Arindam's forecast and the failing print business model

Even though the IIPM boss contradicted himself on newspaper advertising, he is surely right on the relative decline of print

Vivek Kaul December 20, 2014 17:55:12 IST
Arindam's forecast and the failing print business model

Talking about contradictions, here is an interesting one.

The Times of India edition dated 18 March 2013 had a huge advertisement featuring Arindam Chaudhuri, the pony-tailed bossman at IIPM (Indian Institute of Planning and Management) and his father Malay Chaudhuri. The advertisement congratulated Chaudhuri Sr for having turned 75 and had the vision to launch IIPM 40 years back.

This advertisement came four days after Arindam Chaudhuri wrote a column titled Are you still a moron advertising in newspapers? The column ended with the rather prophetic line. "However, yes, your business may not be able to cater to the next generation unless you realise that you are a moron to be still advertising in newspapers!"

Arindams forecast and the failing print business model

The IIPM bosses.

Why Chaudhuri chose to contradict himself is something only he can explain. But his column does offer reasons for why IIPM seems to be gradually moving its advertising budget away from newspapers, the front page advertisement in The Times of India notwithstanding.

As Chaudhuri writes, "It all started changing around 2009 to 2011! As everyone knows, we were one of the country's biggest ad-spenders till 2012! But interestingly, our returns from newspaper advertising started dropping sharply from 2009-10. The first year, the admission applications we received from students due to our newspaper advertisements dropped to 40 percent of the levels we had in 2008-09. The next year, the same was 25 percent compared to 2008-09 levels. And finally in 2011-12, our applications from advertisements were, hold your breath, just 5 percent compared to 2008-09! So basically, in three years, our returns from newspaper advertising came down by a mind numbing 95 percent!"

While this might also be a result of the falling reputation of IIPM, given the negative coverage its constantly got in the media over the last few years, but Chaudhuri does make an important point here.

IIPM's target audience would be people in their early 20s, living in cities and who come from reasonably rich families (given the high fees that IIPM charges). There is enough anecdotal evidence to suggest that people belonging to this demographic group consume news largely online by logging onto the internet through their computers and now their mobile phones. Or, as Chaudhuri aptly puts it, "if you wanted to target the youth, or actually anyone born after 1980 for certain! None of them is reading newspapers anymore! So how will this segment see your ads in the first place and how will they pick up your application form? Yes, that's the hard fact!"

Various readership surveys have shown over the years that print readership in India has remained stagnant. In comparison people logging onto the internet is growing at a very fast pace, albeit on a lower base. It would be safe to say that a large number of advertisers are interested in this lower base which typically comprises youth coming from reasonably well to do families living in cities. In short these are the people who have the money to spend (either their own or that belonging to their parents).

So the moral of the story is that Arindam Chaudhuri is making an important point though he has chosen to contradict it himself.

What Chaudhuri's column does not answer is why is newspaper readership stagnating? When it comes to city-bred youth, at some level it's a matter of what we can call the Levi's syndrome. The jeans brand Levi's over the years came to be associated with something your parents wore - at least in the minds of American youth. The same stands true for newspapers as well. Reading newspapers is not cool, at least among the youth.

Newspapers in India have tried to tackle this through what they feel is younger and funkier design. The looks are getting trendier and there is more sex and entertainment to read about. But this hasn't worked beyond a point. As Chaudhuri puts it, "naked bodies and titillation are far more easily available and in greater variety on the internet". And all said and done a newspaper has its limits on this front. The internet doesn't.

An extension of filling the newspaper with sex and entertainment has been the conclusion that most readers are not looking for serious content in a newspaper. This is what we can call The Times of India syndrome. Since, this kind of positioning has worked for India's most profitable newspaper, newspapers (across different languages) have been looking to do the same thing. But what works for The Times of India doesn't necessarily work for others as well.

As marketing guru Al Ries told me in an interview, "Everyone assumes the No 1 brand must be doing the right thing because it's the market leader. Therefore, we should do exactly the same thing, but better. That seldom works." There are newspapers which have lost hundreds of crore trying to bring out a better Times of India than The Times of India.

They forget a very basic point. If I as a reader want to read The Times of India, I will read The Times of India, and not a clone. More newspapers (at least the top English and top Hindi newspapers) have been trying to bring out different versions of The Times of India, though their managers, editors and promoters will never admit to the same. This has stagnated readership at one level as the standard of content has fallen dramatically. There is inherently better content available on the web in India, if you know where to look.

Another reason for worry for most newspapers is that their business model is not working. In the late 1980s, a copy of the Delhi edition of The Indian Express (with air surcharge) used to cost around Rs 3.50 in Ranchi, where this writer grew up. Now nearly 25 years later The Indian Express costs Rs 4.50 in Delhi and Rs 4 in Mumbai. Most other English newspapers cost around Rs 3-5, i.e. if you buy them off a news stand. The price point of a newspaper hasn't really taken inflation into account at all.

If you are annual subscriber the cost can be very, very low. In Mumbai newspapers have been known to offer a yearly subscription for as low as Rs 99. This basically meant that the daily newspaper was priced at 27 paisa (Rs 99/365 days). No wonder people bought newspapers so that they could accumulate good raddi and then sell it.

The idea behind this business model was to lock in a subscriber for a year by giving away the newspaper almost for free, and then go to the advertiser and tell him, we have so many readers, why don't you advertise with us?

This has meant that most newspapers are now totallydependenton advertisers to make money. This business model worked during the period between 2002 and 2008, when companies were falling over one another to advertise. It doesn't work at all in a low-growth scenario, where everyone is looking to cut costs. Also, with the advertiser getting top billing, any negative stories that hurt a prospective advertiser are a strict no-no. This makes more newspapers concentrate on the feel good and have a pro-business attitude. In short, most newspapers dish out more of the same. There is not enough differentiation for a wide variety of taste that people have.

The other thing this business model does is it limits readership beyond a point. The newspaper cannot expand because it's not viable unless extra advertising comes in. Newspapers are a rare business in which selling an extra number of units can increase losses instead of profits. This is because the reader doesn't pay for the newspaper. If newspapers in India have to survive, they have to figure out some way of getting out of the subscription-based business models that they have got themselves into and can't seem to jettison it.

These were points that go against a newspaper, but what about the internet? Newspapers are a very limited medium of communication. In case of the internet, people can create their own content. Hence, there can (and is) a tremendous diversity of opinion which one can never get in a newspaper. Also space is not a problem on the internet. It is in a newspaper. Thus, internet can have more diversity of opinion and thus appeal to more people than a newspaper can.

Also as the world gets inherently more complicated, the limited space in a newspaper tends to make things overtly simplistic rather than just simple. On the internet things can be explained and arguments and counter-arguments can be made in detail. For anyone who is looking to understand the way the world works around him, the internet is an inherently better medium.

On the internet news can be consumed almost instantly. A reader need not wait for the next day's newspaper to be updated on what is happening in the world around him. Even analysis on the internet is up and ready, before it comes out in a newspaper, the next day. Also, the internet is now accessible almost anywhere and one doesn't have to go looking for it, like one has for a newspaper that one does not subscribe to.

Internet is a very low-cost medium. A newspaper is a very high cost operation which involves buying land to set up a printing press and cutting trees to make newsprint on which the paper is printed.

So there are many good things going for news on the internet. The trouble though is that almost no one has till date figured out how to make money on the internet through news. Internet as a medium tends to be associated with "free". Hence, digital subscriptions have not worked almost anywhere. - though some US newspapers claim they have cracked the market to some extent Also people tend to ignore advertisements on the internet. A part of this equation is falling into space through Google Ads. Now only if websites could figure out the other half, newspapers would become relics of the past sooner rather than later.

(Vivek Kaul is a writer. He tweets @kaul_vivek

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