MEDIA SPOTLIGHT ON: EQUITY FOR AIRTIME - Will swapping advertising for equity become the new deal? New-media start-ups are negotiating a new sort of contract. By Alasdair Reid

Obviously you have to have faith if you are going to go anywhere near an equity for airtime deal. Adam Faith in the case of the Money Channel.

Obviously you have to have faith if you are going to go anywhere

near an equity for airtime deal. Adam Faith in the case of the Money

Channel.



The former pop star announced last week that he would seriously consider

speculating on the shares of ’growth companies’ (for ’growth’, read

dotcom) as an integral feature of his advertising sales policy on his

latest venture - a digital satellite channel covering investment

issues.



Some of the coverage seemed to imply that Faith was breaking new

ground.



He wasn’t. As Faith was making his sales pitch, Channel 5 was putting

the finishing touches to a pounds 1.2 million deal with RapidInsure, a

dotcom insurance company.



It’s not all barter. RapidInsure is putting up pounds 200,000 in cash to

buy a package of conventional airtime. But it will also take sponsorship

worth pounds 1 million in exchange for 8 per cent of its equity.

RapidInsure will be the sponsor of weather reports during the channel’s

main news bulletins - three each weekday - for a year from 1 April.



Faith indeed. Airtime for equity is a straightforward gamble. If the

company you’ve backed starts to take off in a big way, you’re quids

in.



If it flops, you’re left with just so much worthless paper.



On the other hand, valuing a dotcom company at pounds 12.5 million will

not be seen as wildly optimistic in some quarters. But analysts have

been talking for weeks now about the dotcom bubble bursting - and at the

end of last week many high-tech stocks did take a battering.



So how wise is it to get involved in this area? Are we likely to see a

greater number of these deals? Mike Parker, the head of client and

strategic sales at Channel 4, says that it is best to keep an open mind.

But he points out that Channel 4, which is a government-owned statutory

corporation, is not allowed to indulge in overly risky ventures.



Parker adds: ’Although we take a cautious view, we have had

conversations in this area. The trouble is we are bombarded with

propositions. No matter how long you have been in this business, it is

not always possible to make a confident assessment about the prospects

of a company when they have not had time to print business cards, never

mind devise a business plan.



’Also, we already have a lot of airtime demand - largely fuelled by

dotcoms that can actually pay cash. But we are continuing to develop new

media ourselves, and if a company came along with a proposition in line

with the strategy we have in that area, and there might be a mutual

benefit in developing new services, we would look at it.’



The point about demand is one made by many media owners. Some are openly

scathing about Channel 5, implying that dotcoms are actually doing them

a favour by taking unwanted inventory.



The implication is that this sort of thing is appropriate for newcomers

such as Channel 5 or for obscure channels such as those you find in the

wilder reaches of digital satellite.



But that is not true either. The big networks in the US all started

doing it last year. Even on this side of the Atlantic, ITV’s Granada and

Carlton sales points claim that technically they were first off the

mark: when they joined forces to take a 50 per cent stake in Ask Jeeves

last year, airtime was part of the deal.



So will we see more of this?



Perhaps. It is not an easy business, as Steve Platt, the managing

director of Carlton Sales, points out: ’The difficulty in these deals is

assessing both what you are giving and what you are getting. If both

parties are happy, then fine - in that respect it doesn’t matter whether

you are a big broadcaster or a small broadcaster.



’However, big broadcasters can afford to be more selective and small

broadcasters tend to have a lot of airtime availability. My view is that

it becomes dangerous if you do a deal merely to soak up airtime

availability. Good business sense - and I’m sure Channel 5 has done its

research - always has to be at the heart of these things.’



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