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