Analysis of Indian Print Media 2009
2009: A roller coaster ride for Indian print media
Rahul Sharma | afaqs! | New Delhi, December 30, 2009
It is difficult to smile, when there is little to cheer about.
This was the prevailing sentiment in print media companies in India, and pretty much across the globe, when they were bringing out papers on January 1, 2009.
Nobody was sure how deep and wide the financial crisis was; how long the slowdown would continue; and more importantly, whether they would last it out.
Looking back on the tumultuous year of 2009, it was a roller coaster ride for the Rs 16,200 crore (as per PricewaterhouseCoopers’ 2009 report) print media industry in India. The impact of the storm on the sector, whose lifeline is advertising revenues, can be gauged from the fact that ad spends in India, as per Zenith Optimedia, grew 4.5 percent in 2009, compared to an 18.9 percent in 2008. In addition, the actual ad spend growth is lower than the 6.4 percent growth that Zenith Optimedia had predicted in the beginning of the year. But as they say, the show must go on.
Unlike the West, there were few cases of newspapers being shut down. Most resorted to reducing costs through job or salary cuts and reduction in the number of pages and supplements.
On the other hand, new editions of newspapers, largely regional, were launched; and Indian editions of foreign magazines landed in the market as per plan. Local advertisers were chased; and innovations on product and sales side took place, among other things, to beat the slowdown blues.
Products from newspaper companies catering to tier I and tier II cities, which were not as affected by the slowdown as the metropolitan cities, registered growth. Overall, it was tough. But as newspaper owners look back, it wasn’t as bad as was anticipated.
The big picture
The immediate response of any corporate to a downturn is to cut back on marketing spends. In 2009, there was a full-blown crisis at the global level and a major slowdown in India’s economic growth. Clocking more than 9 percent for the three years preceding 2008-09, India’s growth rate in 2008-09 slowed down to 6.7 percent, as per government data.
The situation in last three months of 2008 was similar to the first three months of 2009. The growth rate in both the quarters was 5.8 percent. The macroeconomic scenario did not look good and like most of the sectors, India’s print media too suffered.
A couple of events also helped print media companies counter the downturn. One of them was the softening of newsprint prices. For most organisations, however, the benefits of lower newsprint prices did not kick in immediately. The inventory procured at higher prices was being utilised for the first three to six months of the year.
As per analysts, the cost of newsprint is roughly 50-55 percent of the total costs of newspaper publishers. The year started with newsprint prices at around $750 a tonne. By April, the price was down to $570 per tonne and four months later, it went further south to $460 per tonne. The decline was mainly on account of slack in demand, because many newspapers in the developed markets had shut down. The situation was so grim that many newsprint mills were sold or shut down.
In the last three months of the year, the prices started to firm up. The price for October-December 2009 is $550 per tonne. From an average price of $ 750 per tonne up to October 2008; this year, the price hovered between $450-525 per tonne.
“Also, the rupee has become stronger now. So, over the course of the year, the situation has improved for newspaper companies in India,” says Anil Vig, managing director, Anika International, a newsprint importer. Going ahead, industry sources say that the price will head northwards. But this time, it will be due to a supply push.
On the pricing front, economic conditions ensured that papers could not indulge in price wars. Most newspapers maintained a status quo or even hiked the cover price. “This is something good that happened. Most newspaper owners agreed on not going in for a cut,” says Bharat Gupta, president – marketing, Dainik Jagran.
The year had its share of good news and bad news. Metro Now, published by Metropolitan Media Company, a 50:50 joint venture between India’s two large media houses, Hindustan Times Media Limited and BCCL, was shut down. It was restarted, but this time, it became a free supplement that came along with Hindustan Times and The Times of India. Mid-Day, too, scrapped its morning edition in Mumbai.
Though most of the newspapers were cautious in their approach; expansion continued nonetheless. Non-English language dailies led the way, with at least 10 Hindi publications launching new editions.
Nai Dunia group launched Sunday Nai Dunia in 10 cities and a youth supplement, Yuva, in Indore. Hindustan times launched the Allahabad and Bareily editions of its Hindi daily, Hindustan. Lokmat entered the Goa market; Rajasthan Patrika expanded its footprint in Madhya Pradesh with the launch of its Jabalpur edition; Dainik Jagran launched a ‘Rashtriya Sanskaran’, and also added new territories to its weekly, City Plus.
Among the English dailies, Hindustan Times went for a makeover right in the middle of the year and in December, tied up with Washington Post for content sharing. Its business daily, Mint, which has a content sharing agreement with the Wall Street Journal, launched its Kolkata and Chennai editions. India’s largest English daily, The Times of India, launched its weekend edition, Crest. DNA introduced its Sunday supplement, The Mag.
As it appears, there was more action in the non-English language space. The regional language press performed well this year. Hindi and regional dailies, broadly, showed growth in readership. Since they cater to tier I and II cities, they were more stable than the English dailies.
HT Media, which, towards the end of the year, announced the de-merger of its Hindi business into a separate company, has been seeing a growth of 25-30 percent in its Hindi venture, Hindustan. Dainik Bhaskar, which is a big player in the regional language market, came out with an IPO in December, which was oversubscribed 39 times. Dainik Jagran expects a minimum growth of 50 percent in FY 2010 and double-digit growth in circulation revenues.
According to Starcom Mediavest, of the total ad spends in print media, 10 percent went to the English press, 25 percent to Hindi and the rest to regional languages. “The regional market is expected to do better than national. The ad ratio for regional is far lower than national benchmarks. This divergence is expected to reduce over the years. This sector will continue to see interest from both financial and strategic investors,” says Mohit Ralhan, head – media & telecom investments, Baring Private Equity Partners India.
An indicator of how newspapers did in 2009 is the readership. Round 2 (R2) of Indian Readership Survey (IRS), which captures readership trends for the period, January-June 2009, showed an increase in total readership (TR) of all newspapers combined, over the same period last year.
The total readership of all English, Hindi and regional dailies combined in R2 2008 was 34.1 crore. It increased by 4.3 percent, to 35.6 crore, in R2 2009.
Overall, the readership of English newspapers, and more so, the magazines, was hit harder. The TR of all languages’ weeklies and monthlies combined dropped by 6.2 percent, between R2 2009 and R2 2008. In R2 2009, the TR was 10.29 crore, as opposed to a TR of 10.98 crore in R2 2008.
The list of top 10 newspapers remains more or less stagnant, with five registering an increase in readership; and five showing a decline.
A key development in 2009 was the announcement of the merger between the National Readership Studies Council (NRSC), which publishes the National Readership Survey (NRS), and Media Research Users Council (MRUC), which publishes IRS. Thus, there will be only one readership survey in future, which means one yardstick. According to analysts, this means that no longer would an advertiser or publisher have the option of picking the readership survey results in line with his objectives.
Overall, as per PricewaterhouseCoopers’ (PwC) report, after an average growth of 13.3 percent in four years up to 2008, the print media industry’s growth rate went down to 7.5 percent in 2008. In 2009, it is expected to further slide down to 4.1 percent. The industry is projected to grow to Rs 16,850 crore rupees this year, says the report.
Where is the money?
Though the flow of advertising money into print media did not fall in 2009, the pace was considerably reduced. According to TAM AdEx data, print ad volumes grew by 2 percent between January-September 2009, as compared to the same period last year. In contrast, the ad volumes for the same period in 2008 were 6 percent more than that in 2007.
The initial months of 2009 were extremely difficult. “The earliest casualties were the supplements and the extras. They reduced the number of pages day-by-day, and in some cases, they were merged. Eventually, the newspapers became more and more thin without much advertising support,” says RS Suryanaryanan, media director, Lintas Media Group.
In the March-April period, educational institutes, primarily the private ones, engaged in aggressive marketing and advertising to attract students. Newspapers were flooded with ads, so much so that, as per TAM AdEx, educational institutes became the largest advertiser, by volumes, across all categories of print media. For the entire January-September period, they had the highest (18 per cent) share.
Another saving grace was the general elections. “The total media spends by all the political parties, national and regional, and candidates during the Lok Sabha elections, through formal and informal advertising and bulk deals, would be around Rs 4,000 crore,” says Dr N Bhaskara Rao, chairman, Center for Media Studies. This, in a way, compensated for the lack of corporate advertising that would have otherwise existed, says one of the executives at a newspaper.
The government too, as part of the stimulus package, in February 2009, announced a waiver of 15 percent on agency commission and a 10 percent hike in DAVP (Directorate of Audio-Visual Publicity) rates. All central government ads are routed through DAVP. The rate hike was to last till the end of June, but the newspaper owners met the Information and Broadcasting minister, Ambika Soni, asking for an extension till December, which was granted. The government also promised the industry a new Press Act. The government is in the process of making changes to the Press and Registration of Books (PRB) Act, 1967.
“The year was better, May onwards. We had a good Diwali. Typically, post-Diwali, there is a lull. But a couple of telecom launches in Tamil Nadu, post Diwali, energised the scenario,” says KR Skandraaj, chief operating officer, Sovereign Media Marketing, publishers of Tamil newspaper, Daily Thanthi.
The increasing action in the telecom space — entry of new players, existing players entering new territories, mobile phone manufacturers launching new models and so on — benefited the media companies.
“Ad rates fell in the first quarter; but gradually strengthened, as the economy became stable and the advertisers became aggressive,” says Tarun Deep Kumar, executive director, India - North, Starcom Mediavest.
The growth rate, nonetheless, has been slow and has hit the papers hard. “Overall growth of print media has gone down, because ad rates have come down substantially. They haven’t let circulation fall. It hasn’t grown either. They have clubbed it with different pricing strategies when it came to ad rates. They were affected, because they weren’t getting the ad rates that they were used to,” says Timmy Kandhari, director, media and entertainment division, PwC.
“Because of recession, de-growth was expected. It was partly taken care of by elections and the festive season, but there has been a drop in print spends. Magazines have suffered more than newspapers. Newspapers have come back aggressively, with attractive packages and innovation,” says Anita Nayyar, chief executive officer, MPG.
She adds that some media companies have come with 360-degree offerings, by pushing packages across various products of the company in a combination.
Various newspapers introduced schemes and innovations in selling ad space. Dainik Jagaran, the country’s largest newspaper, launched the 9.9.9 scheme, in September, just before Diwali. Under this scheme, a full page in Dainik Jagran cost Rs 9,99,999.
“We got more than 100 full page ads. This provided us a bank, as typically, post-Diwali, advertising falls. It also attached us to a whole new set of clients and helped gain a market share exclusive to Jagran,” says Bharat Gupta, president - marketing, Dainik Jagran.
I Venkat, Director, Eenadu, which introduced zonal editions in all 294 constituencies at the time of general elections, adds, “One of the things that we had to do was to build confidence with the advertiser. You cannot expect him to put money, just by selling a concept. We also got into smaller clients.”
The year also saw a number of Indian editions of foreign magazines being launched, the most notable being Forbes, Harpers Bazaar, CFO. Though they did create a buzz, media buyers say it’s too early to say whether they have been successful.
“The launches gave the market a fillip, but sustainability will be an issue,” says Nayyar. The facsimile edition of Wall Street Journal also arrived this year. In addition, a few magazines were launched, such as Open from the RPG group and Career 360 from 9.9 Mediaworx. “There has been slower uptake on magazines. They might take a long time to break even,” says Kandhari of PwC.