The Economist is wrong, print media is declining in India too

Yes, there is a print media crisis.

“At Rs 5,028 crore, the 19-year-old Zee is now India’s largest media group by revenues along with the 173-year-old the Times Group,” says Vanita Kohli-Khandekar in Business Standard as part of her introduction to an interview with Zee’s Subhash Chandra.

In completely unrelated news, James Murdoch announced the closure of the News of the World, Britain’s largest selling Sunday newspaper, under pressure from loss of readers and loss of advertising revenue in the wake of revelations that NOTW journalists hacked phones of murder victims and relatives of people killed in terrorist attacks. If one thought that matters could not get worse, they did. News International admitted that it had made illegal payments to police officers.

[caption id=“attachment_38449” align=“alignleft” width=“380” caption=“What is flourishing is not so much the print newspaper business, but the printing and newsprint businesses. Olivia Harris/Reuters”]  [/caption]

This morning, The Economist published a story on the news industry, with a focus on newspapers. “American newspapers are in trouble, but in emerging markets the news industry is roaring ahead,” the story said.

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“There is certainly no sign of a news crisis in India, now the world’s fastest-growing newspaper market. Between 2005 and 2009 the number of paid-for daily newspapers in the country increased by 44% to 2,700 and the total number of newspapers rose by 23% to more than 74,000, according to the WAN,” the story added. (WAN is the World Association of Newspapers).

There is a news crisis in India, and T_he Economist_ has got trapped in data that misleads.

There’s a need to go well beyond the WAN data and understand the dynamics of the newspaper industry in India. While the number of titles and editions has, indeed, grown, there is a need to look at profitability, at yield and the business model itself.

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First, take a look at the macro-picture, from Mindshare India. The Economist article refers to growth in advertising expenditure as measured by Neilsen India. “Newspaper and magazine advertising expenditure increased by 32% in the year to June 2010, according to Nielsen India, a market-research firm.” Neilsen measures only space and by rate card, not by negotiated rates - which will reveal discounts which are getting higher each year.

This is how Mindshare India, India’s largest media buying agency, sees the scenario, as published in Campaign India in January 2011.

In absolute monetary growth, TV is estimated to deliver 60% of the YoY growth in advertising expenditure and print 22%. The current (calendar) year will also see the first year in which advertising expenditure on TV will be greater than advertising expenditure on print.

This brings one to the issue of the business model of newspapers in India. Newspapers in India are about the cheapest in the world (to the subscriber).

Here’s a quick look at the cover prices and paginations of a few newspapers available to consumers in Mumbai:

It’s important to remember that the prices above are only cover prices; distribution costs and commissions could be over 50% of the cover price. Just factoring newsprint and production costs alone, newspapers lose a minimum of Rs. 5 for each copy printed. And the cost of news gathering, which is increasing each year as too many newspapers are chasing too few journalists, is an added burden.

This makes the newspaper business in India predominantly dependent on advertising revenue - and the Mindshare India figures prove, as is the case in most of the world, that the advertisers are, increasingly, looking elsewhere.

The unusual business model also leads to unusual publishers. The low yields from subscriptions - which is a model set by the incumbent players - makes the business close to unviable except for those with very deep pockets - or those who can afford to take a hit and believe that it is worthwhile to take a hit. As we see in news television, politicians of every colour and hue are investing in news media - so that they can send out controlled and favourable messages to their constituents.

What is flourishing, then, is not so much the print newspaper business - but the printing and newsprint businesses.

Which brings one back to the news that Zee is now as large as The Times of India. Superficially, they are as big as each other. The big difference is that more than 50% of Zee’s revenues now come from distribution, resulting in a decreasing dependence on the advertiser. The Times of India, as is the case with all newspapers, sees insignificant subscription revenue and increasing pressure on their main source of revenue, advertising, coupled with increasing newsgathering and production costs, a very different picture than the one painted by The Economist. Unlike Zee, which saw the need to increase subscription revenues and succeeded in the task, The Times of India and other newspapers cannot do much by way to increase subscriber revenues.

Which brings us to the third news story that the environment threw up this week, News of the World’s closing down. Yes, the newspaper had taken a battering from both readers and advertisers thanks to the revelations on the voice-mail hacking, but did that call for the newspaper to be shut down? That it is the largest Sunday paper in Britain suggests that the newspaper could have apologised (which they have) put some checks and balances into place and recovered.

Is the problem of revenue in a fast-growing digital market a bigger reason to shut down - and the recent brouhaha the perfect excuse? Another story in The Economist sheds some light: “The audience is bigger than ever, if you include all platforms,” says Larry Kilman of the World Association of Newspapers. “It’s not an audience problem-it’s a revenue problem.”

Worldwide trends in digital paid newspapers clearly point to success only in cases where readers ‘profit’ from the reading. While the News of The World could be a great laugh, it certainly does not deliver utility - and will certainly have had limited appeal in a digital pay environment. The newsgathering costs of the UK tabloids are astronomically high, which was worth it when you had the readers and the advertisers. In a digital world, the number of readers may explode exponentially - but the revenue from advertisers shrinks dramatically as well. And that’s not good business.