There probably isn’t a word in the English language which can appropriately describe the gigantic size of the Indian newspaper industry. According to the Registrar of Newspapers for India (RNI), there were as many as 1,10,851 publications in the country as on March 31, 2016. For long, the print industry benefitted from the usual morning reading habits of common Indians. However, times are fast changing, with millennials accessing information on their mobile gadgets, supported by internet technology and keeping newspapers at arm’s length.
Circulation figures don’t offer the complete picture
Founded in 1948, the Audit Bureau of Circulation (ABC) is an organisation consisting of publishers, advertisers and advertising agencies. ABC’s primary job is to audit the circulation figures of member newspapers every six months. A quick glance at the list of highest circulated publications across languages (July – Dec 2016) leaves one mightily pleased. In the digital age when industry conversations often revolve around predicting the death of the print industry, twenty Indian newspapers, affiliated to ABC, have an impressive circulation of over 1 million copies.
Out of the forty-one highest selling newspapers spread across 13 languages, thirty-two registered an increase in circulation recently. But that’s only one side of the story and is not reflective of a sustained industry trend. In the previous ABC survey (Jan – July 2016), the circulation of twenty-two of these top newspapers had declined. The performance of English-language dailies was most worrying. Surprisingly, not even a single of the top five English newspapers – Times of India, The Hindu, Hindustan Times, The Telegraph and The Economic Times – managed to increase its circulation.
It is noteworthy to mention that all five made a strong comeback in the next six months. Similarly, the circulation of market leading newspapers in seven languages, including Bengali, Hindi, Kannada, Malayalam and Marathi, picked up in last 6 months' figures after seeing a decline. As per the latest ABC findings, economic development, competitive pricing and home delivery of newspapers were identified as key reasons driving the growth.
After spending more than two decades in the newspaper and advertising business, Jwalant Swaroop took up a slightly different assignment in late 2015. Riding on the digital wave, he entered what is labelled as “emotional wellness space”.
One thing that he is certain about is the changing behaviour of readers. The younger generation is not engaging with newspapers due to the rise of internet-based communication. Being mindful of that development, he shed light on what was termed as the “unorganised sector” of the print industry, the innumerable non-ABC newspapers whose circulation figures are not available. “I think non-ABC publishers have grown to some extent,” said Swaroop, CEO of Happiness Infinite Solutions. His assessment was premised on increased literacy levels and the shift towards localised and neighbourhood-specific news content. Owing to the lack of data, Swaroop’s observation cannot be corroborated since ABC certifies only 967 publications out of which 910 are newspapers and 57 magazines. There is, however, a bigger question: even if we make an assumption that smaller newspapers have grown, does the market offer enough advertising revenues for them?
Print’s pie in ad money amid shift towards digital
The Indian advertising market was not spared when a sub-prime mortgage crisis in the United States developed into an international concern with Lehman Brothers announcing bankruptcy on September 15, 2008. The following year was described as “annus horribilis” by Madison Media from the domestic advertising standpoint. In 2009, two noteworthy developments occurred. The total ad spends dwindled by 10%, thereby causing a drop in the industry size from Rs 20,717 crore to Rs 18,670 crore. Secondly, television managed to dethrone print as the medium which attracted maximum spends. To be precise, TV’s sum total ad spend in 2009 was Rs 8,492 crore, whereas print’s share was pegged at Rs 7,806 crore. At that time, digital advertising was worth a meagre Rs 453 crore. Over the next seven years, the industry underwent unprecedented transformations.
The reputed Pitch Madison Advertising Report’s forecast for 2017 put the total size of the Indian media and advertising market at Rs 56,152 crore. Far from staring into oblivion, the print industry alone is expected to be worth Rs 19,869 crore by the end of this year. While television will retain the largest chunk of the pie with a handsome Rs 21,296 crore in its bag, the talk of the town shall surely be the digital medium which is slated to grow by 25% to Rs 9,144 crore. “Demand for print is not coming down,” said Pradeep Dwivedi, CEO at Sakal Media, the largest Marathi publication. Dwivedi, who was previously heading marketing and sales at Dainik Bhaskar, opined that the money which is being spent on print is “adding to the ad spends” and increasing the size of the advertising pie. He insisted that the ad spends are not getting compromised. Despite that, the survival of the majority print publications is not ensured.
|Medium||Projected ad spends (Rs in crore)|
Projected growth in ad spends across mediums. (Source: PMAR 2017)
As per Dwivedi, 90-95% of the ad spends will be cornered by the top two-three publications in the market. While these will continue to “do well”, smaller publications “will get hit” and might even have to shut shop. “I’d go for digital, rather than a smaller publication,” added Dwivedi, as he expounded the advertiser’s perspective.
In the absence of any recent Indian Readership Survey (IRS) data, the last survey findings of which were published in 2014, the advertisers do not have any credible report on the basis of which they can plan their advertising expenditure. Given such a backdrop, he narrated that one can “either go with legacy media” or premise his/her spends around ABC numbers. Incidentally, the probability of smaller publications prospering out of these two ways of disbursing spends is extremely shallow. Though Dwivedi believed that print won’t face any radical changes in the immediate future, he felt that the industry is not going beyond a point globally. “By 2022-23, print (in India) will start declining or will remain at that level,” he mentioned, highlighting that digital has left behind both television and print across the world. He also pointed out that the availability of quality digital content in Indian languages could further decline the preference for newspapers among millennials.
The bottom line of the business
Following Prime Minister Narendra Modi’s announcement to demonetise high currency notes on November 8, 2016, legacy print media unleashed alarming cost-cutting measures. Gearing up for its “digital future”, Hindustan Times shut four editions in Bhopal, Indore, Kolkata and Ranchi in January. They also halted operations of their business bureau in Delhi, apart from bringing up the shutters in Allahabad, Kanpur and Varanasi offices. In eastern India, ABP Group, which is the publisher of The Telegraph and Anandabazaar Patrika, shunted out hundreds of employees in an effort to “right-size” their organisation in the face of economic realities. Apart from these two, Deccan Herald folded up its Delhi edition, whereas The Times of India went on a hiring freeze.
While Swaroop claimed that there were not many instances of publishers going completely out of business, the real question was in relation to how many new editions and print publications will come out in the future. “I don’t think new editions or publications will be launched,” said the former CEO of Lokmat Media, adding that publishers would refrain from investing in “dinosaur machines” to keep print rolling.
The assertion is not entirely true given the many new editions that have come out recently. These include The Statesman’s early edition dedicated to northern markets, HT’s multiple upcoming editions and Bhaskar’s rumoured scale-up of its presence in New Delhi through an enhanced Delhi edition.
However, what adds merit to Swaroop’s reasoning is the fact that while the costs involved in running a print business don’t seem to be coming down, digital provides the opportunity of reaching out to a vast audience at a considerably lower investment. This has led to the cropping up of many digital journalism websites such as Newslaundry, Scroll, ScoopWhoop and The Wire who are competing with legacy media on the internet. The problem with such initiatives though is the lack of a coherent business model capable of delivering profitability in the longer run.
For instance, both The Wire, led by Siddharth Varadarajan, and Pankaj Pachauri’s Go News fall under the category of not-for-profit entities. While The Wire has received Rs 3.7 crore in funding from the Independent and Public Spirited Media Foundation (IPSMF), Go News has been funded by “well-wishers” of Pachauri. In the case of Newslaundry, they are attempting to rewrite the rules of the game through a subscriber-funded model of journalism which is aided to a certain degree by venture capitalists. Even The Ken is experimenting with a paywall. But none of the digital news start-ups have so far succeeded in coming out with a business model which is tried, tested and can be replicated by the legacy media.
From a financial standpoint, legacy media gains its relevance from the fact that the “newspaper still pays the bills” despite the emergence of digital. While start-ups are struggling to find their way, even the digital operations of print companies are deriving their strength from print because they are themselves not profitable. At the end of the fiscal year 2017, DB Digital’s sum total revenues stood at Rs 55 crore with the bottom line dipped in red. In the first three quarters alone, they accumulated losses amounting to Rs 17.7 crore. Admitting that the “digital business is not about bottom line”, Dainik Bhaskar Group’s Deputy Managing Director Pramod Agarwal told Impact Magazine that they were merely in the investment phase.
“We are not looking at driving profitability. That’s not our core. Our core is how do we build a user base and how do we build stickiness,” Agarwal said. Much of this is bankrolled by the company’s newspaper operations which brought in almost Rs 1600 crore till Q3, FY17. The situation at HT Media is not very different either, with the share of digital in the overall revenues being relatively less. Between April-December 2016, HT Media generated Rs 112.48 crore from its digital business, whereas their multimedia content management operations raked in Rs 149.89 crore. With the digital business far from being profitable till the end of FY17 at HT Media, print will continue to be the company’s main source of income for the next few years to come.
Reflecting on the industry developments, media planner Arun Sharma explained that the bottom line positioning of digital businesses is unfavourable for almost every publisher. “The bottom line will be in red. There is no doubt about it,” said Sharma, Senior Vice President, Lodestar. Contrary to popular imagination, he noted that digital’s input costs are quite high given the amount of money that needs to be invested in servers and making apps. But he simultaneously observed that digital publishers also suffer from lower revenue prospects. “When it comes to digital, significant portion of the advertising revenues goes to Google and Facebook. A very small portion is left for publishers,” he mentioned.
“The bottom line will be in red. There is no doubt about it” – Arun Sharma, Senior Vice President, Lodestar
This does not mean that print is not suffering from its own revenue woes. According to Sharma, the English-language publishers are particularly struggling to increase their top line. The cost-cutting measures, which made headlines recently, were reportedly done to improve the bottom line by cutting down on expenditure. For publishers, the inability to scale-up and monetize their digital operations is a huge matter of concern. However, Sharma had a warning for them given the tough business environment. “The increase in digital revenues will not be equal to the fall in print revenues,” he concluded. While the jury on that pronouncement is still out, Swaroop agreed that “most publishers were out of budget” in FY17 not simply because of demonetisation but also due to what he perceived as the impact of digital on print advertising volumes. Despite that, Dwivedi confidently maintained that market leading publishers are somehow managing an average PAT (profit after taxes) margin of 10-12%.
What print publishers have nevertheless realised is that they need to be prepared for a “digital future” given the present circumstances. Based on their convictions, publishers have embarked on different paths. At HT Media, the strategy is one of integration wherein content creators are being trained to serve audiences across print, mobile and web. For someone like The Indian Express, there is a huge amount of investment in online by creating products across languages and domains. Their strategy is clearly to work towards integration with a fair amount of separation by erecting some “kind of a wall between digital and print” so as to differentiate between the two. The question which remains to be answered is whether publishers will be successful in sustaining their print operations even as they plan to radically scale-up their digital presence eyeing the future.