Issue 7

Arnabgate, TRPs and What you need to know about the ‘Business’ of Journalism

Journalism, despite its claim to honesty, is not always about unbiased, neutral news coverage. What we see as news and the way it is presented and moulded into a narrative is often a product of a larger nexus of debates, deliberations, requests, and often political and social leanings. With sensational journalism and ideologically driven news becoming increasingly common, why the ‘business’ of news reporting needs to be understood today is more important than ever. Arnab Goswami and the Republic media’s TRP scandal is an important marker in understanding how this ‘business’ functions and affects news viewership, content and revenue from advertisements. 

Television Rating Point (TRP) is the primary mechanism that keeps track of the popularity of specific programmes and channels on the television. How the TRP works and the policies for survey and measurement of these points differ for each country. In India, however, BARC (Broadcasting Audience Rating Council) is responsible for installing 44,000 bar-o-meters to represent the program choices of over 2 lakh Indians. BARC thus, is supposed to be an independent, transparent body, vested with significant authority to understand television consumer behaviour within the country. However, despite the sample size of survey by these meters being too small for a country with over 2 crore television sets, another problem with the way the system is its ability to to manipulate these meters and their ratings by paying individuals or households to view particular channels or programmes. Several such instances would thus provide faulty samples and result in something that we see happening today with news agencies like the Republic. The question then arises,

Why do TRPs matter?

 Televised Rating Points, other than establishing what the Indian population watches, also decide who within the myriad of television channels is popular and worth investing by companies.Higher TRPs result in businesses and political parties advertising through these channels to get their product, ideology or achievements to the public. This, in turn, provides a platform for engagement between businesses, political organisations and viewers. This relationship between the three develops further as investments in these channels increases with higher increasing TRPs thus allowing for certain ideologies, products, and affiliations to thrive through advertisements and funding for the channel. 

 Why does the interaction/nexus/business matter?

When we as viewers watch these news channels, not only do we see specific advertisements for products, we also get a glimpse of promotional advertisements by political parties, the government as well as specific financial contributors to the channel, which in turn does affect our consumer behaviour and supply specific information about these products and organisations. Further, news channels may have ideological or political leanings, often stemming from the business aspect of it, or maybe projections of the organisation or editors’ opinions. These factors decide what ‘makes’ the news. Breaking news thus might be a result of deliberated pros and cons for the channel, its beliefs and is often reflected in the way news is presented on tv. What we get as news may thus reflect personal or organisational beliefs, ideologies or political leanings, owing to TRPs which increase the channel’s funding ,reach, narratives, and often holds power to affect public opinion. 

The business of news reporting is complicated and is often hard to understand. Sometimes, it might be difficult to differentiate between opinion, news and propaganda, owing to the fine line between the three. Thus, as consumers, what we can do is try to understand the industry as a business, separate and filter ideas of honesty and truth to further understand what constitutes news. 

While online media, Instagram channels and Twitter have become prominent spaces for debate, what still needs to be done is to understand and differentiate between news and organizational views we are surrounded by and subjected to every day.

Saman Fatima is an undergraduate History student who is an avid reader and poetry writer.

Picture Credits: “TV, Television and remote controller – stock photo” by espensorvik is licensed under CC BY 2.0

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

Issue 6

India’s Dominant Family Businesses Need Newer Challengers

The great Indian business family is dead. Long live the next great Indian business family. Like taxes and death, this key pillar of life in this country is ubiquitous. But like much of society around it, there are clear signs it is atomizing. No longer is the son of the rice merchant destined to continue the family tradition. He, and in some rare cases she, is experimenting with newer opportunities being constantly thrown up by a rapidly changing economy. 

That though doesn’t mean the end of the business family’s  dominant role in the Indian environment. Family Business Network, the Lausanne-based federation of business families, estimates their contribution to India’s gross domestic product at a whopping 70%. 

Not that there’s anything particularly aberrant about this. According to consulting firm Ernst and Young, 85% of companies in the Asia-Pacific are family-owned. Similarly, family businesses make up more than 60% of all European companies ranging from sole proprietors to large international enterprises. What’s more these businesses create value for themselves but also for the broader markets. Across the world, including in India, returns generated by family-owned businesses have been consistently higher than those by non-family owned ones.

For this they have been amply rewarded. According to the Billionaires Insights Report 2020 published by UBS and PwC the net worth of India’s billionaires has surged 90% in the 11 years since 2009.

It mirrors a worldwide trend of big businesses getting bigger. Thus, the Wall Street Journal recently advertised for the position of Reporter, Google. It isn’t uncommon for media outlets to assign reporters to cover specific sectors or countries but doing that for selected companies is rare. But so dominant are some global companies and so pervasive their influence that it may be blasphemous but not entirely untrue to say that Google matters more than many countries. As WSJ goes on to say in its job description: “Google’s impact on business and society is vast. Beyond its core search-and-advertising business, it is one of the world’s biggest video distributors through YouTube, the largest smartphone-software supplier thanks to Android, a leader in developing self-driving-car technology through Waymo, and a top contender in the booming cloud-computing industry.”

As it is with Google today, so it has been with others like McDonald’s, WalMart and General Motors in the past. Size leading to market dominance has ensured that some businesses have a disproportionately large influence on the world. It has led to the constant tussle between big business and regulators keen to ensure they don’t squeeze smaller competitors out of the market.

That’s where the biggest danger of business family dominance in India lies. The first two decades following the liberalization of the economy threw up new names in the business landscape of the country. Entrepreneurs like Sunil Mittal in telecom, Uday Kotak in banking, Naresh Goyal and later Rahul Bhatia and Rakesh Gangwal in aviation, rushed to take advantage of the opening up to the private sector of areas that had hitherto been reserved for state-run monopolies. Some like Naresh Goyal came to grief. Others soldiered on and have become the business families of today. At Wipro, the software-to-consumer products conglomerate that was set up by Hasham Premji in 1945, the third generation of Premjis, in the form of new chairman Rishad Premji, is now in charge.

It is the way economies with relatively free markets grow. In fact, crystal ball gazing in the late 1990s led several analysts to predict that in the future Indian business would be driven by companies like Ranbaxy, Samtel, Infosys, ILFS, Kotak Mahindra and Yes Bank, as much as it would by existing powerhouses like Reliance and Tata. 

The future is here and sadly most names in that list of future stars have dropped off with only Kotak and Bharti holding fort. In fact, over the last few years, a disturbing trend has  emerged with a handful of powerful families mopping up businesses across sectors. Despite a surge in entrepreneurship generously funded by private equity and venture capital, there aren’t too many start-ups that look like challenging the incumbents whether it is in existing business areas or even brand new ones like e-commerce, green energy, telecom or retail.  

Worse still, if some recent changes proposed by the country’s central bank are implemented, that dominance may grow to dangerous levels. With capital being the first need of any new venture, RBI’s proposal to allow business groups to set up banks may just add more heft to their existing clout. In a linkedin post two former deputy governors of the RBI, Raghuram Rajan and Urjit Patel warned that allowing corporate entry into banking “will further exacerbate the concentration of economic (and political) power in certain business houses.”  

The tragedy is that going forward the Indian business world could end up looking more like that of the pre 1990s era when a handful of names reigned supreme. Groups like Aditya Birla, Ambani, Mahindra and Mahindra, Vedanta, Bajaj, Jindal, Munjal, RPG, Hinduja, Murugappa, Lalbhai and Adani are a throwback to our past. In the 21st century, they need to be challenged by newer groups. That’s not going to happen if regulation, and regulators, continue to throw their lot with the incumbents. 

Picture Credit: “India Map on Indian Map” by Kush Patel is marked with CC0 1.0

Sundeep Khanna is a columnist, business writer and executive editor at the Mint.

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).


What do stock market fluctuations in 2020 tell us about human behaviour?

By Srijita Ghosh

If I ask you what’s common between choosing the wrong major and not being able to lose the last 5 kgs that you thought you’d lose by summer, most of you would think there isn’t one. But if I ask you the same question for the stock market behaviour during the dot com bubble (most of you were probably not even born by then) and the same stock market behaviour during the recent pandemic, you can probably name a few. However, the common thread amongst all of them is that they are all driven by incorrect beliefs about future events. 

You were so sure that economics was the right major for you, but at the end of the second year, you realize you have gravely underestimated the technical skills required to finish it and now you wish you had chosen something else. It is natural and quite common to have a wrong belief or estimate about a future event since future events are fundamentally uncertain. 

Economists have been aware of incorrect beliefs and their impact on decision making but modelling them formally has started fairly recently. Taking motivation from psychology and neuroscience, economists have started modelling decision-making under the assumption that the agents are cognitively constrained. They can make mistakes while predicting some uncertain events about the future which can have severe consequences on their life and living. 

It’s the same cognitive constraints that drive the seemingly irrational behaviour in the stock market. But the mistakes that people make in the stock market or most economic context are not random. By studying the patterns of mistakes, we can design effective policies to improve welfare. 

In the context of the stock market, recent studies by Bordalo et al (2020) have found that people overreact to good news and overvalue them in the long run. If we overestimate the long-run valuation of stocks, then eventually we will be disappointed since our predicted value will not be materialized. This can lead to perverse behaviour in the market.

For example, during the current pandemic, the stock market remained more optimistic than what would be expected from the condition of the economy per se. It might be driven by the overestimation of the long-run fundamentals of the stock market. The problem, however, is that the pandemic initiates a “regime change”, which means we cannot be sure where the fundamentals of the stocks would lie in the post-pandemic period.

Another cognitive function that severely affects our belief is that of memory. Various puzzles in the stock market can be related to the nature of memory. There are different features of the memory that affect what we believe. The most obvious one would be the temporal nature of memory; we remember things with more clarity that have happened in the recent past than a distant past. This implies that while forming belief we put more weight on the recent phenomenon that is the underlying trend. This can lead to having an overreaction to bad news. 

The other, more complex feature of memory is representativeness, which implies that different cues about the same underlying object can lead to very different beliefs depending on what comes to mind. In a recent study by Wachter and Kahana (2020) has shown that we often associate two events that are temporally related. If one of these events repeats again we remember both the events, as they are contextually related events. This can lead to further distortion in belief and some examples of such behaviour would be under or over-reaction to news, fear being a leading motivator of financial decision-making, and so on. 

However, we should note that this literature is fairly young and researchers all over the world are trying to understand the impact of cognitive functions on beliefs and subsequently on decision-making. So we should proceed with caution when interpreting the results from the early experiments. Just like any other scientific discipline, we can only conclusively make remarks after several studies have reproduced similar results. 

One major problem here is that human behaviour is complex and when combined with the stock market framework the scope of non-standard (from a neoclassical economics perspective) is large. This makes analyzing and predicting behaviour in the stock market particularly difficult. But one way forward would be to understand how humans form beliefs generally and extend that to the stock market scenario. This will also help us become better decision-makers and be more consistent with our own world-view. 

Srijita Ghosh is an Assistant Professor of Economics at Ashoka University and has done her Ph.D at New York University.


Expectations of Fundamentals and Stock Market Puzzles by Pedro Bordalo, Nicola Gennaioli, Rafael La Porta, and Andrei Shleifer (2020)

Memory and Representativeness by Bordalo, Pedro, Katherine Coffman, Nicola Gennaioli, Frederik Schwerter, and Andrei Shleifer. 2020

 A Retrieved-Context Theory of Financial Decisions by Jessica A. Wachter and Michael J. Kahana

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).