Despite the growth of alternative media like TV, radio and internet over the last three decades, print continues to dominate the total ad spend of advertisers. But unlike mainstream print, regional print has now become the backbone of advertising driven by higher economic growth and under-penetration of products and services in Tier II and Tier III cities, a new report by brokerage Anand Rathi points out.
This is because metros and cities are now witnessing intense competition as readers are constantly consuming news on the digital medium - mobile phones, tablets and laptops but Tier II and III cities are offering sustainable avenues of growth and market expansion for most corporates.
"Print media's widespread appeal, high penetration, niche/localized positioning and contained impact from rising internet penetration, has enabled regional players to increase their share in advertisers’ total newspaper ad spend from 50% in 2007 to 60% in 2012," says the report.
Take a look at these stats:
Between calender year 2007 and 2012, regional print advertising registered a 14.3% compounded annual growth rate (CAGR) against 6.4% for English print and 11% for overall print. In fact ad rates in English print are now only six times of that in regional print versus nine times five years back in those regions.
And after having declined for six successive quarters, advertising revenue growth of Hindi print-media companies improved to 10% year-on-year in the third quarter of financial year 2013.
The logic is simple.
English print media is largely concentrated in metros and tier-I cities, but markets outside these are largely catered to by the regional print media. Besides, the penetration of digital media in these markets is lower here due to inadequate infrastructure (devices, networks) and the language barrier. (digital media continues to be largely English centric). And since GDP growth in key regional print markets is higher than the national average, regional print media is surely an attractive play at the moment.
So unlike regional print, digital media poses a higher risk for English print because of the imminent increase in broadband penetration in urban areas and a higher socio-economic strata of English readers, which makes it more affordable for them to switch to the internet.
Hindi speaking states offer potential to increase readership given low readership among literates
The 2012 Indian readership survey (IRS) estimates that 44% of India's literate population does not read any publication. This translates to significant potential for growth in readership, considering India has a 895 million literate population. And under-penetration of readership habits is more evident in states that are catered to by regional print media. So if one were to increase this reach, the impact of digital media is bound to be mitigated, especially in regional markets.
Elections in several key states and general elections are slated to take place in FY14 and FY15 and this generally aids print media as it promises more political advertising, announcements, higher readership and better engagement of readers.
Regional markets have been growing faster than metro-focused-English markets, driven by increased penetration of consumer products/branded goodsin tier 2/3 cities
Moreover, there has been some shift in advertising from TV to the print segment, as advertisers such as autos, consumer durables, lifestyle have shifted from shift from brand advertisements to those focused on discounts and promotions, a trend typical in challenging macro-economic environment
Add to that waning competition.
"In the key Hindi print markets of Rajasthan, Uttar Pradesh, Madhya Pradesh and Punjab, competition peaked in 2010 and 2011. These markets account for 61% of the combined gross state domestic product (GSDP) of states in the Hindi belt. The challenging macroeconomic environment has checked aggressive expansion/circulation strategies of the challengers and has blunted competitive intensity," says Yogesh Kirve, media analyst at Anand Rathi.
Easing competiton clearly augurs well for local players like DB Corp and Jagran Prakash as they would benefit in their key markets of MP, Rajasthan, Punjab and UP by rationalising circulation strategies and raising cover prices.
" Circulation revenues are now set to grow faster than advertising for Hindi print companies in FY13. There is headroom for regional print companies to raise realizations materially, due to customer stickiness and rising prosperity regionally. However, companies are likely to use their new-found pricing power judiciously as they balance considerations of profitability and growth," says Kirve.
With metros already being saturated, regional markets now provide ample scope for growth in the media sector as Tier II and III cities and towns are set to drive the Indian consumption story in the next few years.