a live feed of its on-air content on its website. The popularity of 9X animated characters prompted him to launch more than 26 games featuring these animated characters. "The idea wasn't to fight the ratings game, but fight reach and increase the time spent by being visible across platforms." While 9XM is consistently among the top two music channels, 9X Jhakaas and 9X Tashan are market leaders in their languages.

Guha says his flagship channel, 9XM, could cross the Rs 100-crore advertising revenue mark this year. With ad tariffs for 10-second spots on a music channel a paltry Rs 800-1,500, Guha realised he needed to look beyond. He turned to his animated characters to create brand integration. For instance, Idea Cellular used the 9X character, Bheegi Billi, for its Honey Bunny campaign. Similarly, Tata Motors created an ad using the 9X character, Silly Chicken, for its Nano.

N.P. Sathyamurthy, President, Mudra Max, the media planning and buying arm of DDB Mudra, says there are enough takers for such brand integrations. "Almost 10 to 20 per cent of youth time is spent on music and advertisers are willing to spend."

Music is all very well, but some experts say it is also important to diversify over time. The biggest risk is that every channel in the business buys the same music, which leads to commoditisation. With New Silk Route looking to exit the business, the hunt is on for a new equity partner. Guha hopes a strategic partner will invest for the long term. If that happens, it will certainly be music to his ears.